Opportunities and Challenges for Europe in Embedded

Intelligent SystemsJean-Luc di Paola-Galloni

Group Corporate Vice president Sustainable Development and External Affairs at Valeo

President ARTEMIS Industry Association

Economic, Social and Technological Context

Why Europe needs to invest in Electronic Components & Systems to create future growth and jobs

Source: Jeremy Rifkin

ECONOMIC

TECHNOLOGIC

Slow GDP growth

Demographic challenges

Productivity plateauing for several decades

Growth will stem from productivity growth

Increasing efficiency of complex value chains → is today’s main challenge!

A new General-Purpose Technology (GPT)

A new Industrial revolution:

▪ A mature Communication Internet infrastructure

▪ Transportation internet

▪ Energy Internet

▪ An underlying Internet of Things

A paradigm shift

▪Distributed vs. Centralized

▪ Collaborative vs. Proprietary

▪ Laterally scaled vs. Vertically integrated

CYBER-PHYSICAL SYSTEMS ARE AT THE CENTER OF THIS VISIONTHEY WILL BECOME THE INFRASTRUCTURE TO IMPLEMENT THIS TRANSFORMATION AND REAP ITS BENEFITS

MATERIALS & EQUIPMENTCOMPONENTS

ELECTRONIC SYSTEMS

SYSTEM OF SYSTEMSCLOUD/ FOG / EDGE COMPUTINGANALYTICS & AI

• TECHNOLOGY RICH• PRODUCT AND APPLICATION

DRIVEN• VERTICALLY INTEGRATED• CENTRALISED

PHYSICAL WORLD SOFTWARE & CYBER WORLD

• DATA RICH• SOFTWARE INTENSE• APPLICATION AND SERVICES DRIVEN• ALLOWING LATERAL INTERACTION • DECENTRALISATION

CPS IS THE BRIDGE COVERING

BOTH WORLDS

The bridge between the physical & cyber worlds

PHYSICAL WORLD CYBERNETIC WORLD

PARADIGM VALUE CHAIN ECO SYSTEM

KEY SUCCESS FACTOR

• Invest in the right set of technologies• Attract volumes → To reach critical mass

• Expand the ecosystem of applications → Integrate breakthrough services from start-up & SME

STRATEGIC FOCUS

• Maintain Europe’s sovereignty• Independently carry-out social & industrial

revolution

• Capture growth, productivity and value by:→ Deployment of innovative, application

specific solutions→ Keep European ecosystem of large, SME and

start-up companies

IMPLICATIONS ON RESEARCH AGENDA

Secure hardware and software capabilities that can meet application-specific context

Design application-specific architectures that are • HW • agnostic & interoperable• re-usable and easily updated Develop the application-specific know-how in AI Analytics to deliver value at solution level

Challenges for Europe

Value is shifting away from Europe

Value is shifting towards Solutions

Objectives for Europe to succeed

Setting an international benchmark

International Benchmark on Applications

Source: ECS SRA, Advancy research & analysis

TRANSPORT & SMART MOBILITY

• Historically leading • Challenged on electrification

• Strong IT giants increasingly investing

• Speech recognition

• Leading in powertrainelectrification & speech recognition

• #1 Potential market globally

• Leading on powertrain electrification &

Good positioning on:• Powertrain electrification• Speech recognition

HEALTH & WELLBEING

• Strong historical players inmedical

EU not expected to lead!

• Leading on AIMDExpected to retain the highest market share in the digital health market

• Strong in diagnostic imaging and digital health

Low adoption potential for connected health devices in Japan

• Samsung emerging in diagnostic imaging and digital health

ENERGY

• Strong position across value chain

• Leading role in standardization initiatives

Currently very limited political will on this topic

Weak today but investments to make China a leader in alternative energies

Leading in smart grid/smart communities

Good positions on smart grids

DIGITAL INDUSTRY

• Strong on digital twins• Lagging behind on AI, IoT

platform & cloud

• Strong on AI, cloud, digital twins, condition monitoring

• Ambitious targets• Investments in AI & smart

manufacturing

Among the most advanced manufacturing sector in the world

Smart manufacturing pushed via private large groups & government

DIGITAL LIFENo segment dominated by the EU

Strong on smartphones, home automation

IoT considered a strategic industry for China

Leveraging its strength in robotics• Ambitious projects for

smart cities

• IoT pushed by electronic manufacturers

Very strong Strong Average Weak

Competitive positioning

The US invests annually over $4b

ARTIFICIAL INTELLIGENCE

Strong statement of intent by the White House under the Obama administration to make AI a strategic area of focus but without any committed funding

