Austria may sometimes appear frozen in time. But below the surface, its people power one of the most vibrant globalized economies in the world

Skis, steel and tobacco – that’s what Austrians need to make you fly. But not on two planks, dashing downhill, nor bungee jumping from a towering bridge; and not with a deep drag of nicotine from a Sargnagel, a “coffin nail.”

No, Austrians will take you above the clouds – literally. As you settle into your seat in the aircraft, as the flaps settle back in place and the winglets begin to vibrate gently, the engines whir and a cheerful voice welcomes you aboard. It may be the Donauwalzer coming over the sound system. But from take-off to landing, it is Austrian technology that keeps you safe.

Austrian industry makes up 28.3% of the country’s economic output, employing more than 425,000 people. Including industry-linked services and trades, over one million jobs in the Alpine Republic are tied to the manufacturing sector. But put on the spot, it would be hard for many foreigners to spontaneously name a big Austrian industrial company. Even Austrians can find it difficult.

And yet, Austrian industrial prowess is in high demand. A whopping 64% of industrial production is exported, and in some branches, the export quota is even higher: For electronics it’s 80.7%; for the automotive industry 84.2%. Austria, one could say, is building the marrow for the backbone of the global economy. And while largely invisible, it is work that is both sophisticated and fundamental for the functioning of our modern world.

These are the hidden giants – companies that are world market leaders in their fields, even though their names are largely unknown. These are firms that pour billions into research and development to refine a product that you never knew existed. These businesses – often still family led – may be located on the outskirts of Vienna , in a Styrian valley or in the hills of Upper Austria, yet their goods and services are coveted from Singapore to San Francisco to São Paulo.

Austria has some 160 of these hidden champions, along with many smaller firms, that keep the industrial sector vibrant. But to find out how they take us to the skies and beyond, we need only follow the trail of skis, steel and tobacco. SURPRISINGLY INGENIOUS It all starts in the 12,000-strong village of Ried im Innkreis in Upper Austria. Here, handsome town houses line the main square, boxwood trees surround the fountain and the stone statue of Dietmar, the legendary founder of the city.

Just a five-minute drive from the center, an imposing factory hall rises out of the landscape. There are no big letters on the façade. But don’t be fooled. This is FACC, headquartered here to serve the aeronautics industry. “Every plane that has been built in the last 20 years has components from FACC,” says Andrea Schachinger, head of marketing and communication. “You could also say, every second, somewhere around the world, a plane takes off with parts from FACC.”

FACC is not a classical aerospace company like Boeing or Airbus, whose businesses rely on massive support from their respective governments. “Our story,” smiles Schachinger, “starts with skis.”

In 1980, the famed sporting goods manufacturer Fischer Ski & Tennis was struggling with weak demand. “They asked themselves: What can we do with the material we are using to make our skis?” This composite was exceptionally light and robust – Austrian ski hero Franz Klammer raced to many a victory on Fischer skis in the ’70s and ’80s. So they approached Airbus with an idea.

And in 1981, Fischer got its first contract to develop lightweight components for aircrafts.

The first Airbus order followed a few years later, and other aircraft manufacturers like Boeing, Embraer, Saab and Fokker were soon to follow, growing the list of new customers of was still merely a branch of Fischer Ski. In 1989, FACC was founded as an independent company, with the financial backing of the Austrian Salinen AG, then a still publicly owned salt producer.

Today, the company employs 3,400 people worldwide, and 3,200 in Austria. FACC manufactures parts for cabin interiors, engine nacelles and aero structures – like the little winglets you can see shivering gently on the tip of an airplane wing to adjust drag and wind resistance. In the future, ever-lighter aircraft will contain over 50% composite materials.

So FACC’s books are full, with current orders of €5 billion stretching out seven years, with hiring and outlays for R&D set to continue at full speed.

But how can a company such as FACC thrive more than 150km away from the next big urban centers and the hub airports of Munich and Vienna?

Leopold Liechtenstein, communications officer for the Federation of Austrian Industries (Industriellenvereinigung, IV) in Vienna, sees a number of reasons for this:

“What makes Austrian industry so efficient, above all else, are our well-educated and well-trained workers,” Liechtenstein asserts. “Austria’s technical high schools (HTLs & HAKs) are unique and top worldwide. Also the apprenticeship system is a Central European specialty.” There are weaknesses, too, which is why the IV has made education a centerpiece of its public campaigns.

Some international conglomerates are even expanding their industrial footprint. Infineon, a leading German semiconductor manufacturer with 3,800 employees in Austria, recently committed to an investment of €1.6 billion in Villach, Carinthia. CEO Sabine Herlitschka sees Austria as a stronghold for research.

