Overview
The Portuguese National ICT is a highly innovative and dynamic sector, which already represents nearly 10% of the Portuguese GDP, reaching almost USD20 billion in total turnover, according to the latest data available from the National Portuguese ICT Cluster, TICE. With young and highly qualified resources, it employs more than 80,000 people. In the past decade, the profile of ICT companies has shifted from traditional ICT providers to highly specified and innovative startups. The sector is supported by world-class research developed in partnership with Portuguese universities. The Software Development Market in Portugal alone, is projected to generate 905.7 million Euros by 2023.
Lisbon’s tech scene is bustling, and the city is one of Europe’s fastest-growing tech ecosystems, making a name for itself as Europe’s Silicon Valley. Portugal has a very high proportion of STEM graduates and engineering talent at a competitive cost. According to Eurostat, the country has the third highest rate of Engineering graduates in the European Union, with around 90,000 students graduating each year. In Lisbon, universities like Instituto Superior Técnico and Nova School of Science and Technology churn out hundreds of excellent developers every year. A very high English language proficiency overall is also a great plus. Lisbon is a growing destination for digital nomads as well as remote programs. The city’s strong tech crowd cultivates an active coworking scene, providing a great environment to meet others and collaborate. Everyone from entrepreneurs, freelancers, and remote workers to digital nomads with diverse backgrounds and professions can come together. This contributes to Lisbon becoming a hub of entrepreneurial innovation and technology, with tech companies of all sizes and innovative startups setting up offices all over as the tech talent swarms the tech city.
Lisbon is home to hundreds of tech events and meet-ups: The Web Summit, for example, is at the top of the list, bringing together all different tech talent profiles from startup founders, leadership teams of large companies, entrepreneurs, investors, and press journalists from around the world.
Portugal ranks 15th of the 27 EU Member States in the 2022 edition of the Digital Economy and Society Index (DESI), climbing one step up from last year’s ranking. Portugal’s relative progress is generally slightly below that of its peers, so there is room for the country to accelerate its digitalization efforts. On human capital, Portugal significantly increased the proportion of ICT specialists, bringing the figure close to the EU average. Portugal performs below the EU average on basic digital skills but has a higher share of individuals with above-basic digital skills. The percentage of female ICT specialists exceeds the EU average.
Portugal is among the EU leaders in digital public services. E-government users have increased to 57%, still trailing the EU’s 64% average. Portugal’s performance is ahead of the EU average in pre-filled online forms and digital public services for the public and businesses. Improving digital skills remains a national priority, as reflected in its recovery and resilience plan (RRP), which includes initiatives for various population groups. In 2020, Portugal approved the national action plan for the digital transition, prioritizing digital inclusion and training of people together with the digital transformation of businesses, public administration, and digitalization of education. These objectives align with the Portuguese RRP’s digital transition strand, focusing on digital skills and digitization of businesses, public administration, and education. Portugal supports advanced technologies such as A.I., advanced computing, and open data.
According to the United Nations Conference of Trade and Development, Portugal ranks in the 33rd position among 166 countries in the Readiness for Frontier Technologies Index. Portugal nests innovation with infrastructure, human capital, and technology investments to enable technological development. The Government of Portugal has implemented measures to promote digital competencies and the digitalization of the economy as part of the second phase of Indústria 4.0, in addition to launching artificial intelligence and advanced computing strategies.
Regarding digital technology integration, electronic information sharing, big data, cloud services, and eCommerce has a significant place in businesses. Still, it is below the EU average and less active compared with other EU countries. In 2019, the Government launched several initiatives to promote the digitalization of businesses to increase the levels of digital literacy, expand cyber-infrastructure and establish cooperation agreements with other EU countries to explore how to develop and deploy advanced infrastructures such as quantum communication and networks.
The National Initiative for Digital Skills e.2030, Portugal INCoDe.2030, aims to stimulate and ensure the development of digital skills as a tool for paving the way for a future-oriented society focused on the new opportunities arising from the fast-paced adoption of Information and Communication Technologies. Portugal INCoDe.2030 is structured around five strategic pillars: inclusion, education, qualification, specialization, and research. Each of these pillars is associated with several public policy goals and measures to be implemented by several institutions and organizations. The Foundation for Science and Technology (FCT) coordinates the various measures associated with the five strategic pillars. Part of the 21st Constitutional Government of Portugal, this is a joint initiative of Administrative Modernization, Science, Technology and Higher Education, Education, Labor, Planning and Infrastructure, and Economy. It is part of the ICT international context and aims to improve and strengthen Portugal’s position in the European Commission’s DESI Index (Digital Economy & Society Index), increasing its competitiveness by promoting digital skills.
