EU Defence Electronics Ecosystem Highlighted in Brussels

Estimated reading time: 10 minutes

With the geopolitical landscape shifting, the need for Europe to strengthen its autonomous defence capabilities has never been more urgent.

In this interview, Alison James, senior director of Global Electronics Association—Europe (formerly IPC), discusses the European Defence & Security Summit in Brussels, June 9–13, as well as the first IPC–ASD Europe Defense Electronics Summit, June 10th, which brought together 70 leaders from across the electronics manufacturing supply chain. ASD is the Aerospace, Security and Defence Industries Association of Europe, and co-hosted both the larger and smaller events.

As Europe increasingly recognizes the crucial interplay between electronics and defense, the insights gathered from the electronics summit help pave the way for a more resilient and self-sufficient defense ecosystem in the region.

Nolan Johnson: Alison, what was the purpose of the recent larger defense summit in Brussels?

Alison James: First, the whole area of defense, of course, has become critically important for the European Union. In these new geopolitical times, Europe must have more autonomy. A few months ago, the European Union began to look at concrete ways we could build up a more robust defense industry in the region. That was the context for the defense discussion.

The IPC summit aimed to approach the situation from three areas: include high-level European Commission officials to speak to the industry; bring together the European stakeholders from both the defense and electronics industries across the value chain; and include OEMs to provide context on what is needed to build up our capacity and capability in Europe when it comes to the electronics value chain. We were asking questions, such as, “Where are you today?” “How do you see this in Europe?” “European Commission, what are the steps that you are taking?”

Electronics is a foundational element in every capability gap. With our research partner, we authored a report, “Security the Electronics Value Chain: The Blind Spot in the European Union’s Industrial Defence Strategy?” It examines the role and the importance of electronics that underlie defense and defense modernization across various defense and security-related products. Every capability and category, every area of response that requires defense “products” to be built, that have also been identified as a capability gap by the European Union, involves electronics—whether it's an aircraft system, a naval system, or cybersecurity.

We conducted an analysis across the electronics manufacturing value chain to determine Europe's current share of the global market. We looked specifically at printed circuit boards, advanced packaging, and IC substrates. Our report also highlights our share of actual production in Europe toward the value chain, which is relatively low and not necessarily getting better.

Marcy LaRont: Does this European defense summit happen annually?

James: Yes, we do something every year. In Brussels, we've spent several years watching the geopolitical climate and how it relates to electronics needed for our critical industries. Last year, the Global Electronics Association produced a study that examined the critical industries of aerospace, defense, and telecommunication servers. It also reported on supply chains and their resiliency, a big focus for us. Our message was, “Are we truly aware of how much is imported vs. how much we produce here in Europe? We need that awareness if we want to build up more strategic autonomy in the region.”

This year, with the focus on defense worldwide, we found it prudent to focus solely on defense.

Johnson: What was the attendance like at the defense electronics event?

James: We had about 70 participants at the Global Electronics Association event. A very high-level speaker from the Defence Industry and Space of the European Commission provided the keynote. There were several panel discussions that included several key European Commission Directorate-Generals in defense, space, and technology, as well as OEMs and supply chain companies. There was structured discussion and time for question-and-answer. Many top executives in the room join in the discussions.  

Johnson: Is there discussion about the supply chain resiliency of being able to design, fabricate, manufacture, and supply the necessary electronics for defense within the EU?

James: Europe has never tried to do everything from start to finish, nor is there the thought that it would be possible or practical. The European Union tends to view supply chain resiliency the same way that the Global Electronics Association does. Neither the European Commission nor the Association supports making everything from start to finish in one region because of the complexity of electronics supply chains.

However, you need to understand the supply chains from start to finish, not just the semiconductor chip, but from the raw material through to the finished product. In certain cases, you also need to build up more resiliency and regional production in certain segments, especially if you see that you're starting to lose industry.

It's reaching a critical mass. That's where we can intervene and say, “You must understand that the whole supply chain needs to be resilient, especially for our critical industries.” We are starting to see some recognition in specific areas like space and defense, where it is becoming clearer that we need a regional base because of security and sovereignty issues.

LaRont: Alison, in the larger European summit, much of the messaging and call-to-action were consistent. But Francois Arbault, director for the defence industry at the European Commission, made a bold assertion that Europe should be able to produce 95% of what it needs. What are your thoughts? 

James: It is a very complex supply chain, and the European market has been very fragmented. The war in Ukraine, for obvious reasons, has certainly stimulated a sentiment around defense readiness and the need for some immediate ramp-up toward more European security and autonomy. Every country is looking at that, but Europe will always work with international partners across the supply chain, even for defense and critical industries. From our deep understanding of the whole electronics supply chain, it is not feasible to think otherwise.

