Ladies and gentlemen,

We are in the middle of a true revolution—the fourth industrial revolution. Like our revolutions of its kind, it will change all our industries, it will change our economy and it will change our lives. It is therefore rightly one of the main themes at this year's Hannover Messe.

This revolution is digital and it is high on the political agenda, not only in Germany with Industrie 4.0 and in the Netherlands and elsewhere but also at the level of the European Union.

On 25 March, the European Commission announced three areas of action for our Digital Single Market Strategy that we will present in May:

First, providing better access for consumers and businesses to digital goods and services: making sure that people use online services and digital goods across borders and that businesses face fewer barriers when they sell to other EU countries.

Second, shaping the environment for digital networks and services to flourish: setting the right rules and conditions for those in the market, both traditional and newcomers.

Third, creating a European Digital Economy and Society with long-term growth potential: we need a digital European market which allows new business models to flourish, start-ups to grow and industry to innovate and compete on a global scale. We urgently need to tackle the most challenging issues such as data, skills and standards, for European industry and citizens to make the most of the digital economy.

 

Industry is a central pillar of the European economy – the EU manufacturing sector accounts for 2 million companies and 33 million jobs. Our challenge is to ensure that all industrial sectors make the best use of new technologies and manage their transition towards higher value digitised products and processes, commonly known as "Industry 4.0".

At the moment, industrial manufacturing in the EU represents 15% of GDP. It is the main source of exports, a major source of investment in research and development, and it is also an important driving force for employment in other sectors.

The European Union has set itself the target of increasing the contribution of industry to GDP and to reach 20% by 2020, given industry's great potential for growth and job creation. However, the reality is that the share of industry in GDP has declined in recent years.

Therefore, to reach our objective, we need to act quickly and become the avant-garde of digital manufacturing. We have to do this together, and at the right scale if we do not want to lose the game as we have done to some extent with the Internet business so far.

Industry 4.0, which is about digital innovation in products, processes and business models, offers opportunities that we simply cannot afford to miss.

What is at stake is not just Europe's industrial position in smart phone production or Web applications. It is about the competitiveness of Europe's industry right across all sectors: from automotive and energy to household appliances and the agro-food business. These are all at risk if they do not rapidly adopt digital technologies.

We need to take part in this global competition on the basis of our strengths - with Europe's large single market, its innovative SMEs and its very creative society – not against the United States, South Korea, China or India, but with them, and in fair competition.

The impact of ICT on the industrial fabric is already enormous today and still far from reaching its limits. Higher value added originates in three dimensions and in particular from their combination:

First, innovation in "digital-inside" products: opportunities arising from embedding digital technology in any product and artefact are almost infinite.

Second, a transformation in processes – "smart manufacturing": digital innovation affects the full product lifecycle "from cradle to grave". It ranges from product design and simulation tools to automation and shop floor controls and from logistics and supply chain management down to product tracking and recycling.

Third, the use of digital technologies leads to radical and disruptive changes in business models including well-established industries such as automotive, lighting or textiles. These are changes that affect the way we do business and generate value in the future. For example, will we sell only cars or also the whole range of new digital services that come with the car? This is going to be all the more important as cars become increasingly connected and automated.

If we do not pay enough attention, we might invest in producing wonderful cars but those selling the new services for the car would be making the money. It would be a big risk for our entire economy if industry in Europe did not take advantage of these new business models while others do—such as those who dominate web service platforms today.

The digital revolution in industry is happening fast and the pace of change keeps accelerating. This means that you can fall behind quickly if you do not act fast. If we want to realise the potential of digital technologies across the economy, industry in all sectors and everywhere in Europe needs to adopt them as quickly as possible.

Our economies in Europe are closely connected, and our industry has built strong cross-border value chains. This is why digitisation of our industry needs to be comprehensive across Europe.

This will enable us to generate a wave of digital innovation throughout the economy and will not only help us upgrade our whole industrial fabric but will also allow Europe to be the continent of digital business champions in the next ten years.

Opportunities are huge and there is a good chance that the next Google and Apple may come from traditional sectors such as textile, construction, energy, watch-making and of course the automotive industry. These are industries where we are strong so let us make sure that they embrace the digital transformation. This is essential to remain competitive and to lead and capture the benefits of upcoming innovations.

When I look at the situation today, I see big challenges that we need to address urgently, for example concerning disparities in digitisation, for example digital platforms and also regarding digital skills. These will require seriously upgrading our digital industrial strategies all across Europe.

