IPC’s Call to Action for the EU Competitiveness Compass

Estimated reading time: 7 minutes

The European Union Competitiveness Compass is a strategic roadmap adopted by the European Commission to guide priorities for the next five years. In this interview, Alison James, IPC senior director of Europe government relations, explains how IPC has been proactive in aligning with the roadmap by conducting a study and organizing an electronics industry Call for Action that highlights the need to bolster Europe’s electronics manufacturing base and reduce regulatory and administrative burdens.

Nolan Johnson: Alison, can you explain the EU’s Competitiveness Compass and the implications of this European mandate? 

Alison James: The European Union Competitiveness Compass is a very high-level strategic document that sets out directions and what's needed for the next five years to be more competitive and react to the new geopolitical situation. 

In the European Union, mandates are changed every five years. At the end of last year, we had a new European Commission, a lot of change in the member state governments—and they're still changing. We have the same European Commission president, but there has been certainly a refocusing of priorities, knowing the European Union's place in the world and some of the challenges that we're facing here.

Johnson: How does the mandate recommend competitiveness be addressed? 

James: In productivity terms, the European Union has fallen behind other regions. The European Union wants to address that through three pillars: innovation, decarbonization, and reducing dependencies.

Innovation is the first pillar, ensuring we have a thriving industry, and able to bring R&D ideas to market and convert them into industrialization. That's always been a challenge. As a region, we're obviously behind the U.S. in having technology leaders. 

The second pillar is decarbonization, where we are shifting away from the focus on the Green Deal we had previously. It becomes more about how do you make a market out of green technologies? How do you really make this a competitive industry? It's not just regulating, but looking to actually decarbonize, to create lead markets in green technologies. 

The third pillar is reducing dependencies and heightening security.

Johnson: I would imagine there are even more initiatives within each of these pillars.

James: Yes, underneath these three pillars are multiple strands, and some are very important for our industries.

One thread is making the most of the European single market. We're one big market with 27 member states, but there are still multiple barriers to doing business across individual borders in the European Union. A key issue for us and for many industries is the bureaucracy, and the administrative and reporting burdens companies are facing in the European Union.

Companies are very highly regulated here, always with good intentions, but there are overlaps, certainly in terms of environmental reporting, sustainability reporting, and so on. There is an excess of obligations and sometimes an overlap of requirements. A key priority is to streamline that and reduce the burden on businesses.

It's really a double whammy for companies here. They've got a higher administrative burden, higher energy costs compared to other regions, and issues like not being able to convert R&D into industrial production. 

Johnson: This is very much interlocked and a chance for a holistic adjustment, if you will, within the state of the industry. How does this new mandate get implemented? How does the EU roll this out? 

James: The European Commission has some initial proposals, with a very important package adopted on Feb. 26 called the Omnibus Package that looks to streamline the sustainability reporting obligations the European Union has been rolling out for companies. 

In our call to action paper for the EU, we set out our priorities for the industry prior to the new commission. We took stock of where we are in Europe, and we produced a study on the state of European electronics manufacturing. One of the areas we talked about was the need to reduce regulatory and administrative burdens. We also spoke to the fragility of supply chains, and dependency on overseas suppliers, especially for critical industries. 

We also produced a study last year called “Reinforcing the European Union’s Electronics Ecosystem,” which looked at critical markets which accompanies the call to action to the new European commission. That call-to-action fits with the Competitiveness Compass because we spoke to reducing dependencies (pillar three). That's key for our industry because our supply chains have so many dependencies across the ecosystem. Part of that call to action in turn called for a level playing field and asked for streamlined regulations and reduced administrative burden. 

Reducing dependencies and increasing security is key. We need electronics in all our secure infrastructure and our critical industries, yet we have severe dependencies. Right now, there is a focus on bolstering the defense industrial base in Europe. Of course, electronics should be part of that.

Today, the reduction of administrative burden through the Omnibus package was produced, and there was also a proposal for a clean industrial deal. It’s a roundabout way of saying that the mandate will be implemented in fits and starts. They've already begun today, with these two proposals and a series of other proposals to follow. So, expect to see a lot of progress over time, all implemented under the three pillars. 

Johnson: It seems to me that reduced dependency and more security is the “pillar” for survival. If you don't have that one, then there's no reason to innovate, and nothing to decarbonize because it's already gone. 

James: Very good point, Nolan. That is why it’s so important to have a viable and competitive electronics  base here. In both the study and the call to action, we're pointing out the dependencies and the need to bolster the industry, particularly the IC substrate, advanced packaging, and printed circuit board technologies, as well as the EMS companies and equipment suppliers. 

The European Chips Act was a very good first step, but it can't be the end because we have so many remaining dependencies. This is part of the focus for the European Union going forward: to understand those dependencies and to mitigate them, whether it's through trade partnerships or, in some cases, by building up the industrial base. We must look at this as an evolving process just as the world is evolving. Geopolitics are evolving, and the European Union is evolving along with that. We must be a part of the dialogue in each of these areas. 

Johnson: Do you feel that the appropriate government entities and individuals understand the seriousness of the situation with the European electronics manufacturing industry?

James: I think we've come a long way. A couple of years ago, that understanding was not there. The challenge now, of course, is that we've had an administrative change at the top level of the European Commission and changes in the European Parliament. So, to some extent, you start again with a new group of people, It’s an ongoing job to explain the criticality and how the ecosystem works. There’s a core of people in government who remain and who have taken on board many of the studies and arguments that we've put forward, but the job continues to keep explaining the ecosystem and matching the priorities of the European Union and the strategic priorities of individual countries. 

Johnson: How can your constituents, the industry professionals, participate and help? 

James: We are always in dialogue with our industry partners and our industry members. IPC works in collaboration with partners. Companies individually can work with us and work with their national trade associations. It is so important that everyone is speaking with one voice for the industry, especially in this region because this is not one government department or one government agency. We have a 27-member-state structure, a Brussels structure, which was the idea behind the call to action. It was signed by multiple trade associations and by multiple electronics manufacturers, Additional manufacturers in the European Union are always welcome to sign and put their logo on to the call to action.

We encourage you to work with us at IPC and your other trade associations to ensure that the voice of the industry is being heard at all levels: local, national level, and at the EU level. We need those voices pointing in the same direction as much as possible.

Johnson: Alison, thank you so much. I look forward to an ongoing discussion on your EU work.

James: Thank you, Nolan. I look forward to it.