By Bertrand Beauté

It was high time. For too long, most of Swissquote Magazine's interviews were held by video conference, as the traditional out-of-office interviews were replaced by discussions let on Zoom, Microsoft Teams and Google Meet. The episode, in itself anecdotal, exposed a more alarming underlying issue: Europe’s almost total dependence on foreign digital solutions.

It was exactly to discuss this issue that we had the pleasure of going to Neuchâtel to meet Alexandre Pauchard, the new CEO of CSEM (Swiss Centre for Electronics and Microengineering). Bobst’s former R&D director takes an uncompromising look at Europe’s current tech situation, while hoping for a recovery. Find out more in this interview.

The pandemic has accelerated the digital transformation of society. But most digital services are provided by US companies. Why are there no European players to compete with GAFAM (Google, Apple, Facebook, Amazon, Microsoft)?

Europe is not a digital desert. We do have some very good success stories, such as the e-commerce platforms Zalando and Asos, or the music streaming service Spotify. In the field of business software, we also have world leaders such as SAP, Sage and Dassault Systèmes.

But we clearly trail behind the Americans. Not surprisingly, as the US has dominated the digital sector since computing was born. Computer chips were created in Silicon Valley. Microsoft and Apple were pioneers in operating systems and office software, and then they made the transition to the cloud. As for search engines, online commerce or social networks, they also emerged in the United States with Altavista (acquired by Yahoo!), Google, Amazon, eBay and Facebook. In short, American firms have been pioneers in all fields and are now massively reaping the benefits.

"Europe generates a lot of promising startups. However, the most interesting ones are frequently bought by big foreign players"

But similar services have been created in Europe. Why haven’t they succeeded in breaking through internationally?

Europe generates a lot of promising startups, often resulting from research. However, the most interesting ones are frequently bought by big foreign players. Skype, for example, was founded in Europe, before being acquired in 2011 by Microsoft for $8.5 billion. That’s what we call the gravitational effect: the big firms get bigger and bigger because they have immense resources to absorb technologies developed by others.

In the field of digital services, US giants also benefit from a snowball effect. These companies feed off the data they collect. The companies that started early have a competitive advantage that increases with time: the more users you have, the more data you have, the more you have to feed your algorithms, and therefore to create new services. That in turn attracts even more users who generate more data.

Finally, in the software sector, there is also a phenomenon of captivity: once installed in an ecosystem, it is difficult for users to change their environment. This high barrier reinforces the status quo and prevents the emergence of new players.

Despite this, China, unlike Europe, has been able to create its own heavyweights...

Beijing has taken an extremely interventionist approach, especially with the Great Firewall (ed. note: an Internet censorship system, named after the Great Wall of China, which bans access to certain foreign content), thereby blocking GAFAM’s access to the Chinese market. This strategy has protected the emergence of local solutions, and then the international development of BATX (Baidu, Alibaba, Tencent and Xiaomi). As in other areas, China has been able to protect its long-term interests.

How is Switzerland positioned?

Thanks to its excellent skills, Switzerland is participating in the development of America’s tech giants. For example, IBM, Google, Oracle and Microsoft have very important research centres in our country. In addition, an entire ecosystem of local software companies exists in Switzerland, with companies such as Doodle, Nexthink, Mindmaze, Netguardians and GetYourGuide, to name just a few.

What will it take for these Swiss companies to grow?

To do better, Switzerland needs to strengthen access to venture capital for companies in the scale-up phase. Even though startups can more easily access venture capital than they could 15 years ago, it is still very difficult in Switzerland and more generally in Europe to raise funds between 10 and 100 million Swiss francs to enable startups to grow.

"Europe must react swiftly"

The current shortage of electronic chips has also highlighted Europe’s dependence on the key semiconductor sector... What role does Europe play in this arena?

Not enough of one. Europe represents about 10% of the world’s production of electronic chips. Not only is it lagging behind, but the gap is widening every year. Today, the most efficient factories for producing chips in volume are all in Asia: Taiwan, South Korea, China and Japan. Taiwan’s TSMC alone has 56% of the global market for foundries that produce semiconductors for third parties, ahead of Samsung at 18%. Even the United States is now lagging behind. Its market share has fallen from 27% in 1990 to 12% today, according to the Semiconductor Industry Association (SIA). Despite Silicon Valley being the birthplace of the industry, Washington must now invest heavily to catch up. Joe Biden has announced that he wants to invest $50 billion in US factories to manufacture semiconductors. Europe must also react swiftly to avoid being left out of this key growth driver in our increasingly digital world.

Even the United States is now lagging behind. Its market share has fallen from 27% in 1990 to 12% today, according to the Semiconductor Industry Association (SIA). Despite Silicon Valley being the birthplace of the industry, Washington must now invest heavily to catch up. Joe Biden has announced that he wants to invest $50 billion in US factories to manufacture semiconductors. Europe must also react swiftly to avoid being left out of this key growth driver in our increasingly digital world.

At the end of March, the European Commission announced its plans to invest in stepping up semiconductor production on the Old Continent, by developing an "Airbus of chips" to ensure its digital sovereignty. Is that idealistic?