In parallel, Portugal launched the second phase of the Indústria 4.0 national strategy to digitize the economy with €600 million in total funding over the next two years. In addition, two relevant strategies on Artificial Intelligence (A.I.) and advanced computing were launched, intensely focusing on improving advanced digital skills.
Portugal is now considered the eighth most attractive country in Europe for Foreign Direct Investment (FDI), according to the EY European Attractiveness Survey 2022. According to the study, in 2021, Portugal attracted 200 FDI projects, representing a 30% increase compared to the 154 announced in 2020. Last year, Portugal climbed two positions in this ranking and is currently ahead of Poland and Ireland. The top three sectors are software and I.T. services, transportation manufacturers, and Transportation and logistics. The U.S. is the top investing country.
Startup Ecosystem
The Portuguese startup ecosystem is still young, but it’s one of the best assets Portugal has, with small-scale but fast-paced and steadily growing companies representing over 1% of the country’s GDP.
The community continues to make strides toward attracting and retaining more international talent while forging partnerships with big corporations, making it easier than ever for startups to access markets throughout Europe and beyond. In 2016, the Portuguese government galvanized the country’s startup ecosystem by creating Startup Portugal as part of a national strategy to foster entrepreneurship through increased structural support, funding, and internationalization efforts.
According to the Startup Portugal dashboard report Portugal 2023, there are over 2,500 registered startups and scaleups, 1599 funding rounds, more than 70.000 employees and 76 registered VC Investors. The amount of total VC funding invested in the ecosystem has grown an impressive 15x from 2017 to 2021, mainly in late-stage funding, which has grown by 55x. Private funding and co-investing initiatives like the “200M Fund” ensure that local and foreign private resources continue to flow into Portugal’s thriving startup community. In 2022, the total funding for the ecosystem was USD811 million.
Portugal’s largest cities, Lisbon and Porto, are part of the Scale Cities Alliance. This collaboration among public ecosystem builders from 13 European cities aims to create Europe’s most connected technology hubs. Further, a national network of incubators makes it possible to start up and develop a concept with support even outside of the major hubs. With easy access to the European market and the Schengen Zone, Portugal has the potential to become one of the strongest startup economies in Europe.
According to the Global Startup ecosystem Index 2023 from Startup Blink, Portugal is ranked 26th best global startup ecosystem in the top 100 countries, climbing up two spots in comparison to 2021. Portugal’s ranking in the EU and in Europe is positioned at 12th and 16th respectively.
All these initiatives are paying off. Portugal has produced seven unicorns to date: SWORD Health, a world-renowned digital physiotherapy company; OutSystems, a low-code enterprise development platform; Farfetch, an online platform for luxury fashion; Feedzai, a RiskOps platform for financial risk management; Talkdesk, a cloud-based contact center and AI software provider; Remote, which provides global HR solutions. Digital asset platform Anchorage, founded in the U.S. and has a Porto office, also achieved unicorn status in 2021. Five of these are headquartered in the U.S., and the total value of all seven unicorns is estimated around USD41.5 billion.
According to the National Innovation Agency (ANI), Portugal has become more attractive for technology-based development. The country now hosts the R&D operations of several high-tech companies and several unicorns. Portugal has one of the most significant numbers of unicorns per capita. Many factors contributed to this, including the maturity and quality of the research environment in several scientific fields, the quality of higher education in technological and digital areas, and a growing number of highly qualified personnel, including those with PhDs. Companies also benefit from Portuguese R&D tax incentives, which have increased by 91% since 2015.
An open society and quality educational environment are woven together by government policy that actively encourages startup activity. Popular incentives include Startup and Tech Visa programs, two options that fast-track residency for those bringing investment, talent, and innovation into the country. The Startup Voucher program will be relaunched this year for founders looking to create startups for the digital and green economy; it helps young entrepreneurs breathe life into their ideas by minimizing risk and lowering the barriers of entrepreneurship, making it more accessible. Public-private intermediaries like Startup Portugal ensure the smooth flow of information, resources, and support among startups, investors, incubators, and the government.
