Sabine Herlitschka and Jean-Luc di Paola-Galloni explain the importance of supporting R&D in the Electronic Components and Systems (ECS) sector for the future of European industry
By 2020, Electronic Components and Systems (ECS) will enable around 50% of European GDP, much of this driven by trends in smart mobility, mobile communications and Industry 4.0. It’s a telling figure, pointing to where the heart of Europe’s industrial future lies – in ECS-based digital technologies. This digital industrial landscape will be key to European competitiveness and jobs. It will also determine Europe’s ability to maintain its societal model, specifically its sovereignty, values and quality of life. As the European Commission designs Horizon Europe, the next European research and innovation (R&I) framework, joint strategy, funding and implementation of advances in ECS have never been more important.
When the European ECS community meets at EFECS 2018 (European Forum for ECS) in November in Lisbon, Portugal (for which SciTech Europa is acting as a media partner), it will discuss Research, Development and Innovation (RD&I) strategy against a backdrop of a changing industrial landscape. Increasingly, most of the economic value of in a huge array of products, from cars to medical devices, is now embodied in electronic components and systems (integrated combinations of hardware and software).
Economic and societal impacts
Sabine Herlitschka, CEO of Infineon Technologies Austria AG and chair of the ECSEL Joint Undertaking (JU) Governing Board, said: “The electronics industry makes a significant contribution to global GDP. In 2017, the global semiconductor industry was worth some US$400bn [~€345.9bn]; this in turn contributed to a worldwide electronics market valued at $2,000bn. And we can expect this to grow significantly. I’m convinced that the figure of 50% of European GDP based on ECS-enabled technologies is a conservative estimate.”
This growth is being driven by ever-greater digitalisation, and technological revolutions in areas such as the Internet of Things (IoT), big data, artificial intelligence (AI), new computing paradigms and robotics. Moreover, as digitalisation advances, the global community is turning to electronic components and systems to tackle the major societal, economic and environmental challenges of our age.
“One key application is energy efficiency and the de-carbonisation of energy supplies. There’s still much to do. Even today, 80% of global energy consumption comes from fossil sources,” Herlitschka said.
Jean-Luc di Paola-Galloni, corporate vice-president for sustainability and external Affairs at Valeo who is also the president of ARTEMIS-IA and head of the ECSEL JU Private Members Board, added: “In automotive and mobility, de-carbonisation and hence electrification is a major trend, along with new business models like connected, electric car-sharing. Because of the progressive introduction of big data and AI, similar major shifts are taking place in other digital applications as well – look at healthcare, where there’s growing focus on prevention and reducing the need for hospital stays.”
Industry and manufacturing themselves are being revolutionised by digital technologies. The ‘Industry 4.0’ transformation is set to boost productivity, quality and flexibility, while creating new kinds of jobs better suited to human talents and capacities.
New industrial landscape
Worldwide, digitalisation is creating a new industrial landscape that traditional industry will need to cope with. “It comes at a time when governments are applying the lessons of the 2008 financial crisis, which showed that countries with the strongest industrial bases were proportionally less affected. Consequently, many governments now see industrial growth as key to national resilience and security, as well economic prosperity,” says Herlitschka.
In the USA, this is reflected in its ‘America First’ policy and growing protectionism, along with increased scrutiny of foreign investment on national security grounds. At the same time, the US’s culture of innovation and investment have led to flourishing research in strategic domains such as AI – the US has more AI companies and AI-related patents than any other country.
Likewise in Asia, massive corporate wealth and governmental funds are flowing into ECS-related research and innovation. Currently, China is investing $150bn to build world-leading competencies in all key areas of the semiconductor industry by 2030. It is also developing one of the world’s largest AI applications in its ‘social credit’ database that will rank every citizen on the basis of fiscal and government fiscal information by 2020.
“This isn’t just an economic revolution. These new industrial realities are becoming the drivers of political and cultural competition as well. Companies such as Google, Amazon and Alibaba illustrate how technological strength now translates into global impact and influence,” Herlitschka explained.
Building on Europe’s strengths
For Europe, this new landscape presents opportunities, internally and in global export markets – from the strong economies of the USA, China and South East Asia, to a rapidly-growing Africa.
