Europe falling behind, ST chief warns

Prague, Czech Republic -Pasquale Pistorio, president and chief executive officer of STMicroelectronics, offered an uncharacteristically downbeat assessment last week of the European electronics sector's ability to meet the productivity challenges it faces from the United States and emerging economies.

Delivering the closing address at the International Electronics Forum here, Pistorio also warned more strongly than he has in the past of the need for governments and companies in all industries to do more in terms of environmental care and social responsibility.

Pistorio's call for higher income taxes on individuals so as to allow governments to give significant tax breaks for R&D was warmly received at the conference, which was organized by U.K. research house Future Horizons. Some thought the applause may also have reflected the fact that this was the ST chief's final appearance at the forum; he has decided to step down next May.

In a wide-ranging talk, Pistorio berated European governments for missing the target set in 2000 of 3 percent of GDP to be spent on R&D by 2010. "According to the latest data available from Eurostat [the statistical office of the European Commission], R&D spending in the European Union progressed by just 0.04 percent to 1.99 percent of GDP in two years," he said. "In the same time frame, American R&D spending increased by twice as much, to 2.8 percent of GDP."

So far only the communications sector-thanks mainly to activities in Scandinavia-can show any realistic progress toward the target set in Lisbon in March 2000 for Europe to become the "most competitive and dynamic knowledge-based economy in the world," Pistorio said.

"Yes, we have the apparently very good excuse of a lack of available resources in times of a weak economy, and certainly it takes time to make a big ship turn around. But it's a fact that in the meantime each European cow is being subsidized, every day of the year, with $6 of EU money," he said.

This lack of competitiveness is problematic at a time when countries like China and India not only record GDP growth approaching 10 percent-albeit from a low base-but also rapidly close the traditional technological gap, Pistorio said.

He called for all European governments to offer at least 10 percent relief in the tax on R&D spending. "There might be variations on the same principle, but the basic concept should not be changed: automatic tax credit."

Pistorio also urged governments and companies to back a number of strategic "megaprojects," co-financed at a reasonably high level by national and European institutions, in areas such as nanotechnology, biotechnologies, wideband communications, intelligent transportation systems and energy conservation and generation. "I am thinking of public coverage in the range of 30 percent of total R&D cost, and the actual support should depend on both the level of financial resources required and the level of risk of the specific investment," he said, adding that the obvious model is pan-European electronics programs like Jessi and Medea.

Energy and the environment have become almost a mission for Pistorio over the past two years. He has warned many times of the urgent need for European industry to reduce its dependence on oil and other fossil fuels.

"Nations who do not pledge protection of the environment, particularly for the control of greenhouse emissions that are changing the climate of our planet, will see their companies defenseless against the more forceful competition of enterprises which have known how to confront and successfully overcome the challenge of sustainable development," he said.

STMicroelectronics produces an annual corporate environmental audit that details how environmental investments such as energy conservation and recycling yield dividends. The audits are available online at www.st.com/stonline/company/environm/index.htm.