Beyond the Draghi Report: Practical Insights on Energizing Europe’s Electronics Industry

As the Draghi report sounds the alarm on Europe’s waning competitiveness, industry veteran Peter Vijverberg offers a blueprint for action. From regulatory overhauls to strategic investments, discover how Europe can reclaim its place in the global tech race – before it’s too late.

The recently released report by former European Central Bank president Mario Draghi on European competitiveness isn’t just another policy document—it’s a stark warning about the continent’s economic future. As Europe’s tech sector faces unprecedented challenges, industry leaders are grappling with how to translate broad recommendations into actionable steps.

Peter Vijverberg, President and COO at Hirose Electric Europe B.V., a leading global supplier of innovative interconnects, offers a ground-level perspective on the challenges and opportunities facing Europe’s electronics industry.

“The biggest opportunity for the European electronics industry is making sure that the production and knowledge is kept within Europe,” Mr. Vijverberg asserts. This includes not only ensuring that Europe is a hub for high-level innovation, but that existing skilled workers are motivated and retained.

This emphasis on retaining talent and innovation encapsulates the core challenge―and potential solution―for Europe’s tech sector. With a view from the frontlines of European manufacturing, Mr. Vijverberg’s insights underscore the critical need for supply chain resilience in electronics.

The Innovation Gap: More Than Just R&D

Mr. Vijverberg points out that the innovation gap extends beyond pure technological advancement. “The top four connector suppliers are all from the US,” he notes, highlighting a competitive deficit even in established electronics sectors.

This gap stems not just from R&D capabilities, but from deeper issues of market understanding and responsiveness. “The technical challenges and the understanding of the customer requirements is still a hurdle we must take,” he notes. To meet this need, he notes that Hirose Europe is increasing both its R&D knowledge and level of internal training.

While European and Japanese firms often excel in quality and customer focus, they can lag in standardization and time-to-market―critical factors in today’s fast-paced tech landscape.

For C-suite executives, this is a call to action.

It’s time to reassess how your R&D teams operate. Are they in sync with market demands, or are they creating solutions in search of problems? European firms need to master the art of rapid prototyping and market responsiveness, or risk being left behind.

Regulatory Hurdles and Global Competition

One of the most significant barriers to scaling innovative products in Europe is the complex web of legislation and country-specific requirements. Mr. Vijverberg cites the battery production industry as a case study: less stringent health, safety, and environmental regulations in Asia allow for more competitive pricing, effectively shutting European producers out of the market.

This regulatory imbalance creates a paradoxical situation where products that cannot be produced in Europe due to environmental concerns can still be imported and sold.

Pointing to America’s aggressive investment in localising battery production as part of Inflation Reduction Act, Mr. Vijverberg urges Europe to adopt policies that attract “technical skilled workers” and “knowledge from stronger countries” to bolster its own manufacturing capabilities.

The Talent Drain and Knowledge Transfer

The report’s observation that European entrepreneurs often seek American venture capital is part of a broader trend of knowledge and talent outflow. Mr. Vijverberg notes that much of the US’s growth in tech sectors has come from acquiring and commercializing European patents and expertise.

To stop the exodus of innovative companies, Mr. Vijverberg suggests Europe overhauls its regulatory landscape, especially for high growth startups. He adds that offering incentives to EMEA businesses focusing on high-tech development could further stimulate innovation.

Mr. Vijverberg supports reforms that could create a more unified approach to funding the next generation of European tech startups, with a push for benefits that could stem the flow of innovative companies out of the region.

Energy Costs and Competitiveness

High energy prices remain a significant drag on European competitiveness. In the electronics sector, these costs are inevitably passed on to consumers, making European products less attractive in global markets. This not only impacts sales but also hampers new technical developments within Europe.

Mr. Vijverberg suggests that investing in renewable energy sources like solar could help mitigate these costs while aligning with Europe’s sustainability goals. However, he notes that while existing energy infrastructure could prove a bottleneck to this goal, a strong EU-led incentive scheme and a push towards stronger cross-border energy grids could turn the tide.

Mr. Vijverberg notes that recent global disruptions have led his customers to demand more localized production, with benefits not just for supply chain security but also for sustainability. “This will also well benefit de-carbonisation as delivery routes have a big impact on CO2 emissions,” he explains.

Investing in Strategic Sectors

Mr. Vijverberg agrees with Draghi’s call for massive investment as a defence against the innovation gap with the US and China, but emphasizes the need for strategic focus. He identifies factory automation, infrastructure, and the vehicle market as key areas that could benefit from increased R&D spending. However, he notes that current investment levels fall short of targets, with actual spending around 2.3% of GDP versus a 3% goal.

Looking Ahead: Opportunities for Global Competitiveness

Despite the challenges, Mr. Vijverberg sees significant opportunities for Europe to reassert its global competitiveness in electronics. He emphasizes Europe’s leading position in sustainability and energy-efficient design as key advantages. However, capitalizing on these strengths will require a concerted effort to unify Europe’s fragmented markets into a more cohesive and powerful economic bloc.

From Report to Action

The Draghi report has laid out a vision for revitalizing Europe’s economy, but the real work lies in implementation. Put bluntly, the report cannot be seen as just another policy document, but as a blueprint for Europe’s technological renaissance.

Mr. Vijverberg’s insights from the industry frontlines underscore the urgency of this mission. “The biggest opportunity for the European electronics industry is making sure that the production and knowledge is kept within Europe,” he asserts. “If Europe is able to unify the defragmented single markets to one powerful market, its global competitiveness will get much stronger.”

Industry leaders like Mr. Vijverberg offer crucial insights into the practical challenges and opportunities that lie ahead. By addressing regulatory imbalances, investing strategically in key sectors, and creating a more supportive environment for innovation and scaling, Europe can begin to close the competitiveness gap.

The path forward will require not just government action, but a collaborative effort between policymakers, industry leaders, and the broader business community to turn vision into reality.

Executive highlights:

1. Boost R&D: Increase spending and focus on market-driven innovation.
2. Regulatory Reform: Push for global standards while streamlining local regulations.
3. Talent Retention: Create an environment that nurtures high-growth companies.
4. Energy Strategy: Invest in renewables and push for cross-border energy infrastructure.
5. Sector Prioritization: Focus on factory automation, infrastructure, and vehicle markets.
6. Supply Chain Resilience: Localize production where possible.
7. Financial Integration: Champion a more unified European capital market.
8. Sustainability Leadership: Capitalize on Europe’s green tech advantage.