Global private sector R&D investments increased throughout pandemic

Global private sector R&D investments increased throughout pandemic
Based in Ispra, Italy, The European Commission's Joint Research Centre publishes the R&D Investment Scoreboard every year. Credit: JCR

Despite a challenging overall economic environment in 2020 because of the coronavirus crisis, companies in the EU and across the world have increased investment in research and development (R&D) in the health and ICT services sectors, according to the recent edition of the EU industrial investment scoreboard published last week.

The EU Industrial R&D Investment Scoreboard, issued by the Joint Research Centre (JCR), the European Commission’s science and knowledge service, has been published every year since 2004.

The 2021 edition of the scoreboard comprises 2,500 companies which invested the largest sums in R&D in the world in 2020, based on data taken from their latest published accounts.

These companies, from 39 countries globally, each invested at least €36.5 million in R&D for a total of €908.9 billion. The total R&D is equivalent to approximately 90% of the world’s private sector-funded R&D.

The sample includes 401 companies based in the EU, accounting for 20.3% of the total R&D in the sample, 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 objective of the Scoreboard is to benchmark the performance of EU innovation-driven industries against major global counterparts and to provide an R&D investment database that companies, investors and policymakers can use to compare individual company performances against the best global competitors in their sectors.

R&D investments by region and sector

“Investing in research and innovation is key for Europe’s industry to lead the green transition, excel in the fast-growing ICT sector and lead the new wave of deep tech innovations,” said Mariya Gabriel Commissioner for Innovation, Research, Education, Culture and Youth (17 December). “The scoreboard shows clearly where we need to boost our efforts, calling us to invest now for the future.”

Worldwide, industrial R&D investment has proved resilient in the coronavirus crisis. In 2020, it continued to grow, by 6%, for the 11th consecutive year. In contrast, 2020 saw significant reductions in capital expenditure, net sales and operating profits.

Consistent R&D trends over the past 10 years have changed substantially the R&D specialisations of world regions with the EU maintaining a stable sector mix of R&D investment, including a heavy reliance on the Automotive sector while the US and China have increased their specialisation in ICT sectors with the US also increasing its proportion in Health.

EU behind in R&D growth

According to the figures on investments by region and sector, the EU has still to catch up with its main competitors in some sectors. For the first time in 10 years, the overall R&D growth rate in 2020 in Europe was negative (-2.2 %), while companies based in the US and China showed the largest R&D growth figures (9.1% and 18.1% respectively).

The overall decrease in the EU was mainly due to the weakening of R&D in the automobiles, aerospace and defence sectors. Three German automobile manufacturers, Volkswagen, Daimler and BMW, appear among the 20 top companies investing the largest sums in R&D worldwide in 2020.

The 10 top companies in the list each invested more than €10 billion in 2020. First in the list is Alphabet, the American multinational technology holding company and parent company of Google, followed by Huawei (China), Microsoft (US), Samsung (South Korea), Apple (US), Facebook (US), Volkswagen (Germany), Roche (Switzerland), Intel (US), and Johnson & Johnson (US).

Top 10 investors in R&D in 2021 vs 2016. Credit: The 2021 EU Industrial R&D Investment Scoreboard, European Commission, JRC/DG R&I.

“International collaboration in the areas of research and science is very important so as to guarantee that the most innovative products and services are developed,” commented Tony Jin, Huawei’s Chief Representative to the EU Institutions. Huawei, a global telecommunication giant, climbed to the second place in 2020 compared to the previous year when the company ranked 3rd in the list.

Much of the global research that Huawei carries out takes place in Europe where the company employs over 2,400 researchers in 23 research centres across Europe. Through a series of partnerships with over 150 European universities, Huawei is also embedded within the ICT research ecosystem in Europe.

Lessons learned for EU

A Commission spokesperson told The Brussels Times that it is not possible to specify how much companies located in the EU invest in R&D in other regions since they do not disclose the information in their yearly accounts.

However, in a parallel JRC survey companies were asked about their expectations as regards where their R&D investments will take place. That survey showed no signs of erosion or offshoring to other regions by EU’s top R&D performers.

The EU remains among the leaders in green high-value patents technology and for green patents in energy intensive industries, which reflects its transformation towards climate neutrality, according to the Commission.

JCR summarizes the following policy challenges for the EU:

– To keep the leadership in the Automotive sector that is facing a double challenge from the required transformation to electric mobility and the increasing integration of digital technology.

– To rebuild a strong Health sector with increasing focus on biotechnology that increasingly underpins the development of new drugs.

– To catch-up in ICT technology, reversing the trends observed over the past decade, to bring the benefits of digital technologies to the whole economy and particularly to exploit their great potential to help solve environmental problems.

– To ensure a strategic autonomy in key technology sectors, keeping in-house critical market segments to guarantee the security of supply and stability of essential supply chains

The Brussels Times

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