Europe’s innovative tech sector is held back only by policymakers

Brussels must look to China’s example to foster growth of global-scale computer firms

My first job, after leaving University, was as a junior official in the European Commission in Brussels. It was 1983, and I joined the task force of the European Strategic Programme for Research into Information Technology (Esprit), under the leadership of director general Michel Carpentier.

At the time, Japan was rapidly emerging as a new global player in the computer industry. During the 1970s, the Japanese government had led an initiative to strengthen its semiconductor firms (such as Fujitsu, Hitachi and NEC) to directly compete with American chip manufacturers (such as AMD, Intel and Texas Instruments), particularly for very large semiconductor memory systems.

Then, in 1982, Japan launched its “fifth generation computer” initiative to focus its national resources on new computer hardware designs and software, aiming to lead the world in artificial intelligence and smart machines.

The American reaction was apprehensive and vigorous. The Microelectronics and Computer Consortium (MCC) was formed in direct response, as a joint research and development initiative by several major American computer and semiconductor manufacturers. The US Department of Defense launched a substantial effort in intelligent systems, including self-driving military vehicles and former US president Ronald Reagan's strategic defence initiative.

In Europe, the Esprit programme was conceived to counter the concurrent efforts in Japan and the US to develop next generation intelligent computer systems. At the time, we had several national champions in Europe – companies such as ICL in the UK, Olivetti in Italy, both Nixdorf and Siemens in Germany, Bull in France and Philips in the Netherlands – but all of them were likely to be surpassed by the investment in computer research in Japan and the US. Esprit was conceived as the European policy response.

China frequently expects partnerships and access to intellectual property

It was an exciting time to be a young civil servant at the heart of a pan-European advanced research effort. My experiences led directly to the formation of software company Iona, which I co-founded with Annrai O’Toole and Seán Baker in Dublin in 1991.

Increasing alarm

Today, there is increasing alarm in both Europe and the US about China's technology ambitions. President Xi Jinping launched his "Made in China 2025" initiative two years ago. The initiative will advance the productivity of the Chinese economy out of low cost, labour intensive activities into a higher, value-added economy. The Chinese government is making loans, of the order of tens of billion of euro, available to its domestic firms which have a strategic potential in advanced technologies. China intends to be both globally competitive in established industries such as computers and aviation, but also to be dominant in new industries such as electric vehicles, drones and artificial intelligence.

China is naturally particularly keen to partner with the world’s current technology leaders to achieve this objective. As has been the case in the past, China frequently expects partnerships and access to intellectual property as the price which foreign companies must pay if they are to access both its own market and its own rapidly developing technical strengths.

AMD – an American semiconductor manufacturer – last year licensed intellectual property to Tianjin Haiguang Advanced Technology Investment Co, to access nearly $300 million in licensing fees, plus volume-based royalties. AMD has also recently announced a deeper relationship with Sugon in Tianjin, a supercomputer manufacturer. Other advanced technology licensing and collaboration agreements have been announced by, for example, HP Enterprise and IBM, or are rumoured.

The core of Apple's augmented reality technology is from Munich-based Metaio

The US administration seeks to protect certain sensitive technologies for export. However, the joint ventures and licensing deals between American and Chinese companies, which involve valuable know-how, appear to have met regulatory requirements.

In turn, US secretary of commerce Wilbur Ross expressed concerns at the Politico Pro Policy Summit in September, about US companies being pressured to trade market access for licensing arrangements, and hinting that a revised policy may emerge from the White House.

Deja vu all over again

Meanwhile, for Europe, it seems like a case of “deja vu all over again”. Of the top 15 international technology companies by revenue, none are European. Six are Asian, including Huawei in China. The remainder are American.

And yet, when it comes to technology itself, Europeans are as innovative as any. The Japanese fifth generation computer initiative was based on the Prolog programming language, for artificial intelligence software. Prolog was created in Marseille. Today much of the world's leading research in machine learning and advanced interfaces is in Europe.

Google acquired London-based Deep Mind in 2014, which then made headlines by beating the world's leading professional Go player last year. The core of Apple's augmented reality technology is from Munich-based Metaio, which the Cupertino-based giant acquired in 2015. Qualcomm recently acquired Scyfer, a University of Amsterdam spinout focused on machine learning.

Time perhaps for another policy reassessment in Europe. Our challenges here are not so much in research and development, but in having catalysing policies to build innovating companies at scale. Chinese leadership is driving national policies to build globally competitive companies, especially in new emerging industries. There is apparently no such vision as yet among our European leaders.