Europe is focusing on ‘tech sovereignty’ as tensions flare between the U.S. and China

LONDON — The European Union is investing billions of euros into what it believes are fundamental and core technologies as part of an effort to boost its tech sovereignty and reduce its dependency on the U.S. and China.

The Fraunhofer Institute, a state-backed German research agency, defines tech sovereignty as the ability of a state “to provide the technologies it deems critical for its welfare, competitiveness and ability to act, and to be able to develop these or source them from other economic areas without one-sided structural dependency.”

Europe is currently heavily reliant on technologies that come from beyond its borders but the continent’s leaders want to change this.

“Strengthening Europe’s digital sovereignty is a key component of our digital strategy,” a spokesperson for the European Commission, the executive arm of the European Union, told CNBC. “Europe can play a leading role on the world stage when it comes to technology.”

Currently, however, Europe has fallen behind when it comes to crucial technological infrastructure such as semiconductors and superfast telecoms networks.

Companies like Cisco in the U.S. and Huawei in China have built the plumbing that underpins the internet for Europe’s 700 million plus inhabitants. Chips largely come from manufacturers including Nvidia, Qualcomm and Intel in the U.S., Foxconn in China, Samsung in South Korea or TSMC in Taiwan, which China views as a breakaway province. Then there’s the U.S. and Chinese internet platforms — think Google, Facebook, Instagram and TikTok — which have hundreds of millions of European users, who share their personal data with the companies on a phenomenal scale.

“Nations have become worried that tech is allowing foreign powers to dominate them in all kinds of ways,” Abishur Prakash, a geopolitical specialist at the Center for Innovating the Future, which is a Toronto-based consulting firm, told CNBC via email. “Because of this, governments are looking at tech through a new lens.”

The ongoing geopolitical tensions between the U.S. and China have not gone unnoticed by Europe’s leaders.

Over the last few years, the U.S. has waged a battle against Huawei, one of China’s most prized technology companies, urging other countries around the world to boycott it. The U.S. has accused the Shenzhen-headquartered company of building backdoors into its equipment that can be exploited by the Chinese Communist Party for espionage purposes. Huawei has repeatedly denied the allegations.

Under the Trump administration, Washington blacklisted dozens of other Chinese tech companies last year including drone maker DJI. Meanwhile, Beijing has for years blocked U.S. platforms like Google, Facebook and Twitter.

“In the face of growing tensions between the United States and China, Europe will not be a mere bystander, let alone a battleground,” said Thierry Breton, the European Union’s commissioner for the internal market, in a speech last July. “It is time to take our destiny into our own hands. This also means identifying and investing in the digital technologies that will underpin our sovereignty and our industrial future.”

Tech analyst Benedict Evans, a former partner at venture firm Andreessen Horrowitz, told CNBC that tech sovereignty as it relates to China and the West is interesting and important. “Your supply chain is in an unfriendly country, and both sides worry about that,” he said. “Differences between the U.S., U.K. and EU seem to me nothing more than populist hand-waving.”

Since Breton’s speech, Europe has announced plans to invest billions in technologies ranging from semiconductor chips to new telecoms infrastructure, with the view that these technologies can help facilitate developments in others, such as artificial intelligence and autonomous cars.

“Europe’s digital sovereignty rests on three pillars: computing power, control by Europeans over their data, and secure connectivity,” a spokesperson for the European Commission said. “To this end, Europe’s capability to design and produce the world’s most powerful processors must be increased, innovative European clouds that guarantee data safety need to be created, and governments, firms and citizens need to have access to high-speed and secure broadband networks.”

Chips are used to power cars, phones, high performance computers, defense systems and AI, but Europe accounts for less than 10% of global production, although that is up from 6% five years ago. The European Commission wants to boost that figure to 20% and is exploring investing 20-30 billion euros ($24-36 billion) to make it happen.

When it comes to connectivity, the European Commission wants 100% of the European population to be able to access 1 gigabit per second download speeds; average speeds are currently well below 100 megabits per second. It is starting to prepare for 6G and looking at using satellites to beam internet across the continent.

Breton and European Commission Vice President Margrethe Vestager included the targets in a new “2030 Digital Compass” plan on Tuesday that is designed to translate the EUʼs digital ambitions for 2030 into “concrete terms.”

They also said that they want Europe to build its first quantum computer — a machine that employs quantum phenomena such as superposition and entanglement to carry out computing tasks — in the next five years.

“As a continent, Europe has to ensure that its citizens and businesses have access to a choice of state-of-the-art technologies that will make their life better, safer, and even greener — provided they also have the skills to use them,” said Breton in a statement.

“In the post pandemic world, this is how we will shape together a resilient and digitally sovereign Europe,” he added. “This is Europe’s Digital Decade.”

The European Commission insists that tech sovereignty is not about “isolating” Europe but more about the region defending its strategic interests and being assertive of its values.

“It’s about protecting our companies against predatory and sometimes politically motivated foreign acquisitions,” said Breton. “And it’s about developing the right technological projects that can lead to European alternatives in key strategic technologies.”

Europe has already lost some of its biggest and most important technology companies to behemoths in the U.S. and China in the last decade. London AI lab DeepMind was sold to Google in 2014 for around $600 million, while chip designer Arm was sold to Japan’s SoftBank in 2016. SoftBank is now in the process of trying to sell Arm to U.S. chip giant Nvidia for a reported $40 billion, in a deal that critics say will reduce competition.

Elsewhere in Europe, Apple acquired part of Dialog Semiconductor, a German chip business, in a deal valued at around $600 million, while PayPal bought Swedish payments start-up iZettle for $2.2 billion.

But Prakash, from the Center for Innovating the Future, said the world will become more divided as nations and nation states strive for tech sovereignty.

“As more governments use technology to reassert control, they will also end up ‘limiting’ their relationship with the rest of the world,” he said, adding that “nations will take action against one another in a way that results in the world becoming fragmented.”