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European Commission

MEMO

Brussels, 23 May 2013

New Electronics Strategy: what's in it for the economy?

IP/13/455

Some figures as to why micro and nano-electronics are important:

In Europe, more than 200.000 people are directly employed in micro- and nano-electronics and the demand for skills is unceasing.

The global turnover of the micro- and nano-electronics industry alone was around €230 billion in 2012. The value of products comprising micro- and nano-electronic components and systems represents around €1 600 billion of value worldwide, supporting 10% of global GDP

Despite the recent financial and economic setbacks, the worldwide market for micro- and nano-electronics has grown by 5% per year since 2000, and this will continue through 2020 and beyond.

The pace of innovation in micro- and nano-electronics is the main driver behind the high growth rates of the whole digital sector (Digiworld report, IDATE 2012).

Do we need this strategy? Aren't industry and Member States already investing enough? What is the value added of the strategy?

Yes a strategy is needed and it is needed now.

In Europe we need to cooperate, focus on areas of strengths (world-leading clusters and competitive industries in key sectors), bring together resources at EU, national and regional level to create critical mass and invest in skills. No single Member State – no single company in Europe has the resources to keep up with the speed of technology development and the high costs of R&D&I. Without a strategy Europe is at risk of losing the capability to design and manufacture electronic components that constitute the essential building blocks of society and the digital economy.

Although in absolute terms investment by European companies is high (in the order of billions of euros), this investment is relatively modest compared to elsewhere. Europe's attractiveness for businesses however is high given the size of our market.

In Asia, micro- and nano-electronics are considered as strategic. That is not so evident in Europe. A piecemeal approach will not help, given the challenges ahead and the size of the investments needed. A strategy is critical to be able to coordinate efforts and scarce resources in Europe in order to reduce fragmentation, avoid overlaps/redundancy and focus efforts to strengthen the innovation and value chains in Europe in the interest of its industry in regions, Member States and the EU.

How exactly will the strategy support investment in the field?

The strategy will:

  1. Support R&D&I through funding using grants;

  2. Develop a manufacturing and piloting infrastructure for SMEs, start-ups, to bridge the innovation gap and connect design with deployment;

  3. Facilitate access to financing through facilitating loans and equities, notably regional funds and the innovation schemes of the European Investment Bank.

How much funding is already agreed? How much of the funding comes from industry, how much from Member States and how much from the EU?

The Communication mentions bringing together €1.5 billion per year for R&D&I. This funding is to come from the EU and from national and regional funds. Industry itself is expected to take on board the main part of the investment. The micro- and nano-electronics industry is very R&D intensive – between 15 and 20% of the turnover is typically spent on R&D.

The total planned public investment in R&D&I over the next seven years is around €5 billion, to be matched by the private sector. About 30% of the public investment is expected to come from the EU. The EU support will gradually increase over the next 7 years. As a result the EU yearly investment in 2020 will be almost double that of 2011. EU funding will come through HORIZON 2020. The budget for HORIZON 2020 is not yet decided. Within HORIZON 2020 micro- and nano-electronics components and systems will be supported through the 'Leadership in Enabling and Industrial Technologies' pillar. It is expected that Member States will at least match the EU contribution. Regions are expected to participate in a significant manner as they will have an immediate return.

Recent experience gained in the launch of manufacturing pilot lines, i.e. projects that are closer to the market/innovation, has shown that industry is willing to contribute up to 60-70% of the R&D&I costs.

What kind of commitment has the industry given? Where does the €100 billion investment figure by industry come from?

In November 2012 the companies and institutes in Europe's nano-electronics eco-system proposed a strategy on 'Innovation for the future of Europe: Nano-electronics beyond 2020.' The strategy proposed a research and innovation programme with a total investment of 100 billion euro up to 2020. The programme aims to increase world-wide revenues of the European semiconductor industry and strategically important end-user applications segments by over 200 billion euro per year and create an additional 250.000 direct and indirect jobs in Europe.

Industry estimates that the total investment needed between now and 2020 is 85 billion euro in operational costs and 15 billion euro in capital expenditures. This investment is deemed to be necessary to safeguard the long-term amplification and renewal of large-scale semiconductor manufacturing in Europe. Innovative SMEs will benefit from access to the eco-system, gaining scale and competitiveness and fostering job creation in Europe along the value chain.

