Standard Industrial Classification (SIC)

What is Standard Industrial Classification (SIC)?

The Standard Industrial Classification (SIC) is a system developed by the United States government to classify industries based on a four-digit code. This classification system was established in 1937 and has been widely used to categorize businesses and industries in the country. However, it is important to note that the SIC system is gradually being replaced by the North American Industry Classification System (NAICS), which was introduced in 1997 and utilizes a six-digit code.

The purpose of the SIC system is to provide a standardized method for organizing and analyzing data related to different industries. By assigning a unique code to each industry, it becomes easier to compare and contrast businesses within the same sector. This classification system helps government agencies, researchers, and businesses themselves to better understand the structure and dynamics of various industries.

While the SIC system is being phased out, certain government departments and agencies, such as the U.S. Securities and Exchange Commission (SEC), still rely on SIC codes for regulatory and reporting purposes. These codes are used to identify and track companies operating in specific industries, facilitating the analysis of financial data and market trends.

The SIC codes are based on a hierarchical structure, with the first two digits representing the major industry group, the third digit indicating the industry group, and the fourth digit specifying the specific industry. For example, the SIC code 3571 represents the industry group "Electronic Computers" within the major industry group of "Electronic and Other Electrical Equipment and Components."

The transition from the SIC system to the NAICS system was driven by the need for a more comprehensive and up-to-date classification system. The NAICS system provides a more detailed and flexible framework for classifying industries, allowing for better analysis and comparison across North American countries. It also reflects the evolving nature of industries and incorporates emerging sectors that were not adequately represented in the SIC system.

In conclusion, the Standard Industrial Classification (SIC) is a classification system developed by the United States government to categorize industries based on a four-digit code. While it is being replaced by the North American Industry Classification System (NAICS), the SIC codes are still used by certain government departments and agencies. The SIC system provides a standardized method for organizing and analyzing industry data, facilitating comparisons and analysis within specific sectors.