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Nokia Crash Shows How Far Europe's High-Tech Has Fallen

Philippe Escande

Not prone to emotional effusiveness, the Finnish have developed a particular taste for euphemisms: “Naturally, this is a day of big change for Finnish industry,” Premier Jyrki Katainen affirmed modestly last Tuesday, when the country’s best-known company, Nokia, sold its mobile phone outfit to Microsoft for $7.2 billion. That is about 15 times less than its estimated value in 2000.

But it is necessary to add that this event also carries major significance for Europe as a whole: With Nokia’s takeover, the continent has lost its last gem in the consumer electronics industry.

Siemens, Thomson, Philips, Alcatel, Ericsson — one after the other, Europe’s biggest electronic brands have announced their retreat from a doomed sector that has brought them nothing but disappointment. And except from certain real gems, such as German SAP in the software sector or the French-Italian STMicrolectronics in the electronics component market, one could draw the same conclusions for the entire digital industry.

Lisbon dreaming

The telecommunications sector, which had long been protected from external interference through national monopolies such as Orange (France Télécom), Deutsche Telekom or Telefonica, has managed to stay afloat for a while. In return, the last two maintain an industry of fixed assets, of which today only three major actors survived: French Alcatel-Lucent, the remains of Nokia and Swedish Ericsson. Only the latter, a world leader for mobile devices, displays relatively good health, while two others are suffering major losses.

This is a far cry from the goals established during the European Summit in Lisbon in 2000, which promised that the continent would become “the world’s most competitive and dynamic knowledge-based economy" by 2010. Obviously, the digital industry sectors, consisting of consumer electronics, telecommunications and computing, are not the only ones contributing to this knowledge economy, but in many ways they are its backbone.

Thus, the access to high-speed internet, which — according to research by IDATE — is probably the most important element of all in this new era, is today 20 times more developed in Asia and North America than in Europe. And consultants at BCG fear that if the decline in investments in the telecommunications sector — which has dropped by 2% annually, after previously rising 2% — continues, up to 750 billion euros of GDP will be lost by 2020. The Old Continent would also miss the opportunity of creating some 5.5 million new jobs.

The main cause for this decline is well-known: With the revolution of the digital age and the Internet, Europe has gotten squeezed out by America’s ever healthy entrepreneurship, on the one hand, and the rising industrial competitiveness in Asian markets. As a result, nine out of the first ten stock market capitalizations were American and one Korean (Samsung).

Internet war

Yet, another aspect is less often mentioned, namely the American hegemony in the software sector. “Software is eating the whole world,” the Californian investor and entrepreneur Marc Andreessen, warned two years ago. This means that the value of our everyday products — from the telephone to the car — is more and more dominated by the software that comes with it. Once telephony networks increasingly started to resemble computers, new actors appeared on a horizon that used to be dominated by Alcatel and Siemens. The same happened once the telephone started to come with a computer-based interface able to access the Internet. As a result, American-based Cisco has replaced Alcatel, and Apple has done the same with Nokia.

The new Internet players — from Google to Amazon — are more or less software enterprises who have now started to pull the plug on what was supposed to be the revenue stream for many operators in the telecommunications industry, who now mainly function as sub-contractors. It is the U.S. that is winning the Internet battle and the digital industry as a whole, simply because they are invincible in software. This is an industry based on individual initiative and entrepreneurial Darwinism.

Can Europe regain its momentum, or will it have to resort to watching others win? Its main trump card remains the strength of its telephone operators, who are among the world’s best. Yet, the economic landscape remains fragmented. In the U.S., four different companies share the market in mobile telecommunications, while there are still more than ten in Europe. Undoubtedly penalized by the crisis, they are weakened as soon as it must turn to mammoth investments in such projects as new high-speed 4G mobile technology networks.

The solution of all this could be a stronger concentration of different players – just as has been the case in the U.S. during the last decade. After its retreat from the U.S., British Vodafone invested 38 billion euros in the Spanish Telefonica — which already was present in Germany at the time — and managed to emerge as the third strongest provider in the country. But because the French telecom SFR is up for sale and American giant AT&T has a strong interest in the European market, it is doubtful that France will join this movement anytime soon.

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FOCUS: Russia-Ukraine War

The Only Path To Peace With Russia? A New Iron Curtain On Ukraine's Eastern Border

With a decisive deal with Putin out of the question, the only way to create a lasting peace is to recreate some fundamental dynamics of the Cold War.

Image of president Joe Biden walking with Ukrainian President Volodymyr Zelensky in the streets of Kyiv, Ukraine.

President Joe Biden walking with Ukrainian President Volodymyr Zelensky down the Walk of the Brave on Constitution Square in Kyiv, Ukraine.

Klaus Geiger


BERLIN — Volodymyr Zelensky was allowed three minutes, but he spoke for 20. In his speech at the G20 summit in November last year, the Ukrainian president laid out, in greater detail than ever before, how peace with Russia can be achieved – and maintained.

Stay up-to-date with the latest on the Russia-Ukraine war, with our exclusive international coverage.

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His main point: “Ukraine is not a member of any of the alliances. And Russia was able to start this war precisely because Ukraine remained in the grey zone – between the Euro-Atlantic world and Russian imperialism. Now, we do not have any security assurances either ... We need effective security assurances.”

German Chancellor Olaf Scholz echoed these words in parliament recently. “At the G20 summit, President Zelensky set out his suggestions for how to achieve a lasting, fair peace,” Scholz said. “We will help Ukraine to achieve such a peace. That is why we are talking to Kyiv and other partners about future security assurances for Ukraine.”

Scholz did not specify precisely what kind of “security assurances” he meant. But Zelensky was very specific in his G20 speech.

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