© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
May 19, 2014 9:59 pm
In a factory in the small Swedish industrial town of Finspång, high-tech 3D printing machines are melting fine layers of metal powder with lasers to form complex parts of expensive gas turbines.
The technology inside these bulky machines is being used by Siemens, the German electronics and engineering group, to speed up repairs and cut costs within its power generation service and maintenance division. In certain cases, the time taken to repair damaged turbine burners has been cut from 44 weeks to four.
Also known as additive manufacturing, 3D printing is one example of the sort of technological leadership that is seen as key to boosting Europe’s manufacturing recovery – and competing against countries with lower production costs.
Siemens is one of the first companies to produce 3D-printed heavy-duty industrial parts for gas turbines but many other heavyweight European manufacturers are exploring how the nascent technology can improve their performance.
BAE Systems, the British defence company, says its RAF Tornado fighter jets have flown the first metal 3D printed flying parts and Rolls-Royce, the UK aerospace company, plans to use 3D printing to produce components for its jet engines.
“The EU’s competitive edge will more than ever be based on innovation, productivity and the EU economy’s transition into higher-tech and higher-value-added activities,” says Bert D’Hooghe, policy adviser at the European Round Table of Industrialists, a leading manufacturing lobby group.
Europe is already a world leader in areas from car and aerospace manufacturing to chemicals, and its focus on high-tech niches – which are less subject to low-cost competition – remains a source of strength.
However, there are concerns that the continent is lagging behind its competitors on several fronts. It is facing growing competition from the US, where shale gas discoveries are helping to reinvigorate the country’s manufacturing sector, and China, which has stepped up its investment into high-value manufacturing, no longer satisfied with just being the workshop of the world.
European industrialists agree that innovation is key but the research and development picture gives cause for concern.
Overall EU R&D spending has remained at about 2 per cent of GDP in the last decade, a long way off the 3 per cent target the EU wants to achieve by 2020. It also lags behind Japan and the US, at 3.4 per cent and 2.8 per cent respectively. Furthermore, the European Commission estimates that China could overtake the EU in absolute R&D spending by as early as 2014.
The share of patent applications – many of which are applicable to manufacturing – also gives a hint of this competitive threat. In the past 13 years, the number of patents filed by companies in the EU has fallen to about 110,000 and jumped from about 25,000 to more than 400,000 in China, according to figures from the World Bank.
Alexandre Affre, director of Industrial Affairs at BusinessEurope, a trade body, believes Europe is missing a “culture of innovation”.
“We are not only missing pure innovation in terms of products and processes but also innovation in the decision-making process in Europe,” he says. Affre believes that EU legislation is often too prescriptive, restricting the ability of companies to innovate.
Yet some countries in Europe are performing better than others. Finland, Sweden, Denmark and Germany spend the most on R&D in the area.
Christian Diemer, chief executive at Heitkamp & Thumann Group, the world’s largest manufacturer of battery components, says innovation is “extremely important”. It hired a group innovation director last year to make sure the company concentrated on the right projects and recognised early trends.
DEIF, a Denmark-based niche manufacturer of control systems for wind turbines, also recognises the importance of innovation: 20 per cent of its workforce are engineers employed in R&D. It has managed to keep all of its production in Denmark and 93 per cent of its products are exported, to countries such as China, India and Brazil.
Toke Foss, chief executive at DEIF, believes that part of its success has been in offering an entire service package, rather than selling just a product. This is an area where many European companies have leapt in front of their industrial rivals. Some European industrials now make as much as half their revenues and profits not from producing things, but from providing services to their customers.
“Niche can mean highly individualised production that responds better to clients’ needs with production spread around the world,” says Uwe Combüchen, director-general of engineering industry group Ceemet.
One big consequence of the financial crisis is that manufacturing has jumped up the political agenda in Europe with governments across the continent clamouring to proclaim themselves “pro-manufacturing”.
Brussels wants to reindustrialise Europe and aims by 2020 to raise industry’s share of EU gross domestic product from 15.6 per cent to 20 per cent. Policy makers and businesses agree there is a need to improve the infrastructure of innovation, from nurturing new ideas to financing high-tech start-ups. “The EU faces a commercialisation gap,” says D’Hooghe. “Too often EU inventions/knowledge is not translated into EU-based innovation,” he complains.
Brussels is addressing some of these problems through its Horizon 2020 innovation and research strategy, which aims to inject €70bn into European technology-driven industries over the next seven years.
But Europe faces a more pressing concern: a lack of skills. “We simply need to invest more in education and training if we are going to be able to keep up with our competitors,” says Combüchen. “Europe is slowly learning – Germany, Austria and Denmark are bright examples of successful systems with high levels of work-based learning.”
San Sebastián, best known for surfing and its bite-sized pintxos, is also home to a small company at the centre of a global race to take graphene – the so-called wonder material – from the lab to the factory floor.
Graphenea, a Spanish technology company set up in 2010, is one of Europe’s main producers of graphene, which promises a range of applications from superfast computers and foldable mobile phones to superstrong aircraft wings.
The material, a layer of carbon a single atom thick, is stronger than diamond but stretches like rubber and conducts electricity better than copper.
But while graphene research was pioneered in the UK almost 10 years ago – when it was isolated at Manchester University, earning Russian-born scientists Andre Geim and Kostya Novoselov the Nobel Prize in 2010 – concerns have grown that the country, along with the rest of Europe, has failed to capitalise on its early scientific breakthrough.
In 2012, there were 7,351 graphene-related patents and patent applications. China made 2,200 of the applications, surpassing both the US and Europe, according to figures from CambridgeIP.
This disparity between producing academic research and commercialisation is dubbed the “European Paradox”. The continent is good at producing cutting-edge scientific research, but it is not so good at turning it into marketable products.
But there are signs that Europe can reclaim the lead. In 2013, the EU launched a €1bn research programme that aims to find ways of commercialising graphene.
San Sebastián-based Graphenea is likely to be one of the main beneficiaries of this 10-year investment push. It is one of a group of small companies making graphene, mainly for research and development. Other players in Europe include Spanish rival Avanzare, and Applied Graphene Materials, a Durham University spinout. “Europe is very well-positioned to lead this emerging sector,” says Jesus de la Fuente, chief executive at Graphenea.
The company, which employs 11 people and exports graphene materials to 40 countries, supplies its products to global operations such as Nokia and Philips. It is part of a growing cluster of nanotechnology companies based at the nanotechnology research centre, CIC nanoGune, in San Sebastián.
The UK government is also determined to protect the country’s stake in graphene, with plans to open a £61m National Graphene Institute in Manchester next year.
Fuente says research and development spending is “crucial” for Europe’s future business success. “Graphene is a new material, market and technology. There is a long way to large adoption of graphene materials and we have to be focused on the long-term competitiveness,” he says.
Although a few niche applications, such as graphene-strengthened tennis rackets, are available – and flexible display screens are not far away – the really big applications in electronics are unlikely to be ready until the 2020s.
Andrea Ferrari, professor of nanotechnology and director of the Cambridge Graphene Centre, says Europe already leads the way in graphene science. “Maybe when it comes to the final application at the moment Europe is not leading,” he says. “But this investment that we now have is to make sure that the applications of graphene are actually based in Europe.”
Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.