“Our plant in Villach is known in our group as the ‘innovaction factory’,” she says. Herlitschka lauds the Austrian research premium of 14%, something Germany just started discussing. But she also points to challenges, particularly in the supply of skilled workers in the technical and natural sciences. “The people we have are highly skilled,” she agrees. “But we don’t have enough of them.”

It is employee know-how combined with a clear strategy that enables Austrian industry to be both productive and innovative. Roland Sommer, managing director of the platform Austrian Industry 4.0 (see graphic on this page) sees the intact social contract in Austria as another crucial element: “Only if employees can be sure that their ideas will be used to the benefit of us all, and not to make their job obsolete, will they be really creative and innovative,” Sommer stresses. After that, the well-maintained infrastructure and high investment in R&D are other crucial elements for success.

Schachinger agrees. “Our location grew out of our history, sure,” she admits. “But it is perfect for us. We’ve got quick access to the highway, excellent HTLs provide us with skilled employees and we offer attractive working conditions – our staff is recruited from more than 38 nations.”

Recently, the nearby FH Wels (University of Applied Sciences – Wels) also introduced a course of study on composite materials – the curriculum developed jointly with FACC. “And ultimately,” Schachinger adds with a grin “there is also something special about the attitude of the Innviertler – if there’s work, they just roll up their sleeves and get it done.”

ENGINEERING PROWESS

A hundred kilometers to the east, in Upper Austria’s Traunviertel, a similar success story has just gotten underway. In the historical center of Steyr, 35-odd software engineers from 15 nations are developing new tools for data processing and simulating the process of varnishing automobiles. Founded in 2015, the company, Engineering Software Steyr (ESS) has grown rapidly.

Founder and CEO Martin Schifko is a soft-spoken man, at the first encounter more like an academic than a tough manager. But his deep technical knowledge and expertise combined with business acumen have already bagged contracts with major manufacturers like Ford, General Motors and Honda.

“I used to develop software products like these for Magna,” a global Austro Canadian automotive supplier. But it had not proved commercially viable, so his department was shut down.

But Schifko had seen potential – after all, he had developed these software tools himself in his doctoral dissertation, developing a preprocessing tool for Magna. Now he would pick up where he had left off. He bought the rights to the technology and launched his own two man firm.

“What I quickly realized is that for software, the conditions are special.” Schifko explains. “After just half a year, we were listed as a tier-one supplier for General Motors (GM), a process that for manufacturers of physical parts can take up to three full years!” He thinks Upper Austria is the best industrial location one could hope for. His company quickly got grants from the Austrian Research Promotion Agency (FFG) and the EU, which even admitted it to the Horizon 2020 program. “Each research grant allowed us another expansion step,” he says. Recently, ESS opened an office with two programmers in Bangalore, India.

Operating on a global scale is also a challenge for small and medium sized companies. What helped ESS enormously, he says, was the global network of trade delegates of the Austrian Economic Chamber (WKO) – praise that Eric Savoye, project manager of the joint “go-International” program of the WKO and the Federal Ministry for Digital and Economic Affairs, hears gladly.  “We want to help Austrian companies do good business in markets around the world.”

More than 660 experts man the WKO’s 110 Außenwirtschaftscenter locations – more than the 82 embassies of the Austrian Foreign Ministry. From Tirana to Tripoli, from Helsinki to Hanoi, the “Advantage Austria” network is worldwide.

Their current focus is scouting for trends and innovation. “We are already based in the world’s high tech hotspots,” says Savoye, “and want to connect Austrian companies with actors and technologies there – be it robotics in Switzerland, life-long learning in Tokyo or smart devices in Silicon Valley.”

These services don’t come cheap – by law, every Austrian company has to be a member of the WKO and pay membership fees that make up an annual budget of some €850 million supporting a total of 3,800 employees. Still, member companies ask a lot from their chamber. Particularly for small companies that have a world-class product but can’t afford a global sales network, the trade delegates are more than worth their salt.

“For interested companies, we provide everything from in-depth information on the market to special reports on their product sector, chaperoning them through their market entry, organizing trade fairs and networking events,” Savoye relates. His enthusiasm is contagious. “Hey, if they need a plot of land in Chengdu to build a factory, we will find it for them!”

For ESS, all this is highly relevant. “We are currently developing brand-new software for flow simulations that can run 100% on normal graphic cards,” ESS’s CEO Schifko reports, with evident pride. “This should make running a flow simulation cheaper by a factor of 80 and make it an available tool for small and medium-sized companies everywhere.” They want to start in the automotive sector, but the potential of the technology goes far beyond, with applications in medicine (simulating blood flow to prevent thrombosis) and many other fields. The WKO’s network will be crucial to reach out to these diverse partners. “If you have the right idea,” Schifko says, “you can make it everywhere!”

