In the context of the Industrial Strategy update, the European Commission made in-depth reviews of a number of areas that can be considered strategic for Europe’s interests. These reviews look into the nature of possible strategic dependencies, their impact as well as relevant policy responses, which in some cases are already ongoing. These assessments should not be considered as an exhaustive analysis of all the EU’s possible strategic dependencies, but rather as a first stage of assessments concerning a number of important areas.

Raw materials

General view of containers in a port Metals and minerals are part of our daily lives. With the transition of Europe’s industry to climate-neutrality, the dependence on fossil fuels risks to be replaced with reliance on non-energy raw materials. Access to resources is fundamental for the entire EU industry and central to Europe’s ambition to deliver on the Green Deal and ensure the digital transformation of the EU economy.

As the EU does not produce all the raw materials that are necessary to meet our demand, EU industry faces global competition in access to raw materials.

  • Extraction of raw materials more than doubled globally since 1990
  • Consumption is expected to grow by 40% by 2040

The Commission identified 30 critical raw materials in its 2020 list of Critical Raw Materials. These are raw materials that are very important economically and have a high supply risk. 

Magnet led bulb Semiconductor hydrogen fuel
Rare earths are used in magnets that move electric cars and make wind turbines work Gallium and indium are part of light-emitting diode (LED) technology in lamps. Silicon metal is used in semiconductors Platinum group metals are needed in hydrogen fuel cells and electrolysers

Key issues

click icon Several strategic sectors and technologies rely on access to critical raw materials 
click icon Global supply of some raw materials is highly concentrated in specific countries
  • 98% of EU’s rare earth element supply comes from China
  • 98% of EU’s supply of borate comes from Turkey
  • 71% of EU's needs for platinum come from South Africa
  • Single companies supply the EU with hafnium and strontium
click icon Global production of raw materials is increasingly subject to export restrictions

More than 70% of global production of cobalt, rare earths and tungsten is subject to export restrictions.

click icon Demand for key raw materials in renewables and e-mobility will increase multiple times from 2030 to 2050

Other actions to support raw material projects

  • Two Important Projects of Common European Interest (IPCEI) on the battery value chain 
  • Investment opportunities under the Recovery and Resilience Facility
  • €300 million for raw materials research and innovation under Horizon Europe
  • Strategic international partnerships to secure a diversified and sustainable supply of critical raw materials
  • Support “product as a service” business model to incentivise recycling and reuse of raw materials
  • Tracking of raw materials through technology, harmonised data requirements
  • Improve permitting process to ensure predictability and maintain high environmental standards
  • Develop principles for sustainable raw materials in the EU

Active pharmaceutical ingredients

medical laboratory Medicinal products are critical for society. They offer therapeutic options for diagnosis, treatment and prevention of diseases and are important to address threats to public health, including the COVID-19 and any future pandemic. In this context, it is essential to ensure citizens’ access to safe, effective and high-quality medicines at an affordable price. However, our analysis shows that the EU appears to be dependent on foreign supply chains in a number of inputs and products in the health ecosystem.

Key issues

click icon Disruptions possible due to complexity of supply chain

Given their complexity, pharmaceutical supply chains are faced with potential disruptions which can arise along the supply chain within and outside the EU. These can vary from trade disputes, cyberattacks, to uncoordinated stockpiling, export restrictions, disruptions in logistics, to closing of sites or on-site accidents as well as non-compliance with Good Manufacturing Practices (GMP). 

click icon High integration of API supply chains

The pharmaceutical supply chain has become one of the most integrated supply chains in the world. In particular, there is a large regional concentration in the production of generic active pharmaceutical ingredients (APIs). In addition, there is a further increasing trend in the concentration of generic APIs being produced in India and China.

Share of global generic API production value (2015)

  • 66% in Asia Pacific (India and China)
  • 24% in the EU
  • 3% in North America
  • 7% in the rest of the world
click icon High trade concentration

European imports of APIs come from only a few sources.

