The rapid developments of technologies such as AI, quantum computing and photonics, combined with societal challenges around sustainability, health and safety, offer opportunities for the Dutch high-tech industry. Cashing in on these opportunities requires a joint strategy from companies, knowledge institutes and government. In addition, the National Growth Fund should be transformed into a structural financing instrument for R&D.
TNO argues this in a paper. "Dutch high-tech has the potential to produce a handful of new ASMLs in the coming decades. This requires a joint approach from a powerful innovation agenda," argues Arnaud de Jong. Managing Director TNO High Tech Industry.
Important contribution to Dutch earnings model
The high-tech sector makes an important contribution to the earning model of the Netherlands. For instance, the sector provided 784,000 FTEs in 2021, accounting for 10% of total employment in the Netherlands. The gross value added of an estimated €80.2 billion in 2021 also highlights the importance of the sector. While the share of the manufacturing industry in the Dutch economy has declined over the past 25 years, the share of the high-tech industry actually increased.
Within the high-tech sector, machinery, electrical appliances and computers, electronics and optics are the main three subsectors. Most subsectors have grown in recent years. At the same time, productivity growth was not strong in all sectors. In particular, the machinery subsector performed well in this respect thanks to strong growth in gross value added averaging 7.3% per year. At the same time, the subsector showed a 4.8% growth rate in labour productivity, closely following the electrical equipment subsector (5%).
TNO has mapped out how the sector can continue to deliver value for society in the future. It is expected that 50% of turnover in 2040 will come from new value chains. Examples include laser-satellite communication and equipment for renewable energy.
Becoming more productive and sustainable
TNO calculates that to maintain the Dutch competitive position in high-tech, the sector needs to become 150% more productive and transform to 100% sustainable operations. TNO mentions that to achieve more strategic autonomy, we need to build new value chains and focus our innovation policy on these chains for a longer period of time.
This transition brings challenges. For instance, the Netherlands must improve its ability to quickly bring innovations and new technologies to the market. This can be done, for instance, through start-up and scale-up programmes and targeted international cooperation. Additional policies are also needed to attract the necessary interest. TNO mentions the importance of a human capital agenda that focuses on recruitment based on skills rather than on education.
National high-tech strategy
De Jong explains: "To facilitate high-tech companies in these challenges, a National Hightech Strategy is needed, building on the National Technology Strategy, among others. We invite high-tech companies, knowledge institutions and the government to develop this strategy together."
In the paper, TNO also points to threats posed by the changing world. These include the transition to a more sustainable society, which in practice means increasingly binding legislation for companies. If companies cannot keep up with this, it could threaten their existence. However, think also of the decreasing access to critical materials.
Success factors
TNO also identifies a number of success factors for the Dutch high-tech industry. These include sustainability, but also the industry's competitive position. "Operating in global and highly competitive markets requires continuous investment in competitiveness. And therefore in innovation. An additional challenge here is the growing scarcity of qualified personnel," TNO writes in the paper.
Long-term resilience is also a crucial success factor. Here, TNO points to COVID-19, the war in Ukraine and rising tensions with China. These developments make it clear that companies have optimised their supply chains too much towards low costs. This has been at the expense of shock resistance.
Successful path to 2040
Finally, TNO identifies a number of transformations that the high-tech industry needs to undergo for a successful path to 2040. These include:
- Net-zero CO2 emissions: no high-tech company should cause CO2 emissions by 2040. This includes both its own operations, supply chain and the operation of its products with customers.
- Circular value chains: Value chains driven by Dutch high-tech companies should adopt a circular business model in 2040, with a resource efficiency close to 100%. Here, TNO points to the so-called 'Re-x' processes, such as rethink, repair, remanufacture and recycle. These will have become a standard part of the production landscape by 2040.
- Connected value chains: TNO argues for a Dutch high-tech industry in 2040 that operates the best digitally connected and protected production network in Europe. Among other things, this will enable a high degree of integration between partners in the value chain, bringing unprecedented flexibility and efficiency.
- Smart manufacturing: With a view to staff shortages, among other things, automation and making production smarter have an important role to play. The Dutch high-tech industry should have the most automated and autonomous production capacity in Europe by 2040. Among other things, this should enable single-piece production at the cost price of mass production.
- Resilient value chains: Maintaining access to scarce resources has become crucial. This includes a movement towards shorter supply chains, diversification of suppliers, running multiple production sites and building more surplus into the chain.
- Unique technology positions: According to TNO, a successful high-tech industry in 2040 is largely built on the unique knowledge positions for new technologies that will be developed in the Netherlands in the coming years. The Netherlands will therefore have to continue investing in these.
- Strengthened market positions: Today's strong market positions form the basis for the earning model in 2040. This calls for protecting, preserving and building on these positions.
- New value chains: At the same time, a significant part of the turnover of the Dutch high-tech industry in 2040 will have to come from new value chains, which currently do not yet exist on a large scale.
The Netherlands is investing heavily in the transformation of the high-tech industry until around 2030, particularly through National Growth Fund programmes. With this, the National Growth Fund is giving the high-tech sector a major boost in the coming years. However, TNO warns that a strategic vision for the sector is lacking. Among other things, it points to the implementation of the European Chips Act in the Netherlands. A clear translation of this is lacking, according to the organisation, while it is needed to realise breakthroughs in key technologies such as advanced materials, quantum technology and nanotechnology.
TNO's paper is available here.
Author: Wouter Hoeffnagel
Photo: Jarmoluk via Pixabay
