Jenny Morris
06 August 2020 by Jenny Morris
I Stock 1166272744

When it comes to artificial intelligence (AI), China and the US lead the field. Europe’s AI market is dominated by the world’s biggest tech organisations including Amazon, Facebook, Google, Intel, Microsoft, and Alibaba. As Boston Consulting Group neatly explain, these major organisations offer little in terms of local investment, jobs on the continent, or tax.

McKinsey have estimated that if Europe were to close the gap on the US’s digital and AI lead, it would add a total of €3.6 trillion to collective GDP by 2030. The second wave of AI is now approaching, where industrial applications of AI in areas such as agriculture and manufacturing will become widespread. The move towards industrial AI has only been exacerbated by the coronavirus, which for many has highlighted issues such as supply chain breakdown and a shrinking labour workforce. Digitisation and AI will be key to economic recovery following the pandemic, meaning it is vital that Europe takes this opportunity to establish themselves on the global stage.

Why is Europe behind?

Despite being home to some of the leading AI research and talent, Europe is behind in terms of commercial AI standing. One major cause of this is the fragmentation of the European digital market. Many European countries (such as the UK, France, and Germany) possess AI-ready markets while others do not yet have an AI strategy in place. This limits Europe’s opportunity to share data and scale-up AI applications, whereas China has a large unified economy ready to adopt new AI offerings.

There is also a severe lack of European investment. The US has a wealth of private AI investment and venture capital whereas China has intensive public-sector funding. In 2016, total European investment in AI was approximately half that of Asia and four times less than in North America. Meanwhile, successful digital companies in Europe (for example, Shazam and Momondo) are
often acquired by one of the major US or Chinese players.

A further issue is infrastructure. Europe is already behind on deployment and uptake of 4G and Ericsson’s CEO, Börje Ekholm, recently spoke out about the need to embrace 5G throughout Europe. In addition, the majority of quantum computing companies, cloud technology providers and chip manufacturers are not based in Europe. A strong digital infrastructure is required to support innovation and development of AI technologies, draw the top talent, and attract foreign investments.

Is there hope?

European world leaders – including both Angela Merkel and Emmanuel Macron – are now recognising the importance of AI. To support this, the European Commission has made AI a priority for the next five years and recently Digital Europe (an organisation supporting digital development across Europe) was awarded a budget of €6.76 billion in the EU COVID-19 recovery plan. While there has also been some progress to establish a ‘digital single market’ (e.g. data sharing), experts continue to stress the importance of this movement to repair the damage of European fragmentation in the global AI race.

Instead of copying the US and China, many suggest that Europe can compete by utilising existing strengths. For example, Europe has a stronger history when it comes to regulation and data privacy (e.g. GDPR) and this may provide a competitive advantage. For example, if AI is developed according to a standard which respects ethics, the democratic process and human-rights, consumers may choose these products and services over those produced by countries not adhering to the same standard.

Europe is also known as a centre of research innovation, being home to half of the global universities for computer science and a third of the top 100 universities for engineering and technology. Whereas the US and China have excelled in areas such as social media, internet search, cloud services and business-to business commerce, Europe is strong in deep tech, education, fintech, health, public services and more. Specialising in these developing sectors may provide European organisations with an opportunity to dominate new markets.

It’s clear that Europe has fallen behind in the global AI race. To compete with the US and China, more work must be done to establish a single digital market. Europe should also reap the benefits of a thriving research culture and continue to focus on maintaining high ethical standards to compete in the second wave of AI developments.