"Both representatives of the technology industry and
Mario Draghi's report indicate that the European Union is lagging behind in
terms of the development of modern technologies, such as artificial
intelligence. The problem is, for example, restrictive regulations on personal
data.
Is the European Union becoming an economic bloc that is
lagging behind digitally? Unfortunately, we can answer this question in the
affirmative. After all, the EU's significant backwardness in implementing
modern technologies and creating a digital economy was written about in an
official Brussels document, the EU Competitiveness Report prepared by Mario
Draghi, former President of the European Central Bank.
"The EU's
industrial model has so far been based on the import of advanced technologies
and exports made by the automotive, precision mechanics, chemical, materials and
fashion industries.
It does not take into account the current pace of
technological change.
Since 70% of new value created in the global economy in
the next 10 years will be applied digitally, the risk of the EU losing value is
growing," says Draghi's report.
It indicates that the EU is 80% dependent
on imports of digital products and services and the related infrastructure. In
the years 2013-2023, the EU's global share of revenues in the IT and
communications services market fell from 22% to 18%, while the US share
increased from 30% to 38% and China's increased from 10% to 11%. The
continuation of these trends threatens to clearly outclass Europe in terms of
the development of digital technologies. However, will EU decision-makers be
able to take appropriate steps to reverse or at least slightly weaken these
negative trends?
Lower league players
Sometimes you can hear the opinion that in the case of
digital technologies, "America innovates, China copies and implements them
in its own way, and the EU only regulates them". It is difficult to see
large players from Europe on the global digital market.
Germany has made an
unsuccessful attempt to create its own digital giant in recent years. It ended
with a major financial and espionage scandal. The giant – Wirecard – turned out
to be a scandalous company created by Russian military intelligence.
41%
– this is how much the capitalization of the entire EU
telecommunications sector fell between 2015 and 2023. At the end of last year,
it amounted to around EUR 270 billion.
The Draghi report indicated that out of the ten most popular
online platforms in the EU, six are American and four are Chinese. They have
little to compete with. Of the 24 companies registered under the EU Digital Act
as “very large online platforms”, only 4 are based in the EU, and only 1 (the
Booking.com portal) was considered to be of critical importance to the market.
65% of the EU cloud services market was captured by a total of three US
concerns, and only 16% by companies from Europe. The largest of these European
companies has a mere 2% market share. EU companies account for only 7% of
R&D spending on the internet and software, while American companies account
for 71% and Chinese companies for 15%. In the case of R&D for electronic equipment,
the EU accounts for 12% of global spending, China for 19% and the US for 40%.
USD 397 billion
– this is the capitalisation of the largest technology
company in the European Union, the Dutch company ASML, which manufactures
machines for the production of microprocessors.
There are areas where Europe is doing quite well – such as
the construction of very high-performance computers, intended mainly for
research purposes – but these can be considered specific niches. Where the most
lucrative and future-oriented areas of the market are, Europe clearly loses out
to the competition. Who has a mobile phone with an operating system created in
Europe? Probably only owners of Nokia phones manufactured in the first decade
of the 21st century. The European market belongs to devices with Google's
Android system in 66%, and to gadgets with Apple's iOS system in 34%. There are
European smartphone manufacturers, but they do not constitute significant
competition for manufacturers from the US or Asia. Apple has 33% of the EU
mobile device market, Samsung from Korea 31%, and Xiaomi from China 15%.
4
– only so many companies from the EU are included in the
group of 50 largest technology companies. Apart from ASML, these are: German
SAP and Siemens and French Schneider Electric
The European Union is also very late to the start in the
race for the development of artificial intelligence technology. It is mainly
dominated by players from overseas and from the Middle Kingdom. 73% of
artificial intelligence models created since 2017 were created in the US, and
15% in China. Americans and Chinese also have a big advantage in financing
start-ups dealing with artificial intelligence. While in 2023 venture capital
funds made investments worth USD 8 billion in the EU, in the US they allocated
USD 68 billion for this purpose, and in China USD 15 billion. (To this should
be added the large sums spent on supporting AI research by state institutions
in the US and the People's Republic of China.) "The pool of talent needed
to work on artificial intelligence is smaller in the EU, and highly qualified
specialists are often tempted by higher wages abroad," admits Draghi's
report.