  • 80%of API import volume from 5 countries (China, US, UK, Indonesia and India) [China 45%]
  • 80% of API import value from 4 countries (Switzerland, US, Singapore and China) [Switzerland and US both 30%]

Lithium (Li-ion) batteries

Used batteries placed in a box for recycling

Batteries are key to enabling the EU’s green and digital transformation. They are essential to achieving the European Green Deal ambition for the EU to become climate neutral by 2050. They also help companies become world leaders in clean products and technologies. Batteries are particularly important for the production of electric vehicles.  They are increasingly used for energy storage and in other industrial applications such as machinery, power tools, or forklifts. 

While there are different battery technologies, Li-ion is a key component for many types of batteries due to its superior performance, compared to various well-established and mature battery technologies.

Global production capacity of li-ion battery cells in 2018

  • 3%in the EU
  • 66%in China
  • 20%in South Korea, Japan and other Asian countries

Enabling factors for increasing production capacity

energy storage Li-ion batteries can now store 300% more energy compared to 1991 Decreasing cost (USD 1100/kWh in 2010 -> USD 156/kWh in 2019)
graph increase Global demand projected to increase to 4 000 GWh by 2040 from 90 Gigawatt hours (GWh) in 2016 European demand expected to reach 400 GWh by 2028

Key issues

click icon Access to relevant raw materials is key for battery production

The EU produces just 1% of all battery raw materials. To cover the needs of the mobility and energy storage sectors, the EU needs:

  • 7-18 times more lithium by 2030
  • 2-5 times more cobalt by 2030
  • 16-57 times more lithium by 2050
  • 3-15 times more cobalt by 2050
click icon Access to processed materials and components
  • 84% of processed materials and components come from Asia
  • 8-9% of processed materials and components come from the EU
  • Several investments in battery materials announced in the EU, but additional ones needed

Overall investments

charging station Electro mobility

€60 billion of investments in Europe’s electro mobility value chain in 2019 alone, mostly private

= 3.5 times as much as China

research Research

About €270 million from EU research programmes between 2019-2020

€925 million proposed for the new European Partnership for an Industrial Battery Value Chain under Horizon Europe

Cooperation Important Projects of Common European Interest (IPCEI)

First IPCEI grants: €3.2 billion in state aid, expected to leverage a further €5 billion in private sector investments

Second IPCEI grants: €2.9 billion in state aid, with a further €9 billion expected in private sector investments

Other ongoing initiatives

  • New legislative framework for batteries to come into force likely in 2022
  • Strengthening the resilience of the EU critical raw materials value chains
  • Ensuring effective implementation of Horizon Europe funding of battery research
  • Developing a European skilled battery workforce

Hydrogen

Sign on a car powered by hydrogen

Renewable or low-carbon hydrogen will be key in addressing critical challenges linked to the decarbonisation and competitiveness of EU’s industry. The EU is a technology leader in several clean hydrogen technologies with half of electrolyser manufacturers being European. However, the EU depends on imports of raw materials for key components as well as the supply of renewable energy.

Hydrogen has a wide range of applications across ecosystems, such as chemical and refining industries but also mobility, energy storage and heating. It has a high energy content per unit mass, which makes it suitable for example for heavy transport. But it must first be ‘extracted’ at an energy expense - either from natural gas or through the electrolysis of water.

Targeted increase in renewable electrolyser capacity 

  • 1 GWrenewable electrolyser capacity in 2020
  • 6 GWrenewable electrolyser capacity by 2024
  • 40 GWrenewable electrolyser capacity by 2030

The path towards a European hydrogen eco-system step by step

  • Today - 2024

    We will support the installation of at least 6GW of renewable hydrogen electolysers in the EU, and the production of up to 1 million tonnes of renewable hydrogen

  • 2025 - 2030

    Hydrogen needs to become an intrinsic part of our integrated energy system, with at least 40GW of renewable hydrogen electrolysers and the production of up to 10 million tonnes of renewable hydrogen in the EU

  • 2030

    From 2030 onwards, renewable hydrogen will be deployed at a large scale across all hard-to-decarbonise sectors

Key issues

click icon Large supplies of clean hydrogen needed

To decarbonise major sectors (e.g. steel, chemicals or heavy transport), a large and reliable supply of clean hydrogen is required. Lack of renewable and low-carbon hydrogen supply in the short term and lack of infrastructure could delay investment decisions downstream.