To be absolutely clear: business as usual will not work!

We need to address the large disparities in digitisation that exist today between industrial sectors, between regions, and between large companies and SMEs.

For example, a mere 14 percent of our SMEs use the Internet as a sales channel today while this is widely the case for large companies. When it comes to using advanced digital technologies like robotics, data analytics or Cloud computing, the situation is much worse: only a tiny 1.7 percent of all EU enterprises use advanced digital tools to innovate in products and processes.

We know the important role of SMEs and mid-caps as backbone of our economy. We therefore need to make sure that they are not left behind. The same applies to non-tech industries like furniture, clothes and textiles, agro-food or construction for which industry 4.0 is the only way forward, if we want to keep their production base in Europe.

A great challenge is also Europe's position in the development of the next digital platforms that will gradually replace the current Internet and mobile platforms. We have so far missed many opportunities in this field and our online businesses are today dependent on a few non-EU players world-wide: this must not be the case again in the future.

As these platforms become important not only for online business but also for our cars and factories and our energy and water distribution, they must be more open and interoperable. They should be based on standards with a significant contribution from European industry.

Digital skills are another crucial aspect of the industrial transformation: In our Digital Union we urgently need more digitally skilled people. According to our estimates we need an additional 150,000 IT experts every year.

But this is not only about experts: everybody needs digital skills. Whether you work in a factory in Wolfsburg or Bilbao: you need to be able to understand software and digital control systems.

I know that some fear that with the digital revolution some types of jobs will disappear. They may be right. But I am certain that there will be new and higher-quality jobs. On balance I am confident that the benefits will outweigh the disadvantages if we manage to adapt the skills of our workforce. We should not underestimate the challenges. But nothing suggests that we cannot master them.

 

Why should we enter the game as a European team? Digitalisation of industry implies, by nature, cross-border transactions and international presence. No single Member State can resolve the related issues alone, or has the resources to respond to global challenges. We need European industry 4.0 champions to win the global game in industry 4.0.

What do we need to do concretely? Our overall objective is to maximise the benefits from digital technologies in every industry in Europe while ensuring that our workforce is adapting to the digital era.

In order to reach this goal and to make industry 4.0 a reality in Europe I propose to take action in four key areas: digital innovation hubs; leadership in platforms for digital industry; closing the digital skills gap; and smart regulation for smart industry. These steps should come in addition to our efforts to create a Digital Union and to further invest in broadband infrastructure:

So, let me expand a bit on these four key points:

First, we need to facilitate access to digital technologies for any industry in Europe: our ambition should be to empower any business, wherever it is located in Europe, and especially SMEs, to master its digital transition. Every industry, large or small, high-tech or non-tech, must have a good understanding of the digital opportunities and easy access to knowledge and testing facilities in latest digital technologies.

Regions and local authorities have a key role to play in this effort, with digital research and competence centres leading the way.

We need competence centres such as Fraunhofer in Germany, TNOs in the Netherlands or Catapults in the UK in every region in Europe and we need to give these centres sufficient means to serve industry well.

These centres should be at the heart of digital innovation hubs in every region of Europe. They should be specialising to rapidly provide world class expertise and digital skills for their local and regional economy. They should connect with other centres to share knowledge and complement their expertise. In this the way, they can help their local industries cooperate with innovators, investors and customers all across Europe and globally.

My objective is to have at least one world class digital innovation hub in every region in Europe. It is my ambition to work with Member States, regions and the private sector in order to mobilise the necessary investments to make this happen.

I know that this is also an objective of several national initiatives in the area of Industry 4.0. It is also part of our support to research and innovation at EU level, like our initiative "I4MS" that brings ICT expertise to SMEs in the manufacturing sector.  Our ambition should now be to significantly increase these efforts and join forces to create critical mass and attract private investment.

At EU level we have planned at least 500 million Euro of investment in such initiatives in the next 5 years. Our goal now is to leverage that amount significantly [by the factor 10] from additional sources, including notably EU structural funds and national programmes. I also see a huge opportunity in this area with the new European Fund for Strategic Investments (EFSI). I am thinking in particular of the parts devoted to SMEs and mid-cap companies. These can support the growth of our innovative businesses and their shift to digitisation.

[Altogether, we should be able to achieve investments of more than 5 Billion Euro in the next five years in building digital innovation hubs and supporting industrial transformation across Europe. ]

 

Our second pillar of actions aims at leadership in platforms for digital industry: the objective is to ensure the availability of state-of-the-art open and interoperable platforms that any business can use to make its products, processes or services ready for the digital age. Their development will require collaboration between actors across value chains, including users and the supply industry.

