The merger of Siemens and Alstom, banned by the European Commission, has led to discussions about a European industrial policy in recent weeks. The German Minister of Economics, Altmaier, and his French colleague Le Maire were at the forefront of the debate.

Sometimes life is like an accident. You can see that there is a crash right away and there is nothing you can do but watch and when it has happened you can’t look away. That’s exactly how you feel in the discussion about a new European industrial policy. Infected or inspired by the “sinophobia” from the USA, politicians tried to force the merger of Siemens and Alstom into a European “railway champion” with the crude argument of a European champion, because otherwise they would not be able to compete against the Chinese suppliers.

Protectionism or innovation?

Almost at the same time, this video made the rounds on the social networks. This shows a battery-powered tram that can be put into operation within a few weeks because it does not require any infrastructure (overhead lines or rails), but only a “road marking”.

So what exactly apart from protectionism should be achieved with a merger? In mathematics: minus times minus results in plus – but certainly not in innovations. We prefer to spare ourselves the discussion about the equally abstruse merger of Deutsche Bank and Commerzbank, as there have already been enough opinions and prefer to look at “related” areas.

In the discussion about industrial policy there is currently no getting around the topic of Huawei. Here, too, we are once again deliberately shooting ourselves in the foot. The discussion about whether Huawei is a backdoor for the Chinese security services or not is dedicated only to the following sentences: The Russian telecom networks use Huawei and their security services have audited the equipment, even the UK services have confirmed that the risk is manageable.

Digital Infrastructure: “Europe is at the back of the game”

Meanwhile Trump at least seems to become a bit more moderate, although it’s bizarre again when he talks about 6G (I don’t want the pills from him). Despite this abstrusity, Trump (for once) has a valid point (unbelievable). Competition is won through innovation and not through exclusion/protectionism.

One of the biggest profiteers from the Huawei fiasco should be Ericsson. As one of the few remaining network outfitters one should think that their CEO doesn’t know what to do with himself just because of joy. Instead, Mr Ekholm tells FT that this uncertainty has led to complete paralysis, because now nobody is doing anything. In the same article he is quoted as saying “at 5G we are back again in Europe” and “5G expansion is full speed ahead in the US and Asia and in Europe most states have not even started selling the spectrum yet”. Furthermore he warns, like Trump “If we are afraid of competition, then innovation comes to a standstill”. He concludes with “we don’t have a positive investment environment in Europe, that’s the problem”.

Selling off European knowledge?

The manufacturer of industrial robots was taken over by a Chinese investor in 2017 and endless discussions about the “sale” of German/European know-how followed. A direct line can be drawn from the Kuka discussion about the burst Alstom/Siemens takeover to the abstruse proposals of Altmaier and Le Maire to make takeovers more difficult or even to block them.

The fact that the discussions are about Kuka and Siemens shows how wrong the thinking is already. Potential champions are not large corporations with hundreds or thousands of employees (and voters).

The Data Artisans case

In January 2019, a relatively unknown start-up called Data Artisans was taken over by Alibaba in Berlin. Data Artisans were the driving force behind Apache Flink, a technology that allows real-time data analysis (stream processing). Data Artisans’ customers are the Who is Who of the data economy: Uber, Airbnb, Zalando and of course Alibaba. Anyone who believes in the thesis that more than less data will be produced and that real-time data processing is a must in the future could have realized that this company has the potential to become a champion. The investors in Data Artisans were Btov, Intel and Tengelmann. Later, Alibaba also joined as an investor.

The Data Artisans case shows the misery quite impressively. The company has an enormous potential which was recognized early by investors. The exit to Alibaba was certainly not only monetary driven, but rather Alibaba offers the company and the founders an environment that otherwise probably only a BigTech group would have been able to offer. Now we have arrived at the chicken and egg problem. If you don’t have a European champion, then you can’t absorb such high-tech companies either. But is that really the case?

What is fascinating is that Data Artisans’ list of customers includes surprisingly few large European companies. One would think that all companies, from the automotive industry to the energy and telecom sector, should have been able to make excellent use of stream processing technology. However, as long as these large corporations prefer to waste time in proof-of-concepts with start-ups instead of productively using new technologies from these innovators, these start-ups will find customers outside of Europe more easily and quickly and will thus also get on the takeover radar there.

Singapore: successful industrial policy

Successful industrial policy outside the Chinese “bubble” is best seen in Singapore with the Temasek investment vehicle or with the non-governmental SoftBank Vision Fund. Champions, especially potential champions, don’t need protectionism and new rules, but, as the Ericsson CEO so nicely put it: a “positive investment climate” with the right vehicles. A German AI 3 billion fund available on call will not help anyone. There is a need for active investment management a la Temasek in future technologies with the right European resources (and not only individual states budgets) at the right level. The mere idea of what a bureaucratic monster could result from it, if one does it “wrong” and does not give the vehicle the necessary degrees of freedom to do so, is a source of fear and anxiety. Without such a “European HTGF-Growth Fund”, European industrial policy will produce European champions, difficult.