Context: Europe’s tech sector lags behind those in the U.S. and China. In the U.S. for example, the “Magnificent Seven” U.S. tech firms’ spend on R&D was equal to 50% of Europe’s entire public and private sector R&D spend across technology and other areas in 2023 alone – and this has led to a €450 billion gap in tech R&D spending (June 20, 2024 McKinsey Global Institute report). This gap has contributed to a 20% productivity disadvantage per year (May 2024, ECIPE Policy Brief). Nokia’s President and CEO Pekka Lundmark and Ericsson’s President and CEO Börje Ekholm are among senior European technology leaders who have been vocal about the need for urgent action to support Europe’s technology sector.
What’s new: Nokia and Ericsson are today holding a “New Industrial Ambition for Europe” summit in Brussels, which aims to “catalyze the momentum across the EU to implement the actions required to deliver future European digitalization success, including a more supportive regulatory environment and making the region more attractive” (January 16, 2025 Nokia press release). The event will be addressed by chief executives at Nokia, Ericsson, SAP and ASML, as well as top European policymakers. Discussions around withdrawing the proposed EU regulation on standard-essential patents (SEP) are on the agenda but the event also aims to discuss how Europe can implement the Draghi and Letta reports and the 5G Security Toolbox.
Direct impact: The summit marks the first time that Nokia and Ericsson have come together to organize an initiative like this, demonstrating how urgent they believe these issues to be. SAP and ASML’s involvement is also significant, given their size – they are Europe’s two largest tech companies by market cap (US$305.37 billion and US$295.45 billion, respectively) and the closest thing the region has to Big Tech. Although it must be noted that they are small compared to the U.S.’s Magnificent Seven (Apple’s is US$3.58 trillion, for example).
As reported by ip fray earlier this month, Europe owns a 17% share of 5G SEPs, but it has lost out in every other field that matters, including operating systems, enterprise software, cloud computing, smartphones, social networks, crypto and AI (January 3, 2025 ip fray article). Without any change, it will practically be impossible for Europe to get anywhere near the top of the food chain, with its most promising companies destined to be acquired by non-European players.
Wider ramifications: The event comes after Poland took over the rotating presidency of the EU Council on 1 January (for the first half of 2025) and there has been intense lobbying pressure to get it to prioritize the adoption of the SEP regulation. Nokia and Ericsson have emphasised in their announcement that Europe must “enforce fair business practices” if it is to catch up and get ahead of other countries, and, they said, this will include the withdrawal of “harmful proposals like the current legislative proposal on SEPs”.
As well as Nokia, Ericsson, SAP and ASML, today’s event will be joined by European Commission Executive Vice President for Tech Sovereignty Henna Virkkunen, Deputy Minister of Digital Affairs for Poland Dariusz Standerski, and former Italian Prime Minister Enrico Letta.
Before becoming an EU commissioner, Mrs. Virkkunen was also vocal about the withdrawal of the EU SEP regulation. In a speech in the Hemicycle (plenary hall) of the European Parliament in February 2024, she highlighted the importance of strong patent rights and the shortcomings of the bill at the time, including how it would negatively impact Europe’s competitiveness in the development of 5G and 6G technologies (September 17, 2024 ip fray article). She said:
“This proposed compromise does not take into account patent protection and creates too much regulatory burden, especially to the standard essential patent holders.”
It is worth noting that while R&D comparisons (as indicated above) are one metric by which Europe’s status can be measured – they are not even the tip of the iceberg. Market capitalization and venture capital funding are a bit more indicative of where Europe really stands in comparison to the U.S. and China. These are the U.S. Magnificent Seven’s market caps:
- Apple: US$3.58 trillion
- Nvidia: US$3.36 trillion
- Microsoft: US$3.16 trillion
- Alphabet: US$2.4 trillion
- Amazon: US$2.34 trillion
- Meta: US$1.55 trillion
- Tesla: US$1.37 trillion
Meanwhile, Europe’s top tech companies by market capitalization do not even come close to those numbers (SAP: US$305.37 billion and ASML: US$295.45 billion).
Also, unlike Nokia and Ericsson, SAP does not have an outbound licensing program for SEPs (it is also not known to own any cellular SEPs and may not own any SEPs at all). But the company may be heavily involved in some of the other agenda items for today, which include:
- Don’t debate the Draghi and Letta reports – implement them to foster innovation, incentivize investment in key technologies, enable scale, and reduce fragmentation.
- Strengthen R&D, capital access, and tech champion support.
- Reduce and simplify regulation and enforce a digital single market.
- Fully implement the 5G Security Toolbox: 5G and fibre are critical for digitalization; Secure, trusted networks are vital for economic resilience and innovation.
- Reform competition/M&A guidelines to support market consolidation.
- Set clear targets for 5G deployment and trade spectrum fees for rollout.
- Align connectivity with EU green goals.
- Enforce fair business practices. Withdraw harmful proposals like the current legislative proposal on Standard Essential Patents.
In a statement today, Mr. Lundmark said:
“European competitiveness already has one foot in the morgue. Our real GDP is 30% less than the U.S.’s, the EU’s share of the Fortune Global 500 is still falling and our digital future looks less certain than ever. The good news is that we can still turn this tanker around. Europe must create an environment in which businesses want to invest, especially in technologies such as AI, cloud and advanced connectivity. This cannot be a decade-long endeavour. Europe must act right now on issues like the 5G Toolbox and telco mergers. If Europe gets this right, it’s a massive opportunity. Draghi and Letta already provided the framework. So, let’s act.”
Letta’s report, published in April 2024 and entitled “Much More than a Market: Speed, Security, Solidarity – Empowering the Single Market to Deliver a Sustainable Future and Prosperity for all EU Citizens” (April 2024 Letta report), provided the basis for the September 2024 Draghi Report, which made recommendations on the future of European competitiveness and noted the overregulation of the EU (September 2024 Draghi report).
Mr. Letta said today:
“In my 2024 report, I underscored the urgent need for Europe to accelerate investments in advanced connectivity infrastructure to secure its future. The leadership demonstrated by companies like Nokia and Ericsson in fostering collaboration with other European tech innovators, such as ASML and SAP, is commendable. However, to enhance Europe’s competitiveness in the global digital economy, it is essential not only to allow greater telco consolidation but also to prioritize substantial investments in advanced connectivity. This focus is vital for addressing the connectivity gaps across the continent and ensuring that Europe remains at the forefront of tech innovation.”
Also today, Ericsson’s Börje Ekholm said:
“The unique coming together of four technology leaders highlights the urgency facing Europe’s economy to decision-makers in Member States. Companies like Ericsson already invest disproportionally more in R&D in Europe. If other regions continue to race ahead this model cannot survive. Those regions are embracing opportunity through investment, policy, and regulatory support. Europe is not. Yet the solution is well known. The EU must implement the Draghi and Letta Report recommendations to enable the technology sector to play our part in delivering future European prosperity.”
Meanwhile, SAP’s Christian Klein said:
“New technologies will bring growth and higher productivity for Europe. That is why we need to act and drive digitalization across all sectors. Policymakers can support a European tech renaissance by reducing regulatory burdens, incentivizing R&D across the economy, digitizing and modernizing public administration, making Europe more attractive to tech talents, and reshaping education so as to give the next generation a deeper understanding of today’s complex relationships between technological and economic success.”