“Europe is a world leader in automotive, and it’s crucial that we keep this position. We have plenty of scope to be ahead in technologies like intelligent embedded systems. And Europe is well-placed to provide ECS for the electrification of transport. In China, which is the number one in implementing electro-mobility, European companies can have a strong presence as technology solution providers,” says di Paola-Galloni.
In the medical sector, Europe has successful global players and an ecosystem of innovative ‘medtech’ SMEs able to deliver new applications and technologies as care and prevention shift from hospitals to home. Similarly, European companies have potential to compete in global markets for innovative electronic components and systems to enable renewable energy distribution and energy efficient manufacturing. And in Industry 4.0., Europe has world-class enterprises in both using and supplying equipment and services for the new age of customised mass production.
“Europe needs to be smart and turn its distinctive values into opportunities. For instance, Europe leads the world in standards for sustainability throughout global supply chains. By pushing for world trading conditions that demand higher levels of social and environmental sustainability in innovation, Europe could establish itself as a leader in the provision of sustainable technology,” di Paola-Galloni concluded.
Taking European opportunities further
According to Herlitschka: “To fulfil its potential in the digital world, Europe requires a clear strategic vision. We need to act together and at a faster pace. Europe has been talking about a first IPCEI (Important Project of Common European Interest) in micro-electronics for three years. In the semiconductor industry, that’s a huge amount of time. Plus, we need the right skills. Education and talent development are vital to Europe’s ECS industry.”
di Paola-Galloni emphasises the need for well-targeted funding in RD&I: “We must look at where new business models are going, and make sure we get the content right – user friendly technology at a good cost. That’s key to social and economic impact. It’s also a question of choices about where Europe plays and where it doesn’t, and of making more of Europe’s unique advantages.”
One of these advantages is Europe’s ability to collaborate, as in the European ECSEL JU and the transnational EUREKA network, which bring together the European electronic components and systems supply chain, research institutes and academia, the European Commission and member states. This kind of pre-competitive, collaborative research that combines a mix of nationalities, size of companies and different perspectives, adds value to accelerate research, avoid duplication and share the burden of costs.
“Everyone stands to gain – not just big companies but SMEs, and all the countries involved. Many of the EU’s smaller members have a lot to contribute in terms of innovation, such as Lithuania in FinTech and Estonia in cyber-security. We can combine advances and preserve leadership in varied domains, which differ from one European country to another,” di Paola-Galloni argues.
The importance of collaborative dialogue
Joint programmes and forums like EFECS enable the entire electronic components and systems community to co-define a baseline of essential capabilities (e.g. connectivity, embedded/smart systems) which are relevant across multiple application domains. By looking into supply chains, the ECS industry can identify where the real value lies in the chain, and which technologies need to be protected, maintained or developed. Furthermore, RD&I priorities can be tailored to digital business models that frequently involve eco-systems of partners, from service providers to suppliers of the underlying hardware.
Moreover, by engaging with all stakeholders, from policy makers to startups within the ECS community and beyond, the European electronic components and systems industry can raise critical issues. What is the right balance between pursuing big breakthroughs and incremental innovation? How can European state aid regulation be fitted to the new industrial landscape? And how to ensure Europe benefits if it funds projects involving multinational companies headquartered outside of Europe?
Some of these issues are fundamental to European values and sovereignty. In areas such as cyber- security and defense, maintaining European autonomy in key ECS technologies is crucial at a time of growing global protectionism. Whereas, in the data industry, it is the dominance of US giants that has led to business models which are out of step with European values on data security and privacy.
“We should ensure we have crucial, strategic technologies that allow us to maintain and develop Europe’s societal, economic and political model. Otherwise we will depend on technologies from elsewhere which come with other values. In the digital world, key enabling technologies such as ECS and industrial power are the new geopolitical currency. They will determine not only competitive strength but economic autonomy, security and societal sovereignty,” concludes Herlitschka.
Chair of ECSEL-JU Governing Board
CEO Infineon Technologies Austria AG
Jean-Luc di Paola-Galloni
Chair of ECSEL-JU Private
Corporate Vice-President for Sustainability and External Affairs Valeo
This article will appear in SciTech Europa Quarterly issue 28, which will be published in September, 2018.