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Introduction

Mr Chairman, Ladies and Gentlemen,

I am pleased to be here today to exchange views on this major topic. A strong and high-performing industry is key for the European economy.

Why industry and its digital transformation matter for Europe

Industry – and I mean here both manufacturing and services - is the engine of Europe's economy. Manufacturing and services are two sides of the same coin. Europe needs BOTH. Europe needs to capitalise on its strengths: its creative, competitive manufacturing and its innovative high-quality services. In the modern economy, you cannot choose the one or the other, manufacture or services. You must do both. The two sectors are increasingly intertwined. 40% of jobs in the European manufacturing sector are service-related. For example, when manufacturing plants move to a new location, they often take with them expertise and employment in high value added services such as research, development, sales and marketing. That is why deindustrialization is a cause for concern. It puts at risk high-value jobs and services. It reduces European competitiveness.

So we must respond. We must do so on a sound and sustainable basis. I see digital transformation and the adoption of key technologies as central to that. They could create huge opportunities for Europe both for new businesses but more importantly for existing businesses. So our industry needs to embrace them. 75 percent of the economic impact of the digital economy is captured by traditional industries, as they become more competitive and grow faster.

Digital technologies and new business models are transforming traditional value chains. New business models lower the barriers for new, more innovative and smaller companies to enter the market with highly specialised and smart products and services. Digital technologies make it easier and more profitable for companies to bundle goods and services together. Companies will integrate intelligence and connectivity into products themselves.

The so-called “smart services” will be part of an integrated-industry portfolio: A car will be sold together with regular maintenance services. And a machine tool will be sold with adaptable software solutions. Soon, European citizens may not need to buy their own car but rather a mobility service. We are moving towards the servitisation of our economy and our society. The boundaries between industry sectors are blurring. Digital technology companies are entering other sectors, with new value propositions. The value is being reshuffled among business partners, old and newcomers, across the value chains.

For example, Big Data, sensors and innovative business models are re-designing health management. The pharmaceuticals value chain is being heavily reshuffled to allow for personalised monitoring and performance-based drug production. In the near future, 30 to 40 per cent of the value in the automotive value chain may pass through digital platforms. Those who are smart enough to re-organise the value chains to make them more agile, responsive and competitive will benefit. Those who are smart enough will offer high value added services.

So digital technologies offer the key to secure a robust industrial base for Europe also in the future. They offer huge opportunities for our companies. And if they can seize them, that will mean more jobs for our citizens. But unfortunately, too few European businesses are seizing those opportunities. Too many European businesses - in particular the small ones - are slow to change and are not investing enough in new technologies. Only 1.7 per cent of EU companies make use of all these advanced digital technologies and reap the new business opportunities. 41 per cent of businesses do not use ANY of them. A new survey shows that almost half of European manufacturing companies have not used advanced manufacturing technologies in the past and do not plan to use them in the next year.

We can change this. And there are some signs that the tide is turning. We may be soon witnessing Europe’s comeback. A recent survey shows that in the course of last year, investors became more confident in European creativity, business agility and entrepreneurship. Last year, Foreign Direct Investment in Europe hit a new record, attracting 10 percent more projects and 12 percent more jobs. Foreign investors now consider Europe as the most attractive region in the world to establish operations, outperforming China and North America. Industrial investment led the process, with a 20 percent surge in FDI manufacturing projects and jobs. For example, FDI projects in the food industry grew by 43 percent. Automotive, machinery and equipment and logistics benefit the most from this trend.

Our improved situation is mainly due to:

  • First and mainly to improvements in automation and 3D printing techniques, that reduce production costs, accelerate prototyping and the set-up of production facilities. For example, thanks to virtual trials, it was possible to set up an automotive part production unit in three days – as opposed to the three months it usually requires.
  • Second, to converging labour costs in China, as manufacturing wages there have risen around 14 percent per year over the last 5 years;
  • Third to higher quality and more agility to meet customers’ needs in Europe;
  • And fourth to better protection of intellectual property in Europe. For example Aston Martin recalled some 17,000 cars assembled in China as it emerged that a throttle pedal was made from a plastic that was counterfeit copy of the plastic patented by the chemicals company Dupont. This has led them to reconsider their manufacturing strategy.

But for this to happen we have to take account of the changing environment, the opportunities offered by new technologies and business models. Europe's industrial future must be designed cross border.

Our policy approach

So how can Europe respond? The push for jobs and growth is the top priority for this new Commission. We want to get Europe back to work. A Digital Single Market and a robust industrial base are central to that.

