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Hi-tech sectors in Italy: a driver of growth

  • Milan
  • 27 November 2023

        The United States/China rivalry that has dominated the international scenario for some years now, and its multiple economic and geopolitical effects, finds its foremost arena in the sector of high technology: specifically, life sciences, aerospace and ICT. Historically US-dominated sectors where nevertheless in recent years China has seen growth places it first among exporters with more than a 20% share; indeed, this rises to 30% when second-placed Hong Kong is added. At the same time, Beijing is also the leading importer of hi-tech products. By contrast, the US ranks third among exporters – trailing only Hong Kong – and second among importers, while Germany holds the top European ranking in exports. From the standpoint of innovation – i.e., the ability to patent advanced technologies – the US is first at 28%; but China is catching up, rising from 15% in the 5-year span from 2011 to 2015 to 25% in 2016-2020. Analysis of individual sectors shows Asia the leader in ICT, with eight countries among the top 15. The West, on the other hand, takes the forefront in life sciences and aerospace, where the US remains the frontrunner in high-impact innovation.

        Italy places 16th in both exports and patents yet ranks sixth in pharmaceuticals – thanks to the presence of multinationals – and aerospace. It should also be pointed out that in some niche sectors more specific to automation and measurement, Italy’s market share is over 20%. Nevertheless, hi-tech accounts for a limited percentage of manufacturing: 6% in terms of companies, approximately 7% for number of employees, with 9% value added and exports at 13%. In any case, the country is a leader in the export of products not strictly categorized as hi-tech but which are considerably dependent on it, such as yachts and construction in general. Moreover, Italy ranked fifth in the world in 2021 for trade balance with a 48-billion-euro commercial manufacturing surplus. Notwithstanding a significant deficit in the energy sector, and a somewhat lesser one in automotive, IT and electronic products (sectors in which France, UK and the US show even worse performance), the country ranks third in the export of all other products, which makes up two-thirds of global trade and also includes some hi-tech sectors.

        Naturally, hi-tech is steeped in digital technologies, particularly AI, whose development has been exponential over recent years. Although experimental for at least 50 years now, AI has only recently come out of the laboratories to permeate the entire productive fabric. According to some studies, by 2026 over 80% of companies across the globe will be using generative AI or implementing its applications – compared with a mere 5% at the start of 2023.

        Technologies that by now figure in all the most promising sectors of research, leading to the development of increasingly sophisticated applications in a range of areas: life sciences, telemedicine and precision medicine; every aerospace activity on the multifaceted space economy scenario; and the most advanced software and electronics components in the telecommunications sector. The availability of massive amounts of data and the related facility of high precision computing makes it possible, for instance, to replace the traditional “trial and error” research method, consequently lowering costs and optimizing manufacturing processes. Moreover, the relative ease with which companies are able to implement generative AI greatly reduces barriers, which could ultimately have positive repercussions on Italy’s many SMEs.

        Central to meeting the challenges of innovation is the role played by educational and political institutions. On the one hand, it is estimated that by 2027 the skills required of workers in these areas will multiply by 50%; satisfying that demand will of course require vertical skills, but those must be accompanied by immense flexibility. Indeed, it is predicted that by the end of this decade generative AI instruments will achieve performance levels near human level in creative activities, problem solving, logic and comprehension of natural language. It follows then that persons capable of properly “training” these systems will be in demand. The role of universities is therefore pivotal to both research and to the training of new talent, especially in STEM subjects while also increasing the number of college graduates – Italy currently ranks last in the EU in this regard.

        On the other hand, both Italy and Europe are having difficulty keeping pace with hi-tech giants, which cannot be overcome without the contribution of national, and especially community, institutions. For its part the EU, however tardy, has sought to draft an industrial policy calibrated on contemporary challenges. The design for a European strategic autonomy, not protectionist but attentive to the defense of community assets, and at the same time open to cooperation with other actors, the Chips Act and Raw Materials Act, go in the same direction, while keeping an eye on at least two main problem areas. 

        The first of these is that Europe has not got the legal and institutional apparatus for making crucial decisions that too often fall to individual countries. The second concerns the economic and financial resources needed to support industrial planning, in contrast to the very aggressive policies by which the US and China support their industries. If setting up a sovereign fund seems an unlikely solution, it will be necessary to seek financing elsewhere, e.g., through Eurobonds. Attention must also be focused on sources of private capital with a view to understanding – and encouraging – their willingness to intervene in the form of public/private partnerships. On the one hand, investments of American and Asian multinationals must be attracted and, on the other, companies must be encouraged to keep patents in Europe: these are challenges on which much of future European prosperity depends.