European innovation is “in check” and Europe is in a situation of “high technological vulnerability”. This is the main conclusion of a report by the strategic consultancy Kearney, which reveals that 20% of Europe’s total gross value added depends both directly and indirectly on high-tech components, which makes technology and innovation “in a non-negotiable requirement ”for some of the most important industries in Europe, and millions of jobs they create, such as the automotive, industrial, financial sector or the retail. “But it is not only vital for these industries, it is also an essential requirement to ensure the sovereignty, geostrategic and economic independence of the different countries,” the consultancy underlines.
In terms of spending In R&D, Europe invests practically 25% less in absolute value than the US and China. And the Old Continent lags behind those two countries and Japan in terms of the number of high-tech patents, with only 855,000 registered in Europe until 2020, compared to 1.4 million in China (63% more).
The report notes that Germany, Europe’s R&D powerhouse, has the capacity to compete globally with major players such as South Korea and Japan. However, when it comes to the UK, France, Italy or Spain, the outlook looks devastating, both in terms of percentages and absolute figures for R&D spending, and this means that the EU of 27 is lagging far behind. back against the two superpowers.
Another data that shows the delay of the European region has to do with graduates in scientific-technological disciplines per year: 1.3 million in Europe compared to 5.5 million in China.
“It is not surprising that China is developing a workforce of STEM graduates, but the numbers are not necessarily the problem. The most important question is whether it is sufficient to meet current and future demand from the high-tech industry. And data from Europe shows an apparent paradox: With the region producing 1.3 million STEM graduates, there are only 539,000 jobs actually available. In other words, Europe has an oversupply of qualified graduates ”, Nicolás Sanz, Kearney partner in Iberia and leader of the Aerospace and Defense area in Europe, tells CincoDías.
The report warns of another worrying fact: European high-tech companies have a presence in the top 5 of the ranking in only eight of the 21 segments of technological products and services dominated, almost entirely, by Chinese companies ”. Those eight segments are electrical components, sensors, software, robotics, IT services, consumer applications, radio access networks (RANs) and core equipment, and telecommunications networks.
According to Kearney’s analysis, the global technology sector (made up of the components and systems industry) today is worth an estimated $ 1.2 trillion, and its value has grown 14.5% since 2014. And if you look at it more broadly, including products and services for the end consumer, its value is five times higher and increases to $ 5.65 trillion. Likewise, and as the study points out, high technology represents up to 8% of world GDP and its impact does not stop growing, as an increasing number of industries depend on high-tech components directly or indirectly.
In this context, Sanz insists, “Europe continues to lose ground in the world battle for economic independence from China and the United States, which creates important geostrategic and economic risks for the region”Continues Sanz. The strategic consultancy urges in its report to bet and accelerate four axes for the future to shorten distances: increase spending on R&D, stimulate patent registration, increase production capacity, for example, of semiconductors and batteries, and synchronize technological talent with the needs of companies. Likewise, the consulting firm considers it imperative protect geostrategic technology assets and foster the creation of European champions through mergers and acquisitions. The effective use of Next Gen funds represents a unique opportunity for Europe ”.
According to Kearney, artificial intelligence, sensors, batteries, microcontrollers and microprocessors, the cloud and connectivity are the technologies that most stimulate innovation and growth in almost every industry.
The consulting firm warns of the growing threat of disruptions in supply chains, a situation that has been highlighted by the Covid-19 pandemic and the stoppages in remote production and manufacturing chains. Sanz points out that “six out of ten European executives (58%) see a high or very high dependence of their company on China for the delivery of high-tech components.”
The report specifically talks about the current serious problem in the supply of semiconductors, a fact that has led the EU to include in its 2030 strategy that 20% of the latest generation chips manufactured in the world are made in Europe.
“The recent increase in demand for chips by certain industries (some related to 5G, white goods and automotive, among others), has led to a lack of production capacity of many manufacturers, with portfolios of historical orders ”, highlights the report, which also highlights constant disruptions in supply chains, longer waiting times and generalized price rises, prioritizing short-term supply assurance.
Therefore, continues Sanz, Kearney urges to apply a series of measures. “Companies should increase their resilience to global technology supply disruption applying measures throughout the supply chain, from R&D, innovation and patent development to supply and manufacturing itself. But European governments must back it up with measures: from tax incentives to increase the attractiveness of high-tech investments to boosting talent training ”.
Sanz, who points out that the situation in Spain is more complicated than in other European countries, such as Germany, “we invest six times less in R&D”, believes that there is a “great opportunity now with Next Gen funds to promote and scale our technological capabilities and create companies with more scale to compete globally ”.