AID & THE STATE

“Everywhere” may sometimes seem to be primarily the country’s industrial heartland of Upper Austria. But in fact, all Bundesländer have their share. And in the upper Styrian industrial town of Kapfenberg, population 22,000, it is the men of steel who give the city its beat. It is here that the Voestalpine Böhler Aerospace division, producing tool steel and special forgings, has one of its big biggest factories, manufacturing the engine discs, connectors, suspension and center wing boxes for planes – the joints that hold an aircraft together.

Following the acquisition of Böhler-Uddeholm by Austria’s special steel giant Voestalpine in Linz, the new company is a testament to one of oddest features of Austria’s industry – it is not only successful in high-tech or software products, but also in sectors supposedly obsolete in developed countries.

Sharp declines in activity have characterized industry in recent decades – from 1975 to 2015, manufacturing’s share of GDP almost halved in the US, from 22% to 12%, imploded in the UK from 28% to 10% and fell even in Japan, from 29% to 19%. Over the same period, Austria’s descent was relatively mild, from 34% to its current share of 28.3%.While steel’s decline has frustrated US President Donald Trump and gifted us with tariffs, the highly specialized products of Voestalpine and Böhler Uddeholm – for rails, cars or planes – remain largely unaffected and yield consistently high profits.

This reflects a choice of positioning: “At important crossroads, Austrian companies bet on quality in a niche instead of sheer quantity,” explains Michael Renelt, adviser of the department for industry of the Austrian Economic Chamber (WKO), in part due to the small size of the domestic Austrian market. “Austrian companies have to focus a laser on innovation,” Renelt explains. So they do: More than 70% of all R&D spending in Austria is done by industry. In addition, “they have to internationalize fast and early – as a result, 70% of all Austrian exports are industrial goods.”

His colleague, Andreas Mörk, stresses the importance of the industrial environment: “We’ve kept the whole breath of manufacturing in the country, from primary production to the finishing touches on a high-tech product.” Political continuity and the collaborative spirit of employers and employees in the Austrian Sozialpartnerschaft (Social Partnership) are also key. The new flexible working hours have ruffled some feathers, But Mörk expects this to ease: “We’ll work something out together, we always do.”

More than once, an idea will be spun off and nurtured for years before it comes to fruition. The small Graz based industrial startup Agnosys is such a case. In 2006, working for EAM Systems, a leading company in measurement and control technology for large buildings, Georg Leitner and colleague Gerhard Wolf were amazed by the antiquated fire alarm systems. “Everything was still done in an incredibly conventional way – the systems looked like an ’80s computer game,” Leitner laughed.

Thus was born the idea for Agnosys, a fully digital system for preventive fire safety, interconnecting all necessary systems and components. But from 2005 to 2009, the product languished. “We soon realized that project business, what EAM was doing, and product development, what Agnosys was supposed to be doing, were two very different things,” Leitner notes. In 2011, he took over Agnosys operations with his own team of two and half employees. In 2013/14, they presented their first product and installed it in the Hotel Park Hyatt in Vienna.

Now, with 10 employees, Agnosys already dominates the market in Austria and has branched out internationally, with projects in Germany, Norway, Sweden and Denmark. “Once you’ve really made it in Austria, with its high standards, high costs and small market, then the world is open to you!” Leitner confides. “First, you expand to the German-speaking countries, then to the rest of Europe and then the world.”

In the case of the big steel manufacturers, Austria’s politicians were also unusually brave. The Verstaatlichte (the state industrial sector) as it was called, employed hundreds of thousands of people. But in the 1980s, with its best years behind it, and ballooning losses ahead, Ferdinand Lacina, Social Democratic minister of transport (1984-86) and finance (1986-95), put through an ambitious program of restructuring and, finally, privatization of the steel sector. Voestalpine and Böhler Uddeholm shrunk, but they also specialized and poured billions into R&D. As a result, while steel giants far larger across Europe and America tremble at Chinese competition, in 2017, the Voestalpine Group flourished, reporting profits of €584 million pretax, at a revenue of €6.3 billion.

As did the industrial start-up Agnosys with expected revenues of €1.5 million and expected pretax profits of €300,000 in 2018.

ABOVE THE CLOUDS

So back to the plane. With FACC’s composite materials and Voestalpine’s steel, it is certainly airworthy. But how does it navigate safely? This is what the Vienna based high-tech company Frequentis has made its core business. Founded in 1947, Frequentis started out as a supplier of electronic devices in the renascent Austrian Republic.

