Study: Europe is behind on almost all critical technologies; current economic security strategy is too defensive

A new study by DIGITALEUROPE paints a concerning picture of Europe’s performance in critical technology sectors. The study, titled ‘The EU’s critical gap: Rethinking economic security to put Europe back on the map’’ analyses the EU’s standing across eight of the critical technology areas outlined in the EU’s Economic Security Strategy – semiconductors, AI, manufacturing, quantum computing , biotech, energy tech, space tech, and advanced connectivity.

Cecilia Bonefeld-Dahl, Director-General DIGITALEUROPE said,

• “The EU needs a refreshed approach to economic security. We are behind our global rivals in 7 of the 8 critical technologies. Diagnosing our weak economic security as solely a supply chain security is only half true, and leads to the wrong treatment of the illness, relying only on restrictive trade and investment measures. The irony is that this only adds further burden to those European companies who are leading in their sectors, further weakening Europe’s position in the supply chain. 
• Europe still has many strengths across the value chain, including world-class research, a strong manufacturing base and a thriving scale-up ecosystem. Yet we lack the ability to grow large successful tech companies, partly to a lack of investment,  
• We must actively ‘promote’ and ‘partner’ to thrive, not just focus on ‘protect.’ We must ensure that technology companies can be born, scale and compete on the global stage while staying in Europe, supported by partnerships with likeminded countries.”

Key findings of the study:

• EU lags in most critical technologies: Europe lags global rivals in 7 of the 8 technologies we analysed, only leading in advanced connectivity- and even in this area, investments and profits are mainly captured by the US. In advanced manufacturing, health biotech, energy tech, space technologies and quantum we have competences but there is no room for complacency as the EU could be rapidly losing ground. We are further behind in AI and advanced semiconductors, due to a lack of presence in key supply chain chokepoints.
• Investment gap hinders innovation: The study reveals a significant shortfall in public and private investment across several critical technologies, particularly AI, quantum computing, and space tech. For example, private investment into AI start-ups and scale-ups in the EU is about one-seventh of that of the US, and about three times less than in the US for quantum. This financial gap hampers the EU’s ability to develop robust industries and compete globally.
• R&D strength unmatched by commercialisation: While excelling in research and development across many technology areas, including in advanced connectivity, advanced semiconductors, quantum or space technologies, the EU struggles to translate it into manufacturing and commercialisation. This limits the ability to capture the full economic value of these innovations within Europe.
• Regulation stifles growth: Complex regulations hinder European companies’ growth and scalability, often forcing them to seek more favourable markets.
• Talent shortage threatens future: Europe faces a critical talent shortage in key areas like AI engineering, quantum computing, and additive manufacturing. This limits our capacity to compete and innovate in these rapidly evolving fields.

Promote and partner:

The study emphasises the importance of strategic collaboration to bolster the EU’s position. Strengthening partnerships within the bloc and with global leaders is essential to limit supply chain disruptions and build competitive technology ecosystems. Additionally, the EU’s leadership in global standards development can provide a significant edge.