In addition to its technical infrastructure, Portugal offers a rich network of institutional knowledge. A national network of over 160 incubators ensures that entrepreneurs can receive the support and resources they need to thrive. According to IDC’s Startup & Entrepreneurial Ecosystem Report, 65% of founders stated that they relied on incubator support during the early stages of their startups.
Portugal is the perfect beachhead for European expansion. Situated at the southwestern tip of Europe, Portugal is the ideal portal for startups looking to enter or expand into the continent, a market of over 500 million people. As the closest European country to the U.S., Canada, and Brazil, doing business in Portugal also allows startups to sync with some of the world’s most prominent economies. Portuguese startups adopt an international-first strategy earlier in their lifecycle, which can be a more efficient path to success. Geographically efficient with world-class talent, communities, and infrastructure, Portugal is an unbeatable value proposition that startups worldwide would do well to consider.
Portuguese startups look to international markets, primarily the European Market, taking advantage of the open economic zone. Some startups even prioritize USA markets in their business plans and are born global.
Portugal has become a reference in the European startup scene, especially after hosting the Web Summit in 2016, putting the country on the map as the place to be for technology entrepreneurship. The Web Summit has brought incalculable added value to the Portuguese economy, boosted the growth and diversification of ICT-related businesses in the country, and enjoyed solid political commitment from the Portuguese government and the Presidency of the Republic. The Web Summit is the world’s premier high tech conference and gathers policymakers, heads of states, CEOs and founders of unicorns and fast-growing startups. It features more than 1,200 speakers, 1,200 investors, 2,100 startups, 300 event partners, 2,500 journalists, 80,000 attendees, 160 countries and typically introduces disruptive new technologies and raises thoughtful meta-issues by industry experts across related fields, such as big data, education, enterprise, entertainment, finance, health, lifestyle, machine, marketing, philanthropy, social and travel and e-commerce.
The “National Network of incubators” was created as part of the Startup Portugal Strategy, promoting cooperation and sharing resources and knowledge to improve products and services made available to entrepreneurs and companies. From 2016 to 2020, the number of incubators grew by 40%. Portugal has a competitive cost/value environment among its competitors within Europe. According to StartupBlink’s Ecosystem report 2023, Portugal has 6 cities (Lisboa, Porto, Braga, Coimbra, Leiria, Aveiro) in the top 1000 and has a startup scene that ranks 26th within the competitive global top 100.
The Portuguese government established the “National Digital Competences Initiative e.2030,” an integrated public policy to enhance and foster digital competencies. One of its action lines focuses on promoting specialization in digital technologies and applications to improve employability and create higher added value in the economy.
Artificial Intelligence
“AI Portugal 2030” is an innovation and growth strategy to foster Artificial Intelligence in Portugal within the European context. The strategy fully aligns with the coordinated action plan of the EU in the “INCoDe.2030.” The document sets the basis of a national strategy for developing the Portuguese economy and society by using Artificial Intelligence in public and private activities and consolidating fundamental and applied AI research.
The AI Portugal 2030 Vision is based on seven pillars: 1. A safer, better, and evolved society: sustainability, resources management and employment. 2. Developing AI skills and digital mindsets in education, long-life learning and attraction of talent. 3. Promoting new jobs and a economy for AI services in various industries. 4. Fostering Portugal as a living lab for experimentation of new developments: urban development with sustainable cities, sustainable energy networks, bigger biodiversity, green and blue economy, cybersecurity, autonomous driving, quantum resources for AI and supercomputers. 5. Securing AI niche markets through key specialized services in Portugal. 6. Contributing to new knowledge and developments through AI research and innovation 7. Providing better public services for citizens and businesses, increasingly evidence-based by using the vast amount of data that can be available.
According to the AI Portugal 2030 document, areas of specialization to drive innovation, research, and opportunities: natural language processing, real-time decision-making, AI for software development, AI for edge-computing and IoT, urban transformation thru sustainable cities, sustainable energy systems, smart mobility, environment and biodiversity, cybersecurity, health, industry 4.0, AI research and development. A plan to install an AI hub in Lisbon is under discussion, and that would entail €1.5 billion of investment per year by private and public entities, leveraging EU funds.
According to the European Landscape on the Use of AI in the Public Sector report 2022 (via European Commission), Portugal recorded the third most cases of AI use in the Public Sector, recording 60 cases of AI technology, trailing behind Italy (75) and The Netherlands (123).