7%
- this was the share of the European Union in global
semiconductor production in 2023. Their market in the EU is estimated at USD 57
billion, while in the world - at USD 520 billion.
The quality of digital infrastructure in the EU is also a
problem. Only 56% of households in the EU have access to the Internet via
optical fiber. 5G Internet reaches 81% of the EU population, while in China and
the US it reaches about 95% of the population. European operators, however, are
unable to provide satellite internet of the same quality as Elon Musk's
Starlink.
A wealth of regulations
The Draghi report contains a number of recommendations for
improving the EU's competitiveness. Most of them boil down to ensuring huge
investments in individual sectors of the economy or increasing the integration
and centralization of the Union. Whether Brussels will manage to create large
investment packages is a very doubtful issue. However, it seems certain that EU
institutions will strive to strengthen their power. But what will they do with
this power? Will they provide the Union with a development impulse or produce
more tons of paper printed with unclear regulations?
One of the regulations with which the EU bureaucracy has
"made" Europeans happy is the GDPR, or the regulation on the
protection of personal data, which came into force in 2018. Its most visible
effect is that annoying pop-up windows have appeared on websites containing
long and difficult to understand texts explaining how a given website uses the
data of its visitors. In addition, many institutions have created positions for
GDPR specialists, and more documents regarding the use of personal data need to
be signed. GDPR may also become one of the barriers to the development of
artificial intelligence in Europe.
“Differences between member states in the implementation and
enforcement of GDPR, as well as areas of its potential non-compliance with the
provisions of the Artificial Intelligence Act, create a risk that European
companies will be excluded from early AI innovations, due to regulatory
uncertainty and obstacles to the development of artificial intelligence by EU
researchers and innovators,” Draghi’s report indicates.
Brussels prides itself on having created the world’s first
comprehensive set of regulations on artificial intelligence. However,
technology companies fear that these regulations will prove too vague. In
September, nearly 60 companies signed an open letter initiated by the Meta
group calling on the EU to provide greater clarity on the issue of regulation.
They warned that Europe could become a continent lagging behind in terms of
building open AI models.
Cheaper electricity is needed to develop artificial
intelligence
One of the key factors for developing artificial
intelligence is relatively cheap electricity. After all, data processing
centers consume huge amounts of electricity. Meanwhile, electricity is
expensive in many European Union countries.
The EU competitiveness report
prepared by Mario Draghi, former president of the European Central Bank, quotes
calculations stating that retail electricity prices in the EU are on average
two to three times higher than in the US and China.
The situation in this
respect has deteriorated significantly over the last five years. In 2019,
retail electricity prices in the EU were "only" 80 percent higher
than in the US, and their level was similar to that in China. However, there
have been very large differences between individual Member States in recent
years. In some, electricity prices for consumers exceeded EUR 250 per 1 MWh,
and in others they were below EUR 100 per 1 MWh. The Draghi report points to
Europe's high dependence on imported energy resources as one of the causes of
the energy crisis. However, other reasons for high electricity prices in Europe
are also easy to see: the closure of nuclear power plants by some countries and
the operation of the CO2 emissions trading system.
The Draghi report indicates
that natural gas is sold to EU consumers at prices three to five times higher
than in the US.
One of the reasons that Americans benefit from cheap gas is the
widespread use of hydraulic fracturing technology to extract the raw material
from shale deposits. In Europe, however, the use of this technology has met
with considerable social opposition, fueled by environmental organizations.
Countries such as Germany and Austria have for years treated Russia as a source
of reliable energy and relatively cheap supplies of blue fuel."
Chancellor of Germany Scholz ended that, when he declared a
turn to militarism (Zeitenwende), supported sanctions on Russian energy,
cutting the main supply of cheap energy for Europe. German voters are looking
to make an Ende to his Zeitenwende and to him in politics too. What a pathetic
loser…
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