We absolutely need to create an Airbus of chips, because semiconductors will fuel future growth. Europe seems to have become aware of this necessity following concerns about the supply of electronic components. The shortage shows how important it is to maintain local production, as is the case in Switzerland with EM Marin, a subsidiary of the Swatch Group. The Brussels plan aims to increase Europe’s share of the semiconductor market from 10% to 20% of global production by 2030. This is a step in the right direction. But we must be careful: success is not always the consequence of investment. The know-how involved in such cutting-edge technology must be built over time: an entire ecosystem must be established, from production plants to customers, including subcontractors and student training.

If Europe’s announcements are followed up with action, and if these efforts continue over the long term, I’m still optimistic. We can reverse the trend and catch up within 10 to 15 years.

To achieve that, the EU is also trying to convince Intel and TSMC to build factories in Europe. Isn’t it counter-productive to call on foreign companies when you’re trying to build your own sovereignty?

It’s pragmatic. These firms are where the expertise is. So it’s worth it to bring them here, so they can create highly skilled jobs, which will develop opportunities for students who want to get into these fields. To be honest, I’m not sure that Europe can reverse the trend without these big companies. The United States knows how it works. In June 2020, it convinced the Taiwanese company TSMC to invest $12 billion to build a factory in Phoenix, which will create 13,000 high value-added jobs.

CSEM’s mission is to transfer innovation from research to the industrial sector and especially to help companies in their digital transition. But isn’t CSEM itself lagging behind in the digital sector?

Not at all! CSEM is renowned worldwide, especially for its Bluetooth Low Energy (BLE) chips, which are used in wireless headsets. Many companies, including Fujitsu, are asking us for this expertise. Another example: in machine learning, a CSEM spin-off called ViDi Systems was acquired in 2017 by Cognex, the world leader in machine vision. It’s a good sign when big names like Fujitsu and Cognex are interested in you. It means you’re on the cutting edge. That said, digital technology is a vast industry. CSEM cannot cover all digital fields. For example, we are not going to start developing apps for iPhones. We try to focus on our strengths.

What are those strengths?

CSEM focuses on three sectors: precision micro-manufacturing, which is its core expertise; renewable energy, with internationally recognised know-how; and digitalisation. In digitalisation, we excel in miniaturisation, precision and low-energy use. These are key aspects in certain digital applications, such as the Internet of Things, Industry 4.0, quantum technologies and energy management.

What concrete applications has CSEM developed in digital technology?

We are highly active in the digital industry. For example, the Zurich-based company Ava, an offshoot of CSEM, has launched a fertility monitoring bracelet developed in collaboration with the Centre. All data is transmitted to a smartphone via Bluetooth. An application can then visualise the best time to try to conceive a child. This startup has recently made news by showing that its bracelet can also track COVID by detecting the infection in patients two days before the first symptoms appear.

Still in the medical field, startups Aktiia and Biospectal have launched wearable bracelets that measure blood pressure. Compared to other tools already on the market, all these products developed in collaboration with CSEM stand out in that they are medically validated. They are not gadgets like those found on smartwatches and smartphones. These medical devices are currently attracting keen interest.

AN ECLECTIC AND INTERNATIONAL PROFILE

On 18 January, Alexandre Pauchard, age 50, succeeded Mario El-Khoury at the helm of CSEM. Before joining CSEM, this Fribourg-native spent 10 years as head of R&D at Bobst, the Swiss machine builder for the packaging industry. Pauchard holds a degree in physics from ETH Zurich and a doctorate in microtechnology from EPFL. In addition, he worked as CTO for a Sillicon Valley startup specialised in optical components, then at ID Quantique in quantum cryptography and at Synova in laser cutting. He also worked as a consultant for six years with the Californian firm Intel.

CSEM, BRINGING RESEARCH AND INDUSTRY TOGETHER

With locations in Basel, Zurich, Graubünden, Central Switzerland and Neuchâtel, CSEM (Swiss Centre for Electronics and Microengineer­ing) was created in 1984 from the merger of three separate entities: the Centre Electronique Horloger (CEH), the Laboratoire Suisse de Recherches Horlogères (LSRH) and the Swiss Foundation for Research in Microtechnology (FSRM). The purpose of the Centre is to serve as a bridge between research and industry. In addition to watchmak­ing, its core field, CSEM has gained expertise in numerous high-tech fields such as photovoltaics (the in­stitution works with Meyer Burger, among others), medical technology,life sciences, space, automation, semiconductors and transportation. Among its achievements, CSEM developed the first mouse with an optical reader, which was later commercialised by Logitech. The Centre is a non-profit organisation and employs nearly 540 people. Its budget totalled 89.2 million Swiss francs in 2020, with 42% of the funds coming from industrial pro­jects and Innosuisse funding, and the rest from public contributions and research funds. Last year, CSEM collaborated with 225 companies. For the next few years, Alexandre Pauchard’s objectives are to support CSEM’s growth, accelerate its digital transformation and raise its profile.