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European firms cut R&D expenditure less than in US, clean tech fares well

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The recently published European Commission "EU Industrial R&D Investment Scoreboard" shows that R&D investment by top EU companies fell by 2.6% in 2009. The fall in R&D investment by leading players in the US, at 5.1%, was twice as sharp as in the EU. 15 of the companies featured in the study were from the clean tech space, up from 9 in the previous year.

The worldwide reduction in investments has been less pronounced (1.9%) in Japan than in Europe, with Japanese firms maintained their level of investment. The Japanese car maker, Toyota, is the world's biggest R&D investor (€6.8 billion) for the second consecutive year, while companies based elsewhere in Asia (China, India, Hong Kong, South Korea and Taiwan) have continued the high R&D growth seen in previous years.

This year's Scoreboard – which covers the top 1,400 companies worldwide – shows that despite extremely difficult economic conditions, R&D investment remains an important strategic priority for top firms worldwide. Three EU companies feature in the top ten: Volkswagen, the biggest investor based in Europe with €5.8 billion; Nokia and Sanofi-Aventis.

During 2009, leading EU companies reduced R&D investments much less than their US counterparts despite similar drops in sales (around 10%) and higher drops in profits (13.0% as against 1.4%).

"The fact that major EU firms have largely maintained their R&D investment shows that they recognise R&D as key to emerging stronger from the crisis,” said Máire Geoghegan-Quinn, Commissioner for Research, Innovation and Science. “But the wide gap with the top US companies in areas like software and biotechnology and the continuing rapid rise of Asian-based companies highlight the innovation emergency Europe is facing. We urgently need heads of state and government at the December European Council to back the Innovation Union proposals that Antonio Tajani and I announced on 6 October."

European companies' R&D performance is weak in key hi-tech sectors. For example, the US companies featured in the Scoreboard invested five times more than their EU counterparts in R&D on semiconductors, four times more in software R&D, and eight times more in biotechnology.

Alternative energy investment strong

Despite the crisis, the sectoral composition of R&D investment worldwide has remained broadly the same. For US companies, high R&D-intensity sectors, such as pharmaceutical or computer services, contribute to more than two-thirds of the total R&D. By contrast, for European and Japanese companies, medium-high R&D intensity sectors (for example automobiles or electronics) predominate, while the high R&D intensity sectors constitutes only around one-third of the total investment.

There were massive reductions in R&D investment by some automotive firms, e.g. Ford (32.4%), Renault (26.5%) and General Motors (24.1%). Others such as Nissan and Toyota showed a modest reduction or even increased R&D investment, e.g. Hyundai.

The alternative energy sector continued to grow rapidly. The Scoreboard now includes 15 companies (9 more than last year) fully focused on clean energy technology. These companies, 13 based in the EU and 2 elsewhere, invested more than €500 million in R&D in 2009, an increase of 28.7%.

The clean tech companies included in the EU Scoreboard are as follows: Vestas (Denmark, €239 million), SMA Solar Technology (Germany, €53.47 million), Centrotherm Photovoltaics (Germany, €28.41 million), Nordex (Germany, €28.15 million), LM Wind Power (Denmark, €26.37 million), Q-Cells (Germany, €24.70 million), Roth & Rau (Germany, €15.70 million), Hansen Transmissions International (Belgium, €14.94 million), SolarWorld (Germany, €10.15 million), PV Crystalox Solar (UK, €8.17 million), Ceres Power (UK, €6.03 million), Solar Millenium (Germany, €5.04 million), 3w Power (Luxembourg, €4.39 million). The two non-European clean tech firms are First Solar (US, €54.47 million) and Renewable Energy (Norway, €44.52 million).

Spain's top R&D investments

Within the EU, R&D growth rates differ between Member States due to their varied sector composition. Some of the biggest R&D decreases in 2009 were by companies based in countries such as Germany (down 3.2%) and France (4.5%) with a large automotive industry. Countries like Finland (down 6%) and Sweden (6.6%) where IT hardware is a major industry for home-based companies were also hit hard.

However, Spain's top R&D investors increased investment by 15.4%, despite a drop in sales of 6.4%. This was due to large increases by top Spanish companies such as Telefónica (16%) and Acciona (29%) – primarily thanks to its investments in renewable energy – and the inclusion of top players such as Banco Santander (18%).

The EU Industrial R&D Investment Scoreboard is published annually by the European Commission (DG Research and Joint Research Centre). It measures the total value of their global R&D investment, irrespective of the location where the relevant R&D takes place. It does not therefore indicate trends in private sector R&D intensity – business R&D expenditure in a particular country or region as a proportion of GDP, whether that expenditure is by home-grown companies or through inward investment.

For additional information:

EU Industrial R&D Investment Scoreboard

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