As far as ramping up capacity and capability within Europe, there are certainly many initiatives being created or that have already been put into place to enable the European Union to ramp up its own defense needs, but I cannot see reaching a level of 95% internal supply for European needs.

Johnson:  There does seem to be a goal around a certain level of self-sufficiency by 2030. Can you provide insight into what that might mean?

James: The European Union is definitely looking to increase defense readiness by 2030. To do so, it is striking a whole series of defense and security partnerships with other regions, including Canada, the UK, Australia, and Norway. There is talk around statistics related to common procurement, which can get quite complicated. When countries buy together, they can get loans. That's why we're now starting to see such figures called out as 65% sourcing between the European Union, EEA, broader Europe, and also partnership countries.

LaRont: What are some of the systemic challenges that come with creating this ecosystem?

James: One of our great challenges is simply not having the instruments that we need to build up the industrial base in the European Union. Over the years, just like in the U.S., we have allowed and encouraged our production to go outside the region. We've become a region in which it's very difficult and costly for manufacturers to base themselves, whether it's electronics or any other kind of manufacturing.

The instruments we have with the European Chips Act are great. It's really important to have this legislation, but we need to have something that addresses the whole ecosystem.

So, last year, we issued a call to action for a holistic electronics strategy. There is no silver bullet, no single instrument that would address this. It’s a whole series of steps. We have talked about an instrument like the Chips Act that would be extended across the ecosystem. We have yet to see it, but we are talking about it.

We have also discussed creating a level playing field and the regulatory and administrative burden on companies in the EU. The European Union is, at least, trying to move in that direction, but it is difficult to roll back existing environmental regulations. The EU is starting to understand how difficult it is for companies to operate, and several initiatives are attempting to roll back, simplify, and remove some of the duplication in environmental sustainability reporting. If these omnibus proposals are helpful and we can see the practicality of all these efforts, then maybe we can do something about energy prices and workforce. You need this to have the framework that makes you an attractive manufacturer.

LaRont: Are the different political entities and leadership throughout the EU amenable to this? Are they starting to pay attention?

James: They're paying attention to competitiveness. Under this new political mandate, competitiveness is more key. We called for creating a level playing field in Europe. Despite having a climate where many companies want to be, it's expensive. This is a great region for medical and skilled workers, but the government realizes that companies are overburdened with regulations and reporting, and that it's much harder to do business here.

There are myriad proposals and initiatives to make the business climate easier, but it’s a slow process in Europe because it's a very complex 27-member state group. No one entity can make a decision. It's always this political process of agreement and compromise.

We are seeing progress toward creating a more level playing field in Europe, but a lot more remains to be done.

Johnson: Alison, can you describe the sentiment in the room at the end of the defense electronics summit?

James: I would say there was a feeling of solidarity, but also of truly understanding that a great task lies ahead. There is a lot more coming together in Europe and a greater understanding that we can't work in silos. I saw the sentiment as examining, “How can we continue to work together to do this, because we have to work together across industries and government departments?” It doesn’t begin and end with defense. We need to have a much broader perspective on the role of electronics for the economy in general and all of our strategic industries.

Johnson: It does have that nice knock-on effect. As you build up the infrastructure to support your defense manufacturing, that capacity is also available for use in more civilian applications.

James: Yes. Europe doesn't have a defense industry as large as the U.S., so, on its own, it would never be a big enough market to sustain a whole ecosystem of electronics companies. Something will have to be done there to make sure that we have a base which can serve our defense needs, and then it will also be there for other industries.

LaRont: In your summit, did you discuss NATO partnerships?

James: We didn't specifically discuss NATO, and there was no NATO representative in the room. This forum was really the European industry talking to the European Commission. But knowing what needs to be done in Europe comes from the capability gaps that NATO has defined and updated.

LaRont: Was there much talk specifically about the Ukraine-Russia war and its implications?  

James: Yes, actually, the European strategy begins with what's happening in Ukraine and what we are learning from it on how modern warfare is changing and how innovation is simultaneously driving modern warfare. We are seeing it in real time.

Also, there's a commitment from the European Union to support Ukraine, so a lot springs from that. There's a bit of finding a path forward. It also depends on the member states being willing.

LaRont: I assume that people are coming around because, really, what other options are there? It's a survival thing. If you are successful at this, you certainly won’t do it alone.

James: No, you won’t. But as always, there are divisions amongst member states on who finds it to be more of an urgent priority. But certainly, from a European Commission perspective, it is a top priority to have more defense readiness by 2030. That requires an industrial ramp-up across the European Union.

Johnson: Thank you, Alison, for your time.

James: Thank you, both, for the opportunity.