Electronics Manufacturing: The Achilles’ Heel of EU Strategic Autonomy [Promoted content]

“Any sufficiently advanced technology is indistinguishable from magic.” These words are as resonant today as they were when they were written by science fiction writer Arthur C. Clarke more than 60 years ago. Innovation in artificial intelligence, communications, and energy, in particular, challenges our notions of what is technologically possible while enabling radical transformations in human activity.

Alison James is the Senior Director Europe, Government Relations for IPC

So, it’s no surprise that European policymakers, much like their peers around the world, are increasingly focused on bottling the magic that is tech innovation and establishing regional mechanisms to conjure even more powerful magic that will define the world tomorrow. Indeed, recent legislative acts on AI and semiconductor chips aim to grow European technology leadership to deliver strategic autonomy and economic might in the global marketplace. But European aspirations are likely to fall short without a more comprehensive Competitiveness Deal that sees through the magic to the ecosystem of electronics manufacturers responsible for the technology we rely on every day.

In passing the Chips Act, European policymakers made a strategic decision to bolster one segment of the electronics industry, even as other segments, including those for printed circuit board fabrication and electronic assembly, have continued to lose market share to well-resourced international competition. The less-than-comprehensive EU approach to electronics leaves Europe increasingly dependent on electronics produced abroad.

This over-dependence on electronics manufactured outside of Europe compromises EU efforts to achieve strategic autonomy, as well as initiatives to bolster the defence industrial base and accelerate the digital and green transitions. Electronics are critical to all of these important EU goals because electronics are central to almost every technology.  Electronics are on the backbone of modern innovation, from personal devices to advancements in aerospace, defence, healthcare, renewable energy, and more.

So, it is distressing that, even as the importance of electronics grows, the Europe electronics industry struggles to invest in both capabilities and capacities to remain globally relevant. A new report by IPC, the global electronics manufacturing association, reveals Europe’s growing dependency on other regions for electronics manufacturing in critical and strategic sectors including aerospace/defence, automation, mobility, healthcare, and renewable energy.

The report, Securing EU’s Electronics Ecosystem, reveals a sharp decline in Europe’s electronics manufacturing sector: our global market share in critical electronics production components beyond chips, including printed circuit boards (PCBs), electronic manufacturing services (EMS), and advanced packaging, is set to lag behind global trends and decline from 16.5% to 15 percent by 2035. Europe’s share of electronics manufacturing has fallen significantly in the last two decades despite demand for electronics soaring. Instead of growing its manufacturing capabilities, the EU is highly dependent on non-EU countries, and these dependencies are expected to worsen by 2035 without a strategic response.

The imminent release of the Draghi report demonstrates Europe’s need to bolster its industrial resilience and technological prowess. We are in a pivotal moment to shape policy that recognizes the sector’s critical role. The decisions made now will determine the future of Europe’s electronics manufacturing capacity, and influence our ability to remain a global technology and innovation leader.

In response to these critical vulnerabilities, the European electronics manufacturing industry has called for a dedicated “Electronics Manufacturing Strategy” under the 2024-2029 European Commission mandate. This industry “Call-to-Action” includes support from more than 35 leading European electronics manufacturers and 15 Trade Associations raising awareness for this situation.

The industry recommends policies that:

1. Establish an Electronics Manufacturing Strategy: This should be part of a new Competitiveness Deal, with specific EU targets for electronics manufacturing set for both 2030 and 2035. Introducing a European Minimum Autonomy Threshold (EMAT) for strategically critical electronics supply and manufacturing is crucial.
2. Introduce a Strategic Electronics Manufacturing Act (SEMA): Building on the European Chips Act, the SEMA would strengthen key links of the electronics value chain, from chip and component manufacturing to finished products and devices. This would reduce strategic dependencies and ensure the EU can compete globally.
3. Level the Playing Field through Regulatory and Tax Environment: European electronics manufacturers face disadvantages due to more relaxed regulatory regimes and government subsidies in other regions. The European Commission should work with Member States to introduce duty suspensions on imported base materials and reduce administrative burdens.
4. Enhance collaboration for a Future-Proof Skilled Workforce: The EU must continue addressing the skills gap by providing dedicated funding and coordination across Member States to increase the visibility and attractiveness of electronics manufacturing careers.

As we approach the new EU mandate, the goal is clear: to capture the magic of the world’s most advanced technologies by creating a vibrant and self-sufficient electronics manufacturing ecosystem that meets domestic demand and competes globally. The challenges are significant, but so are the opportunities. Policymakers and industry leaders must come together to chart a path forward that ensures the EU’s industrial resilience, economic prosperity, regional security, and technological sovereignty. With strategic foresight and collaborative effort, the EU can reclaim its leadership in the electronics manufacturing industry and pave the way for a prosperous future. Read our full report for more.

For more information, including the full study and call to action, please visit: www.ipc.org/EU.