EU vs. Everyone – A Blow Upon a Bruise

More regulatory meddling.

• It takes quite a lot to upset the normally quiet and sober European OEMs, but even they have been forced to speak out against the EU’s latest scheme that could quite easily finish them off.
• The EU is close to publishing a strategy designed to promote European technology sovereignty, but, as usual, the EU seems to intend to restrict when what it should really do is incentivise. 
• The idea is to restrict the access of US companies to European technology rollouts such as AI, data centres, vehicles, consumer devices and so on.
• The EU thinks that by hobbling the competition, local versions of the technologies will have a better chance to win the business of those companies deploying the technologies.
• Obvious beneficiaries would be the likes of SAP, Siemens, Nebius, Mistral, among others.
• However, by removing US (and other) competition, the EU would be saying to the European technology providers that it is OK to be mediocre and sub-par compared to the US competitors.
• The impact on the consumer market could also be catastrophic, as the US companies beat the other contenders in the race to be the place where users live their digital lives over 10 years ago.
• Given this level of entrenchment, I would assume that the smartphone ecosystem would get a free pass, but this would cause all sorts of problems for the car makers.
• Given the OEMs’ inability to design good digital user experiences in their vehicles, Apple CarPlay and Android Auto are very popular with users and if these were suddenly to become unavailable, the European OEMs would likely start losing more market share to imports.
• Furthermore, over the last 5 years there has been a systematic shift to SoCs for both Infotainment and ADAS, and it is the US chip makers Nvidia, Qualcomm and Israeli Mobileye that have taken over the majority of these sockets.
• They were able to win these sockets on the merit of their products, meaning that the local competition was uncompetitive.
• Forcing European manufacturers to use uncompetitive products would have the knock-on effect of making their products uncompetitive and unattractive to consumers who already live their digital lives with one of two US digital ecosystems.
• If Europe wanted to encourage a European digital ecosystem, it should have done this 15 years ago when the contest for the digital ecosystem on the mobile phone was fought.
• Hence, I think that any action of this nature by the EU will have the effect of driving European companies overseas in much the same manner that the founder of OpenClaw decamped to the USA pretty much the minute his innovation went viral.
• This is why the European OEMs are making such a fuss, as moving overseas or out of the EU is not really an option for them and this proposal is likely to have the effect of making their products less attractive to consumers.
• This is the last thing that European OEMs need as they are already labouring under the onslaught of Chinese competition, which has exposed them as uncompetitive on cost and slow to react.
• When one takes this in the context of the AI Act, where very little has happened in the last year despite plenty of promises, it is easy to explain why Europe lags badly in technology and hopelessly in AI.
• Given the pushback from industry, I expect that these proposals will never come into force, and so if the EU can move quickly to fix the AI Act, there is still time for Europe to become relevant in AI.
• However, given the last year of inaction, I am not optimistic.