All phases of the innovation cycle will be addressed, from Technology Readiness Level (TRL) 2 (technology concept formulated) to TRL 8 (system complete and qualified).

What is the role of research institutes in the strategy? What is the role of clusters? How did you decide which clusters to focus your efforts?

Research institutes are a cornerstone. Europe's micro- and nano-electronics industry is concentrated around a few major regional production and design sites. These centres have built over decades an impressive infrastructure, including clean rooms (special facilities with exceptionally clean air so as to avoid damage to the produced chips). They have access to the latest technology/equipment and attract talents from across the globe. It is essential to make the best use of these centres in the interest of the industry in Europe. Research centres and large industries are strongly anchored in these regions and clusters of innovative companies, mainly SME's, organically emerged.

We need clusters because no single organisation or research centre can be "on top" of all technologies - strategic choices need to be made, strategic grouping need to be formed, funding must be prioritised.

Therefore the focus will be some 10 centres/clusters in Europe, at least three of which are of global importance (Dresden, Grenoble and Leuven-Eindhoven). This does not imply that only these centres/clusters/regions will benefit from the strategy. On the contrary, the strategy is aimed to involve all actors along the value and innovation chain. The economic footprint of the micro- and nano-electronics industry is extensive and covers many Member States and hundreds of suppliers, mostly SMEs.

With respect to these centres the strategy is

  1. "specialisation" to ensure excellence,

  2. collaboration in the value chain,

  3. intensified collaboration,

  4. putting the research infrastructure at the use of industry including SMEs for the design and advanced manufacturing of electronic components and systems.

Specialisation will enable Europe to invest in the three tracks that are shaping future electronics: further miniaturisation - More Moore (referring to "Moore's law", an empirical observation according to which processing speeds double roughly every 18 months, first stated in the 1960s), extended functionality - More than Moore and advanced manufacturing - 450 mm wafers (a wafer is an input material out of which chips are produced).

This clustering and regional specialisation is essential for the future development of the sector to face the high complexity of building components that nowadays contain billions of individual devices of nano-metric dimensions. Such complexity can only be addressed by combining the know-how of many actors: suppliers, equipment manufacturers and advanced laboratories. The efficiency of collaboration is significantly improved when R&D&I is done in clusters. Clusters tend to attract/develop the eco-system/suppliers/technology needed for this type of industry.

Can the EU, Member States and regions afford to spend that much at a time of crisis?

Electronics is an industry that generates growth even in times of crisis. Despite the adverse economic conditions, the global market for micro- and nano-electronics has grown by 5% per year since 2000. At least similar rates of growth are expected for the rest of this decade.

This is not an opportunity to be missed. The strategy aims at unleashing an investment in electronics of up to 100 billion euros up to 2020.

Europe has the choice – either it steps up its investments to a meaningful level or it faces the cost of being dependent and having to import in future essential building blocks for its digital economy including its security. Once the capability and capacity to design and manufacture electronics is gone it will be near to impossible to regain it - one generation of technology missed means the incapacity to return without excessive costs. Indeed, the levels of investments, know-how and experience to be able to manufacture a given generation of components are very high and are incremental.

To remain competitive investments in Europe need to be on a par with the other regions. This is the only way to avoid dependency in Europe and the Member States. Close proximity and intense interaction between the providers and users of advanced components and interaction facilitates effective and fast innovation.

How will European society benefit from this strategy?

Micro- and nano-electronics are not only the computing power in PCs and mobile devices. They fulfil also the sensing, actuating, interaction and computing functions found in almost all artefacts including for example in smart meters and smart grids for lower energy consumption, or in implants and sophisticated medical equipment for better healthcare and for helping the elderly population. They are the building blocks for better security, for higher safety and efficiency of the whole transport systems and for real-time environmental monitoring. Today no societal challenge can be successfully met without electronics.

How will SMEs benefit from this strategy?

SMEs play a key role in emerging areas like plastic and organic electronics, smart integrated systems and in general in the field of design. Some of the markets they serve are currently niche but with double digit growth rates.

One of the main aims of the strategy is to better integrate SMEs in value chains, and provide them with premium access to state-of-the-art technologies and R&D facilities. Support to embed micro- and nano-electronics in all types of products and services will be essential to spur innovation across the economy including non-technology SMEs.