Portugal has also been notable, due to its innovative approach on applying AI into the education system of flow of students. Portugal has recognized that its crucial to implement AI into its curriculum to prepare students for the future of work, and the necessities of digital skills for any industry. Also, on the teaching side of the initiative, integrating AI in education can help personalize learning. It can analyze student data and provide personalized recommendations for each student. AI can automate routine tasks as well, such as grading and lesson planning.
Connectivity and Digital Data Market
The pandemic crisis has significantly impacted internet services as isolation restrictions encouraged individuals and businesses to rely on internet-based services and products. As a result, Portugal reinforced measures to achieve a more robust digital transformation and economic recovery. They range from supporting the health system and expanding tools to manage health resources and patients, introducing new and additional online public services to citizens and businesses, and developing initiatives for digital learning.
Portugal is also deploying high-capacity networks but remains behind comparable with advanced nations in implementing 5G. The Portuguese government raised nearly 567 million euros with the 5G spectrum auctions. Following the country’s spectrum auction in October 2021, telecom operator NOS became the first to launch 5G services in December 2021, securing 100 MHz in the 3.6 GHz band and 2x10 MHz in the 700 MHz band. MEO, owned by Altice Portugal, which launched its 5G network in January 2022, has invested over 1 billion euros in its network infrastructure to achieve a 5G coverage of 50% of the population (March 2022). Vodafone Portugal was also able to secure 5G spectrums. In total, the Portuguese government was able to raise nearly 567 million euros with the 5G auctions. Portugal also came upfront positioning itself on the group of countries that plan on banning Chinese suppliers of 5G, one of them being Huawei. The three main operators in Portugal already have said that they do not plan on using Huawei’s equipment 5G core equipment.
Public sector investment and private sector competition have spurred Portugal’s ICT broadband infrastructure expansion. Portugal’s priority continues to be the replacement of the Atlantic submarine cable ring linking the mainland with Madeira and Azores and between the islands (CAM submarine cables). The operational sections are planned for 2024 to Azores and 2025 to Madeira. The public telecommunications operator, IP Telecom S.A., was awarded the concession to develop this project as a wholesale operator.
On June 1st, 2021, the Prime Minister of Portugal, António Costa, presided over the launch of the first high-speed submarine fiber optic cable linking Europe (Sines, Portugal) and South America (Fortaleza, in Brazil), an essential infrastructure for the digital connection and data transmission between the two continents. The EllaLink will reinforce Portugal’s strategic location for connecting Europe to the rest of the world, and it is a crucial infrastructure indispensable to growing Portugal’s digital economy.
Portugal maintains close cultural, economic, and political proximity to several African countries, especially with the Lusophone countries Angola, Mozambique, and Cape Verde. Equiano, a Google-funded state-of-the-art subsea cable scheduled to be operational in 2022, is being deployed from Portugal to South Africa. The line starts in Portugal, follows the west coast of Africa, and lands in South Africa, with several branching units along the way. Equiano will improve the digital connectivity between Europe and several West African countries. The long-term, steady-state-impact project will enhance the economic potential for businesses using this infrastructure directly or indirectly. The two (EllaLink + Equiano) cables will improve the internet bandwidth for internet users in Portugal, contributing to the Portuguese GDP by up to €500 million per year.
Additional two subsea cables are under development to moor at Sines. 2Africa, a subsea cable project funded by Facebook, will become the most comprehensive subsea cable system ever deployed by the time when finished, with 28,000 miles. 2Africa would serve an estimated three billion people in 33 countries, and it will run from Europe, around Africa, to the Arabian Gulf, India, and Pakistan. It is expected to go into service in 2023. Medusa is a new 326 million-euro submarine cable project (8700km, 24-fibre pair, 480Tbps). Medusa is owned by infrastructure and telecom Operator AFR-IX telecom, a private Barcelona-based capital company. AFR-IX telecom is a licensed telecommunication operator in Portugal, the USA, and in multiple African countries such as South Africa, Nigeria, Ghana, DRC, Mali, Burkina Faso, Sierra Leone, Niger, and Cameroon. Medusa will be ready for service in 2024, connecting Portugal, Spain, France, Italy, Morocco, and Algeria and in 2025, connecting to Tunisia, Greece, and Egypt.
The City of Sines will also host the Sines 4.0 project, a 3.5 billion euro hyper-scale data center developed by Start Campus, funded by a U.S. investment fund and a British company. Powered by 100% green energy will make Sines 4.0 unique. It will be the largest renewable data center campus in Europe, designed to handle the ever-growing demand for streaming services, video conferencing, cloud computing, artificial intelligence, and data storage. Once completed, Portugal will have Europe’s second-largest data processing capacity after Ireland. Portugal aims to anchor the ambitious Sines data center project to attract additional projects.