“Back then, the company built everything, from radios to ultrasound therapy units,” says Brigitte Gschiegl, director of corporate communications for Frequentis. Even measurement systems for tobacco for the state owned Austria Tabak. But when Hannes Bardach acquired the company in 1983, it completely changed directions.

Bardach, who had studied electronics at the Technical University of Vienna, started to implement his dissertation thesis, for a completely digital air traffic control system. Today, every plane starting or landing at Vienna International Airport – and in many more countries around the world – gets its information from a Frequentis system. “In the field of voice communication for air traffic control, we’ve been world market leaders for many years,” says Norbert Haslacher, Frequentis CEO since April 2018. In just over three decades, the company grew from a team of 45 to today’s 1,800 employees worldwide (900 of which work at the headquarters in Vienna’s 10th district). The deep drop in air traffic after 9/11 gave another jolt for reinvention, and Frequentis established departments for Maritime, Public Safety and Public Transport. Again, the external centers of the WKO helped hugely in expanding to new fields and markets. Today, Frequentis serves over 500 customers in 140 countries worldwide.

With an R&D ratio of 12%, Frequentis keeps on innovating. One of their newest projects is the remote virtual tower – basically a pylon of cameras for small airports – which transmits all necessary information to an air traffic center, potentially hundreds of kilometers away. The result: Operations at small regional airports become far more affordable. A raft of additional information can also be displayed on monitors, making the digital picture clearer than the real one.

However, Haslacher underlines that having the best technical solution is always only the first step: “What made Frequentis so successful,” he says, “is our special culture for the handling of safety-critical systems and our understanding of such processes. It is essential for our customers, air traffic controllers for example, to have complete trust in the company and that our systems are absolutely reliable.” Their mission statement – “For a Safer World” – is something they take very seriously.

Finally, the appeal of Vienna also comes into play, Gschiegl notes with a grin. Clients get a tour of the headquarters, and then “they go to the state opera, see the city and then enjoy a Heuriger. At this point, Mr. Bardach used to say, ‘We’ve got them!’”

Frequentis is still doing research and producing its hardware and software at its headquarters in Vienna. The building is an odd. but fascinating, mix: On the upper floors, conference rooms carrying the names of Klimt, Schiele and Mondrian. On the ground level, visitors don white ESD lab coats and ankle bands to enter a warren full of humming, floor-to-ceiling computers. “Here, we test all our systems before shipment,” explains Peter Tymciw, director of production, planning and logistics as we pass a group of Chinese being trained on site and flags from France, Croatia, Australia and many others countries the systems are destined for – all tested one last time on arrival.

MAKING THEM INNOVATE

What all agree on is the immediate need to innovate. And while many Austrian companies are ready for the challenge, and digitalization is second nature to them, some conglomerates have difficulty getting moving. “That’s what we are for!” claims Francesco Rubino from the young Viennese company Pioneers Discover.

An outgrowth of the Pioneers Festival – the biggest startup fair in Central Europe – Pioneers Discover aims to infuse large corporations with a culture of innovation and entrepreneurial spirit. Still a startup themselves, they already operate internationally – 50% of their clients come from German- speaking countries, 50% from all around the world. Pioneers Discover organizes hackathons or startup weekends for companies like Airbus in Toulouse, Madrid and Bangalore, or innovation coachings for Booking.com and energy provider Vattenfall. They also offer their clients their curated database of 17,000 startups eager to connect with bigger companies. “Sometimes, we just plant the seed, and that’s all that’s needed,” says Rubino, who moved to Vienna from his native Italy in January.

Roland Sommer from the platform Industry Austrian 4.0 believes that in the Austrian industrial ecosystem, efficiency gains are higher than many think: “Industry 4.0 means to learn inter-sectorally, and Austrian industry is really good at that,” Sommer says. “Most innovations are out there already.”

One company increased its efficiency by 44% in half a year, he says, when they found the right solution in a different field. It is this collaborative spirit of innovation that gave rise to companies like Agnosys, ESS, FACC and Frequentis. It is a fire that was rekindled when the blast furnaces of giants like Voestalpine and Böhler Uddeholm were in danger of going dark. It’s a spark that keeps drawing in international conglomerates like Infineon. And it is tended by the work of institutions like the WKO and the IV, and new private entrants like Pioneers Discover, who can see behind the frosting of Austria’s snow globe and find the real treasures within.

Just as with flying – you may not know exactly what is going on under the casing, but Austrian companies will ensure that you touch down safely, as surely as Strauss’s timeless music welcomes you home from
your journey.