Competition for leadership in core digital platforms for industry has already started and can lead to market dominance similar to what we can see for the web today.

It is essential to have common standards and interoperable solutions throughout the products and services life cycles. The "data economy" should not develop in locked environments and platforms.

Industry in Europe should take the lead and become a major contributor to the next generation of digital platforms that will replace today's Web search engines, operating systems and social networks.

The European Commission would like to enter into a dialogue with industry to explore a European platform initiative in digital manufacturing. We should aim at openness and win-win partnerships in initiatives like the Industrial Internet Consortium. We need a solid framework in Europe: I therefore propose to launch a roundtable in this area with high-level industry representatives in June together with my fellow Commissioners Elżbieta Bieńkowska and Carlos Moedas.

In addition to a regulatory environment conducive to the development of platforms, we need to strengthen our research and innovation in this field: my intention is to focus the efforts of the Public Private Partnerships (PPP) for research and innovation on the next generation of digital platforms.

This includes the ECSEL Joint Technology Initiative (JTI) as well as our Partnerships in Factories of the Future, and big data.

Industry in Europe has assets to build on: they include leadership in industrial robotics and factory automation, embedded digital systems, enterprise and design software and 3D- and laser-based manufacturing.

My ambition is to upscale developments of European platforms from 2015 onwards with the launch of at least 5 large-scale platform projects per year until 2018.

Investment in platform-building in Horizon 2020 is expected to reach more than 800 Million Euro in the next five years. This is complemented by contributions from Member States and a substantial matching investment by industry, leading to more than 3 billion € until 2020.

Third, and as already mentioned: we must fill the digital skills gap and prepare our workforce for change: there is a clear need for promoting digital skills at all levels, for re-skilling, and for lifelong learning across Europe and its regions.

Digital skills will therefore need to be an integral part of our future education curricula while training a significant part of our current work force must be a priority.

This is why I want to raise this issue with education ministers in the near future to reach agreement on a set of objectives to be achieved in this field. Of course, this is the competence of member states, but given the dimension and urgency of the challenge, I believe we need a concerted effort to be able to progress more rapidly. I will suggest to my fellow Commissioners for employment and for Education that we act as a catalyst for that effort to take place.

Finally, we need to ensure that existing and new regulation is fit for purpose in the digital world, e.g. by establishing a mechanism to scan existing EU and national legislation and identify regulatory gaps and unintended barriers in this area.

New digital business models are challenging existing regulatory systems worldwide, requiring a new way of policy-making. Our current regulatory environment can create unforeseen hurdles to digitalisation and uncertainty for digital businesses.

This includes for example the liability of systems as they become more autonomous, safety and security with the increasing interaction between smart devices such as robots and humans, and the protection of massive amounts of data generated by digital manufacturing.

The availability and use of big data is crucial for maintaining the EU's competitiveness. Currently there is a lack of clarity about who owns these industrial data, and about how they may and may not be used. This reduces incentives to develop data-analytics services. It also puts industrial IPR and know-how at risk.

In order to make quick progress in this area, I will invite key players to share their views on how to transform our current legislation on the regulatory framework for platforms, liability, safety, IPR and data protection to make it fit for purpose in the digital world.

In short: we need smart regulation for smart industry.

 

 

Ladies and gentlemen,

The future of Europe’s industry is digital! This is certain.

Member States and regions are rolling out many initiatives to promote digital transformation, and I encourage all regions and Member States to promote initiatives such as Industrie 4.0 in Germany, Smart Factories in the Netherlands, Usine du Futur in France or High Value Manufacturing Catapult in the United Kingdom and also to provide appropriate investment for them.

However, there is a danger that these initiatives create national silos. At the same time, digitisation is developing at a rapid pace worldwide and competition between global regions to attract investment in innovative businesses is fiercer than ever.

This is why our efforts to create a digital single market need to include adequate measures for the development of smart industry in Europe in order to avoid fragmentation and to offer a level playing field for our companies. The European Commission would like to work with Member States and regions to up-grade their efforts to the benefit of the EU as a whole.

Europe has huge assets and I am confident that if we all pull together, industry, Member States, regions and the Commission, we will succeed.

Our strategy for the full digitisation of Europe's industrial fabric must be bold and at a scale that matches the challenge. What is at stake is far beyond building a strong digital industry in Europe: it is about the future of all our industrial sectors and our economy.

Thank you for your attention.