But there are limits to what we can do alone. Ultimately only businesses can make the move to digital. Only businesses can create the jobs that Europe needs. So what we and public authorities can do is to provide a supporting framework for that move. We can be an enabler for investment, research and innovation. I think that we can do so in three ways.

First, we can act now and be ambitious, both at European and national level.

I believe that the European Commission can be useful and effective by using its convening power. We can ensure that we make maximum use of all the tools we have available.

  • European and national and local policies;
  • The Smart specialisation strategy;
  • Measures to establish common standards across Europe;
  • Financial and investment instruments;
  • Research and innovation programmes;

We can align them, make them work in tandem and mutually reinforce each other. This is why modernisation of industry is at the core of all major initiatives of this Commission:

  • The Digital Single Market strategy.
  • The Energy Union package.
  • The Circular economy
  • The Capital Markets Union.
  • The European Fund for Strategic Investments.
  • And last but not least, this autumn's Internal Market Strategy.

And we can bring together people from across Europe. National governments, business leaders and academia must be partners in achieving our ambitions. Member States are already developing policies to accelerate the digital transformation of their businesses. They cover a broad spectrum, from infrastructure deployment, access to finance and skills to more targeted initiatives for the digital transformation of industry, such as the German Industry 4.0, La nouvelle France Industrielle, the UK high-value manufacturing catapult, or the Dutch Smart Industry. What is missing is scale-up at pan-European magnitude. At one point in time we will need a European solution. I will invite national governments to demonstrate leadership:

  • to set ambitious targets and work to fulfil them.
  • to create better measures for the modernisation of industry, digital transformation and welfare.

We have to act also on regional and local levels. We need to team-up with cities and regions: those that pioneer in modernising their industries and economy. In the thick of the the crisis, many cities across Europe restored spectacular economic growth and competitiveness, boosted digital transformation and incubated new companies that improved the lives of millions of European citizens. This is why I have set up a dialogue with business leaders, academia, international organisations, social partners and governments. Building on this work, I will organise a high-level conference in November to take stock of the state of play and define the way forward.

Second, we can act to restore confidence in the modernisation process

I mentioned before that digital industrial platforms are becoming an intrinsic part of traditional value chains. “Smart services” will create new value chains and market opportunities. For example, Facebook is acquiring a stake in the drones business and Google is entering the biotech sector, providing self-driving car technologies and researching new methods of combating age-related diseases. European businesses need to be confident that digital platforms can be open players in the value chains no matter who actually owns the platform. This means for instance having clear rules on the use of Big Data and promoting open access. The Commission is committed to explore this complex issue, understand how national governments deal with this and propose a European initiative to promote the free movement of data. I have established a dialogue with industry and legal experts to further analyse this. We have to strike the right balance between ensuring confidence and encouraging more innovation.

Third, we can put in place a business-friendly environment. 

The Digital Single Market Strategy creates the appropriate framework conditions and is a significant step towards the digital transformation of European industry. The Commission is working to make cross-border e-commerce easier; to end unjustified geo-blocking; and ensure a modern European copyright law. We are working to reduce the administrative burden from different VAT regimes. We have started work to define priorities for standards and interoperability in the digital world, to promote digital skills and become pioneers in e-government. We need to boost the supply of digital leaders to lead the digital transition. We need to ensure new highly-specialised skills, such as on big data analytics, cybersecurity, robots, or key enabling technologies. We have to combine skills with targeted support measures, professional advice and financial instruments.

Modernisation of industry has to be mainstreamed in all main EU funds and programmes. This means harnessing the potential of eProcurement; opening public tenders to all business in the EU, across the border in a simple, easy way. This requires also better regulation and better policy making. You have seen our Communication on Better Regulation. The REFIT programme is of particular importance. And there is now a “digital dimension” in the REFIT exercise. Policy makers will have to deal more and more with the regulatory challenges of new business models in a sharing economy. We need to shift mind-sets and open our eyes to the issues and solutions of the future.

Conclusion

Ladies and gentlemen,

The forces of renewal are already at work. I am convinced that the European industry has great potential to grow now and in the decades to come. And that growth will deliver many more jobs for our citizens. But we will only realise that potential if we all address the crucial role of digital and key enabling technologies that empower the services and products of the future. So government and business leaders across Europe need to work together: To foster a creative, high-performing and globally competitive European industry. To underpin sustainable economic recovery, growth, jobs and prosperity for the European citizens. To create the conditions in which our businesses can adapt and grow. As Commission, I see our role as a catalyst to make this happen. But nothing will happen without your determination and your support.

Thank you for your attention.

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