The level of investment has decreased due to the pandemic. However, Europe needs to invest more in new technologies to catch up with the US and China, which have increased research and development spending during the first year of the pandemic.
According to data published in the issue of the European Commission Industrial R&D Industrial Scoreboard for 2021, the COVID-19 pandemic has dealt a significant blow to the growth of investment in research and development in the EU.
The rating of investments in industrial R&D of the EU, issued by the Joint Research Center (JCR), the service of the European Commission for Science and Knowledge, has been published annually since 2004.
The 2021 ranking includes 2,500 companies that invested enormous amounts in R&D in the world in 2020 based on data taken from their latest published reports.
Each of these companies from 39 countries has invested at least 36.5 million euros in R&D, totaling 908.9 billion euros. The total amount of R&D is equivalent to about 90% of the world's R&D funded by the private sector.
The sample includes 401 companies from the EU, which is 20.3% of the total R&D, 779 US companies (37.8%), 597 Chinese companies (15.5%), 293 Japanese companies (12.2%), and 430 from the rest of the world (14.2%).
The main goal of the Scoreboard is to compare the effectiveness of EU innovation industries with the central global counterparts and provide a database of R&D investments. Companies, investors, and politicians can use it to compare the results of individual companies with the best international competitors in their sectors.
R&D investments by region and sector
Investment in R&D is primary for European industry to lead the environmental transition, succeed in the fast-growing ICT sector and lead a new wave of profound technological innovation. "The results table clearly shows where we need to step up our efforts, encouraging us to invest now in the future." - said Maria Gabriel, Commissioner for Innovation, Research, Education, Culture and Youth.
Worldwide, investments in industrial research and development have proved to be sustainable in the context of the crisis caused by the coronavirus. In 2020, it continued to grow by 6% for the 11th consecutive year. On the contrary, in 2020, there was a significant reduction in capital expenditures, net sales, and operating profit.
Consistent R&D trends over the past ten years have significantly changed the specialization of R&D in the regions of the world: the EU maintains a stable mix of R&D investment sectors. They include a strong dependence on the Automotive sector while the US and China have increased their specialization in the ICT sectors, with the US also increasing its proportion in Healthcare.
EU lags in R&D growth
Looking at investment data by region and sector, the EU has yet to catch up with its main competitors in some spheres. For the first time in 10 years, the overall growth rate of R&D in 2020 in Europe turned out to be negative (-2.2%). The companies in the USA and China (9.1% and 18.1%, respectively) show the highest R&D growth rates.
The decline in the EU was mainly due to the weakening of R&D in the automotive, aerospace, and defense industries. Three German car manufacturers, Volkswagen, Daimler, and BMW, are among the top companies investing the most considerable sums in research and development worldwide in 2020.
Each of the top 10 companies on the list invested more than 10 billion euros in 2020. Facebook (Johnson & Johnson), Volkswagen (Germany), Roche (Switzerland), Intel (USA) and Huawei (China), Microsoft (USA), Samsung (South Korea), Apple (USA), Facebook (USA), Alphabet, an American multinational technology holding company and the parent company of Google, are first on the list.
"International cooperation in research and science is very important to ensure the development of the most innovative products and services," commented Tony Jin, Huawei's chief representative in EU institutions.
Huawei, a global telecommunications giant, climbed to the second place in 2020, compared to the previous year, when the company was ranked 3rd in the list.
Most of the global research that Huawei conducts takes place in Europe. The company employs more than 2,400 researchers in 23 research centers across Europe. Through many partnerships with more than 150 European universities, Huawei is also integrated into the ICT research ecosystem in Europe.
Lessons learned for the EU
Companies have been asked in a parallel JRC survey about their expectations of where their R&D investments will take place. This study revealed no signs of erosion or offshoring to other regions by the EU's leading R&D performers.
According to the Commission, the EU remains one of the leaders in green high-value patents technology and for green patents in energy intensive industries, reflecting its transition to climate neutrality.
JCR summarizes the following policy challenges for the EU:
- To maintain leadership in the Automotive sector, which faces a dual-task: from the necessary transition to electric mobility and the growing integration of digital technologies.
- To restore a strong Healthcare sector by paying more attention to biotechnologies, which are increasingly at the heart of the development of new drugs.
- To make up for the lost time in ICT technologies by reversing the trends observed in the last decade, to extend the benefits of digital technologies to the entire economy, and, in particular, to use their enormous potential to solve environmental problems.
- To ensure strategic autonomy in key technology sectors, while maintaining its critical market segments to ensure the security of supply and stability of the essential supply chains.
The sources: Global private sector R&D investments increased throughout pandemic and Commission reports first fall in industry R&D investment in ten years.
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