The Start Campus project also leverages the strategic geographical importance of Sines and Portugal at the edge of Europe through the new submarine cables now starting to operate, namely EllaLink, Equiano, 2Africa, and Medusa. Portugal will become the significant data hub between Europe, the Americas, Africa, and beyond and act as the gateway for an explosion of transatlantic connectivity. There will be a strong demand for U.S. products and services across all the above segments.
A January 2022 Deloitte report concludes that Portugal is well positioned as a critical player in the European data strategy, bridging a set of unique conditions to connect Europe to markets such as North America, South America, Africa, and the Middle East/Asia. Portugal “is in the right place and the ‘timing’ to benefit from the explosion of the digital data market that in recent years has seen an exponential increase in volume, with the amount of data created, consumed, and stored reaching more than 180 zettabytes in 2025, 90 times the amount of data in 2010.” The Deloitte report indicates that “Portugal has unique conditions to attract the biggest technological players who need to expand their offer in the global data market,” and the country “emerges to meet Europe’s infrastructure requirements with competitive, robust and far-reaching connectivity.
Cybersecurity and Data Protection
According to the Global Cybersecurity Index (GCI), from 2018 to 2020, Portugal rose 28 in ranking and is now in position number 14 among the 182 countries in the survey. When compared with the overall European scoring, Portugal is at number 8. The result reflects the positive efforts and investments the Portuguese government has adopted in recent years to improve cybersecurity.
“Advanced Computing Portugal 2030” is a dynamic and evolutive process aimed to promote and expand Advanced Cyberinfrastructure (ACI) in Portugal through 2030. It considers close international collaborative actions and has been fostering all advanced scientific computing fields, as well as mobilizing data processing in an effective and diversified way among industry and academic communities, including health, climate, energy, mobility, and the study of social processes. The strategy consists of three main areas of intervention: to create the country’s supercomputing infrastructure at the service of research and innovation, to develop and retain a workforce with advanced computing skills, and to implement public policies on info-structure promoting the creation of high-value services and software.
The Portuguese National Cybersecurity Center (CNCS) is the operational coordinator and Portuguese national authority specialized in cybersecurity working with State entities, operators of essential services and digital service providers. On April 2020, CNCS published its National Cybersecurity Framework which adopted most of the NIST´s (U.S. National Institute of Standards and Technology) Cybersecurity Framework. Cybersecurity is a priority for Portugal as cyberattacks increased 79% in 2020 as result of the pandemic and its effects, CNCS already urged increased investment in digital skills, including youth education, artificial intelligence, 5G and cybersecurity asymmetries. This was also a priority during the recent Portuguese EU Presidency, namely investments in networks security and cybersecurity skills as key elements to build a fairer, more resilient, and sustainable Europe able to face future challenges.
Portuguese public opinion is susceptible to government access to shared public data. The National Data Protection Commission (CNPD) is an independent administrative entity with legal authority under public law and administrative and financial autonomy. Portuguese public opinion (and Europe) is very sensitive to government access to public data and recent decisions by CNPD against U.S. firms has raised concerns and the need for an agreement on a privacy shield framework.
Leading Sub-Sectors
Key segments and topics of interest include cybersecurity, internet of things (IoT), big data, health IT, cloud computing, business IT including ERP, Data centers, smart social business platforms, integrated systems, virtual & augmented reality, and digital factory.
Opportunities
There is strong demand for U.S. products and services across all the above segments. Key players like Microsoft, IBM, Oracle, and CISCO are well-established. Cyber training and development are also a focus for the Portuguese government.
The U.S. Embassy in Lisbon and the U.S. Commercial Service Portugal closely follow ICT developments and work with stakeholders such as associations and multipliers and the American Chamber of Commerce in Portugal to identify opportunities and flag policy concerns.
Resources
AICEP Portugal Global – ICT Cluster
Portuguese Regulator for the Communications Sector (ANACOM)
Startup & Entrepreneurial Ecosystem
Science and Technology Foundation
Leading Products – NAICS
- Computer and Electronic Product Manufacturing – 334
- Electronic Computer Manufacturing – 334111
- Communications Equipment Manufacturing – 3342
- Semiconductor and Other Electronic Component Manufacturing – 3344