EU–wide partnerships between end-user industries, public authorities and suppliers (large and small) of micro- and nano-electronics will help open up new high growth areas like electric vehicles, energy-efficient buildings and smart cities and all types of mobile web services. For public sector markets, public procurement of innovations will facilitate market development.

Can Europe really remain/become a world player?

Europe has considerable assets in micro- and nano-electronics, among them an excellent academic research community and industrial leadership markets such as electronics for automotives (around 50% of global production), for energy application (around 40%), for industrial automation (around 35%), while it is also strong in designing electronics for mobile communications.

European companies are also very strong in the areas of semiconductor manufacturing equipment and materials supply.

European companies, including a large number of SMEs, are world leaders in smart micro-systems like health implants and sensing technologies. Although these currently represent niche markets, they are areas of high growth (above 12% per year).

Building on these strengths and mobilising the resources needed should make Europe a major player in micro- and nano-electronics. Mobilising resources will need close coordination of actions at regional, national and European level. This will build confidence and stimulate the renewal and growth of manufacturing capability in Europe. Public investment in R&D and policies to attract private investment remains highly fragmented across the EU despite the progress made in the last five years. Considering that European R&D in micro and nano-electronics is world-class and attractive to international players, bringing together resources and coordinating activity in the field could bring even better results.

How can this be achieved? Firstly, by putting emphasis on reinforcing and building on the excellence of research and technology organisations (RTOs) in terms of facilities and staff. They should be the "place to be" for talented engineers and researchers in the field, at the centre of ecosystems to attract private investments in manufacturing and design. Secondly, further progress towards complementary specialisation and stronger cooperation between the main RTOs will be a key for success, maximising return on investment and ensuring excellence. Thirdly, the strategy aims to ensure the further uptake of electronics in all industrial sectors, while close cross-border and cross-sector collaborations (including with end-user) industries will be reinforced to exploit the benefits of cross-disciplinary work.

Have the two Joint Technology Initiatives ENIAC and ARTEMIS failed? Why are they replaced?

Not at all – independent evaluations of both Joint Technology Initiatives (JTIs) on embedded computing systems (ARTEMIS) and on nano-electronics (ENIAC) acknowledged the value of the JTI's and recommended a continuation – albeit with a number of simplifications.

In the period 2008-2011, the two JTIs supported a total of 84 projects (44 for ARTEMIS JU and 40 for ENIAC JU).

ENIAC defined and implemented a Research Agenda strengthening the relevant areas in which Europe improved its competitiveness by directing funding to the priority subjects. It is thus far the only mechanism that engaged in concretely implementing the recommendations of the High-Level Group on Key Enabling Technologies of 2011. It introduced a new quality of collaboration between the stakeholders that resulted in remarkable progress and provides a solid basis for the future strategic perspectives.

ARTEMIS has achieved its high-level goals of reducing fragmentation by enlarging the typical project 'footprint' at a European level. "Centres of Innovation Excellence" (CoIE) - a formalization of the "Self-sustaining Innovation Ecosystem" concept – were created notably on safety-critical (electronic) engineering, on process automation and on energy-efficiency in intelligent buildings.

For both JTIs, the first projects approaching completion demonstrated significant advances of the state of the art strengthening the global competitive position of the European industry. Furthermore the participation rate of SMEs is high (above 35% for both) showing the effectiveness of both programmes to engage smaller actors and raise innovation in Europe.

The two JTI's were set up in the context of Framework Programme 7 and to allow new investments a new initiative in HORIZON 2020 is needed. The new JTI will build on lessons learnt from the current ones and provide a simplified funding structure.

The implementation of the future Joint Technology Initiative through a single tripartite public private partnership will happen on a legal basis that will better take into account its specificities in line with the Horizon 2020 proposal.

The scope of the programme will cover the areas of the current ENIAC and ARTEMIS JTIs with a bridging by part of the activities of the current EPoSS European Technology Platform. At the same time, in order to better address the issues of transforming R&D into marketable products, the JTI will cover the Technology Readiness Levels of 2 to 8 (over a scale of 9). While continuing to fund research, this broadening of project types will allow strategic projects to be supported for implementing research and innovation, such as pilot lines and demonstration projects.


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