  • Connection of 80 to 120 GW of solar and wind energy production capacity needed to provide the necessary electricity by 2030
click icon Dependencies on imports of raw materials

The EU depends on imports of raw materials for key components (such as electrolysers and fuel cells) required for the hydrogen economy.

  • Around 30 raw materials are needed for producing fuel cells, electrolysers and hydrogen storage technologies. 13 of these are classified as critical raw materials.

Semiconductors

computer parts Semiconductors power the smart devices and services we use every day. They enable key industries to innovate and compete globally so that Europe can design and produce the most powerful processors. However, limited production capacity, high entry costs and lack of a level playing field are threatening the EU’s capacity to fully seize the opportunities of the digital transformation.

The recent shortage faced by the automotive industry is illustrating the EU's challenges. Semiconductor chips are the basic building blocks of all digital products and services. They are embedded in cars, aircraft, medical equipment, cell phones, networks and supercomputers.

Key issues

click icon Leading-edge chips have become more difficult and more costly to produce 

Designing and developing the most advanced chips today can cost up to €1 billion. A leading-edge fabrication plant requires investments of up to €20 billion. In 2020, only 2 manufacturers, TSMC (Taiwan) and Samsung (South Korea), produced the most advanced chips. 

click icon Dependencies

The EU is strongly dependent on the US for general design tools and on Asia for advanced chip fabrication. 

click icon Level playing field

Geopolitical tensions and the lack of a level playing field harm the competition in this area. The development and fabrication of chips has been increasingly subject to massive subsidies. 

click icon Europe’s semiconductor footprint is small

The EU share of global revenues is approximately 10% overall and around 6% for the computing and communication segments.

Cloud and edge computing

Person using a computer Data is becoming a strategic asset for any organisation. Cloud computing technologies enable the functioning of technologies such as AI, Internet of Things and 5G/6G. They are a strategic key enabling technology for a green and digital future of EU industries and the public sector. Europe has a unique market opportunity in the next decade to strengthen its data processing technologies by capitalising on the changes to come, in particular related to edge computing.

Cloud technologies offer on-demand, flexible and cheaper data storage and processing. They operate in centralised data centres, distributed facilities or on connected devices close to the user (edge computing). Many services that businesses, public administration and citizens use every day are based on cloud computing.

Opportunities for EU's autonomy

  • 80%of all generated data is expected to be processed at the edge by 2025, with no current dominant market players
  • Computer
    Strong growth in software services is a major opportunity for European providers to leverage their position
  • 5g 5G networks and multi-cloud computing (risk-mitigation tool) constitutes another opportunity

Key issues

click icon Use of cloud in the EU is rising very slowly

Despite some growth in recent years, the use of cloud services in the EU is still low. According to Eurostat’s data, while improved compared to 2018, only 36% of EU enterprises used cloud services in 2020, mostly for simple services such as for e-mail and storage of files.

click icon Small market share for EU actors

The largest EU-based cloud provider accounts for less than 1% of total revenues generated in the European market. In comparison, the top 4 global leaders (Amazon Web Services, Microsoft Azure, Google Cloud and Alibaba Cloud) will account for over 80% of global revenues in 2021. The market position and scale of these hyperscalers makes market entries by other competitors less rewarding and prevents the rise of European leadership.

click icon Investment gap

This situation is exacerbated by an estimated investment gap of €11 billion annually between what the US and China and the EU invest in cloud.

click icon Concerns of European users

Cloud users have in practice a very limited if non-existing possibility to switch between different cloud service providers. In addition, they express their concerns with the use of foreign cloud services for reasons of personal data protection, cybersecurity or questions over applicable law.

Documents

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