US federal government investments annual $1b in unclassified research

ANNUAL FUNDING BY

THE NITRD OF OVER $4B

(2017)

$168m$202m$221m$232m$282m$386m

$648m$716m$728m

$958m

Large scale networking

High-confidence software &

systems

Large-scale data management &

analysis

Cyber security &

information assurance

Robotics & intelligent systems

Social, economic & workforce

implications of IT

Software design &

productivity

Enabling R&D for

high-capability

computing systems

High-capability computing

systems infrastructure

& applications

Human computer

interaction & information

Management

HIGH-END COMPUTING

$667m to be invested in exascale computing

PRELIMINARY

China is setting ambitious targetsChina key initiatives

Source: Merics, USSC, Advancy research & analysis

NEXT GENERATION

AI

MADE IN CHINA 2025

Become the global leader in AI by 2030 - $150b fund to be invested over the coming decade

Already very strong private sector in AI: BAT (Baidu, Alibaba & Tencent), start-ups,...

Transform China into a “manufacturing superpower” which dominates advanced industries

$250b funding announced since 2014 to support strategic sectors: $100b National Integrated Circuit Fund, $6b Emerging Industries Investment Fund, $3b Advanced Manufacturing Fund,…

Examples on specific themes:

▪ High-performance computing: to surpass the US in 2020 with the fist exascale computer – China has invested over $1b since 2009

▪ Industrial robotics: significant local funding ($7b+), facilitate acquisition of foreign companies

▪ Has already become the clear leader in commercial drones

PRELIMINARY

Engaging the European Private sector

European private sector R&D spending in ECS seems to be lagging behind other countries.

Source: IC Insights, Annual Report, Advancy analysis, Strategy& Top 1000 innovators survey

TOP SEMICONDUCTOR PLAYERS RESEARCH AND DEVELOPMENT | 2015, % OF TOP PLAYERS TOTAL R&D SPEND

9%

18%

5%

>$50B

6%

51%

2015

6%

TOP SOFTWARE PLAYERS RESEARCH AND DEVELOPMENT | 2015, % OF R&D SPEND IN TOP 1000 PLAYERS IN APPLICATION & SYSTEM

>$70B

8%

2015

2%6%

84%

China

US

Others

EU

Chinese, US and Japanese research program public funding seem to operate on a different scale vs. EUBenchmark of public support to R&D

Source: Advancy research & analysis

300

200

100

150

50

Leadership in Enabling and Industrial Technologies (LEIT) component of H2020 (incl. ECSEL):

€13.5Bn over 7 years

Networking and Information Technology Research and Development (NITRD):

$4.5Bn annual budget

Made in China 2025 plan:

$75Bn over 10 years,

(excl. bank supports and the National Integrated Circuit Fund dedicated to M&A)

KEY PUBLIC R&D SUPPORTPROGRAMSTO ECS

ANNUAL PUBLIC R&D SUPPORT INDEX 100 = EU 2016 ANNUAL AVERAGE

Super smart society plan included in the 5th S&T plan 5 year plan – relevant funding agencies:

$3.6Bn annual budget

Manufacturing 3.0, I-Korea 4.0,… with government support to reach

$7Bn over the next ~5 years

Relevance of the ECS-SRA

The ECS-SRA identifies all key technologies required to succeedin this new industrial revolution

Conclusions

• Key Digital Technologies are expected to create a new generic purpose technology

• Embedded Intelligent Systems contribute to the move from products to solutions and systems of systems

• Value is shifting along the value chain to solutions and away from Europe

• To succeed in this competition, Europe needs to:

Create European Global Market leaders in fully integrated solutions and systems of systems

Safeguard EU sovereignty through technological capabilities

• The international benchmark learns that:

Europe has an excellent strength in Transport and smart mobility and Digital Industry.

But the USA and China are investing on a higher scale than Europe

• Key for Europe is to:

Fully engage the European private sector

Strengthen Public support on ECS R&D

The ECS SRA identifies all key technologiesrequired to succeed!

Thank you!

Jean- Luc di Paola-Galloni