Competition commissioner spells out terms for clearing new industrial R&D partnerships

EU Competition Commissioner Margarethe Vestager spelled out some of the conditions that companies must meet in order to win Commission approval for an important new type of public-private R&D partnership.

In a meeting with journalists on 3 May, Vestager said that the new class of R&D projects – called Important Projects of Common European Interest (IPCEI) – are permissible if, among other things, they address a need the market cannot meet alone and do not unfairly harm competition.

The European Commission adopted rules on IPCEIs in 2014, but the first ever IPCEI for R&D – a €1.7 billion microelectronics project involving France, Germany, the UK, and Italy – was only approved by Vestager in December 2018. With a new IPCEI for battery technologies now being mooted by countries including Poland and Belgium, the criteria for the first provides an insight into how such cases may be decided in the future.

Ordinarily, the EU’s strict state aid rules make it difficult for member states to subsidise private sector research, lest it give one company or national economy an unfair advantage over another. But the IPCEI framework allows several member states and companies to join forces and seek an exemption, which must be approved by the competition commissioner. Until Vestager’s decision at the end of last year, no such research project had ever been approved.

IPCEIs differ from the myriad varieties of public-private research partnership authorised under the Horizon 2020 research programme in that they are not directly organised or funded by the EU, but by coalitions of member states with the Commission’s blessing.

No ties to failed Siemens-Alstom deal

The microelectronics project includes German electronics giant Siemens, whose planned acquisition of France’s Alstom had been blocked by Vestager in February 2019. Vestager said the two decisions – blocking the merger but approving the R&D project - were unconnected. “It had nothing to do with the merger consideration. These two things are completely separate,” said Vestager.

“We have these rules to make Important Projects of Common European Interest come true, in order to make sure that those businesses who are not part of it, and who do not receive state aid, find that it is justified. Otherwise, of course, they would complain,” said Vestager, a Dane who is one of the liberal ALDE group’s seven candidates for president of the Commission. “What we do is to make sure that there are legitimate reasons for making projects where some businesses participate.”

In the case of the IPCEI approved in December, she said, “these reasons would come from there being a market failure in microelectronics – that you don’t find the microelectronics that you need – that it is sufficiently ambitious, [and] that there are higher risks involved so that you understand that businesses may not want to take that risk on their own.”

Vestager said non-participating businesses should also benefit, by ensuring “that the knowledge created is being shared. So that even though you may not participate as a business, you get access to part of the knowledge that is being built up.”

Besides Siemens, the 29 industrial participants in the microelectronics IPCEI include Bosch, ST Microelectronics and TDK-Micronas. Its five areas of focus are energy efficient chips, power semiconductors, smart sensors, advanced optical equipment, and compound materials.

Only the fifth category, compound materials, involves UK-financed participants: Integrated Compound Semiconductors, IQE, Newport Wafer Fab, and SPTS Technologies, working alongside French and German-backed companies. The fourth category, advanced optical equipment, includes just two participants, both financed by Germany: AMTC and Carl Zeiss. The remaining three categories involve a combination of French, German, and Italian-backed firms.

Cover the “full circle”

The Commission suggested that member states could form an IPCEI for batteries in its October 2018 action plan on batteries for the European Battery Alliance, a Commission-led partnership focused on addressing the fact Europe has no capacity for the mass-production of high-performance batteries.

“What is being discussed now is whether there should be one or several” IPCEIs on batteries, Vestager said.  She added  that “quite a huge number of member states” were interested, including France, Germany, Poland, Finland, and Belgium.

Vestager said that while “it will still be the key criteria” that decides the fate of the next proposed IPCEI on batteries, the project “will be different from the first,” which “took quite a lot of time” to approve due to its size and complexity.

Those key criteria, she said, are that there is “more than one member state [participating], preferably also more than two, different businesses, [and] it can be also research organisations, universities, that kind of bodies – and then of course that the project should push for innovation for the next generation [of technology].”

However, she added, “depending on the technology, you’d have to make a set-up that would allow you to actually do that. And as far as I have learned,” for batteries, “you have to have at least some production capacity in the mainstream technological level right now in order to push for the next one.”

She added that another issue to address “is how to make sure that the project covers [the] full circle,” from sourcing raw materials, to production, use, and recycling, “so that you also think about organisational innovation, because innovation in this perspective is not necessarily just the technology.”

Vestager made a statement in December justifying her position on the microelectronics IPCEI, but did not at that time comment on the proposal for another such partnership on batteries. On Tuesday, a Commission announcement on the third ministerial meeting of the European Battery Alliance quoted Vestager as saying “we are now working closely with Member States and companies to help make their plans for such projects in the field of batteries a reality.”

The European Battery Alliance was launched by in October 2017. Its stakeholders include, among others, the Commission; the European Investment Bank; EIT InnoEnergy, which is itself a public-private “Knowledge and Innovation Community” under the European Institute of Innovation and Technology; and battery companies Northvolt and Saft. Siemens is also involved.