Italian Capital Goods between excellence, innovation and global challenges

These are some of the questions at the heart of the new brief by the Sector Strategy and Impact Department, which analyses the Italian capital goods sector – a strategic component for products Made in Italy but increasingly exposed to global risks – highlighting strengths in the international landscape and examining the main challenges related to foreign demand trends, industrial consolidation and digital innovation.

Read the study’s key findings and download the document for all the details.

• With 18,000 companies specialised in the production of industrial machinery, annual revenue of almost 150 billion euros and about half a million employees, the capital goods sector is one of the pillars of Italian manufacturing.
• The sector ranks first in terms of value added, ahead of the metal products and food industries, and second in terms of share of employment. At the EU level, the Italian machinery sector is second only to Germany in terms of value added.
• Capital goods stand out for their strong capacity to generate revenue in international markets: they account for 16% of Italian goods exports, worth more than 100 billion euros, with a trade surplus of almost 60 billion euros. Such is the significance of foreign sales in the sector that without capital goods Italy’s overall trade surplus would turn into a deficit.

The capital goods sector is facing a number of uncertainties. Some are linked to trends in foreign demand:

• In fact, in 2024 the machinery sector recorded a setback, with a significant reduction in revenue (-6%), production volumes (-3.8%) and exports (-1.3%). A significant factor has been the slowdown in the EU domestic market, particularly in Germany and France, which together account for nearly one fifth of the sector’s exports.
• The introduction of tariffs by the US – the main export market – is an additional major threat. However, the sector’s high level of specialisation, often in niche fields, and the limited presence of American competitors with adequate production capacity should limit the impact of US protectionist policies, at least in the medium term.
• Nevertheless, given the weak growth of the European economy and trade tensions with the United States, the geographical diversification of exports is an unavoidable strategy to reduce exposure to the demand of a few countries. In this sense, the large emerging economies of Asia and Mercosur countries represent key market opportunities.

Moreover, the sector faces structural challenges, such as the need to deal with being considerably undersized compared with European standards: the average company in the EU is 40% larger in size, nearly triple in Germany. Indeed,

• While until now the small size has not undermined competitiveness – as international performance shows – it is a major obstacle to entering new markets and increases vulnerability to external acquisitions.
• Hence, there is an opportunity to encourage strategic consolidation in the sector through horizontal and vertical aggregations, and to leverage technological and commercial synergies.

Finally, it is clear that the pace of ongoing technological transformation calls for a significant acceleration in innovation through greater integration of mechanics, electronics and digital technologies. In this respect:

• Although Italian capital goods show higher adoption rates of advanced digital technologies compared to domestic manufacturing as a whole, there is a clear lag compared to leading EU peers. For example, only just over 9% of Italian companies in the sector have integrated AI technologies, far behind not only the leaders – including Germany (20%) – but also the EU average (15%).
• The delay in adopting advanced digital solutions is also reflected in limited use of digital technical skills: only one in four companies employs IT specialists, a figure that places Italy among the lowest-ranked countries in Europe.
• For these reasons, there is ample room for improvement and support, so that Italy’s well-established manufacturing tradition in machinery production can be renewed by harnessing the potential of the ongoing technological revolution.