Dr Vassilia Orfanou, PhD, Post Doc
Writes for the Headline Diplomat eMagazine, LUDCI.eu
Introduction
The USA invents, China creates and the EU regulates. That’s pretty much how to describe the global artificial intelligence competitiveness status, as the European AI Act kicks off in Q2 2024.
Years before the latest wave of AI development and adoption, market research analysts like McKinsey have always highlighted that AI will significantly impact on the competitiveness and productivity of companies in the future. Today, companies like OpenAI, Microsoft, Alphabet, Meta, X, and Amazon – all from the United States – are leading on global AI product development with an adoption rate of “nearly 75 percent” by companies. According to a PwC report, AI will add $15.7 trillion to the global GDP by 2030. This is practically screaming evidence that investing in AI is no longer an option. It has become a necessity for modern economies.
And the reality is that if Europe doesn’t cooperate better in the development and regulation of AI, cars, machines and doctors will soon come from China and the USA. It’s already happening. While all popular generative AI tools come from the US, already, Europe is spending billions of dollars importing health technology machines from the US.
As of 2017, European hospitals have imported over 719 DaVinci surgical robots since they started getting rolled out, with each costing around €2.2 million. Europe cannot afford to be left behind in this global race for AI supremacy. But the way we are moving, we probably will not just stay behind but keep losing billions per year to our competitors.
This article goes deep into the critical role AI optimization in maintaining EU competitiveness. It explores success stories of European nations already championing specific AI applications. It also discusses the policy landscape within the EU, exploring how regulations can impact European AI innovation.
An Industry Composed of Two Titans
While Europe fosters responsible AI innovation, the global competition is fierce. Across the Atlantic, the US boasts a dynamic AI ecosystem fueled by a culture of rapid innovation and risk-taking. Silicon Valley giants like Google and Meta (formerly Facebook) are investing heavily in AI research, churning out cutting-edge applications that transform industries.
According to McKinsey, US state governments are also at the heart of this technology, using it to “redefine services to residents and revamp service delivery”. AI is transforming the American economy with deployment already seen in sectors, such as retail and e-commerce, food tech, banking and financial services, supply chain and logistics, travel, real estate, media and entertainment and automotive.
However, this freewheeling approach often raises concerns about privacy and ethical implications as high-profile lawsuits keep mounting on Silicon Valley giants.
Meanwhile, China presents a different challenge. Backed by massive government funding and a centralized approach, the Far Eastern country is aggressively developing AI for various sectors, from manufacturing automation to social control systems. The country aims to become the world leader in AI by 2030. At this time, it is already the largest AI research producer in the world.
Still, while China’s approach fosters rapid advancement, it raises questions about potential misuse of AI for authoritarian purposes.
Where Does Europe Stand?
While US tech giants and their Chinese counterparts are rapidly researching, developing and deploying AI solutions, it’s not all doom and gloom for firms in Europe. The EU already boasts a vibrant and diverse AI ecosystem.
Several EU countries are emerging as global leaders in specific AI applications, showcasing the continent’s innovative spirit. Here are some notable examples:
Estonia
A pioneer in e-government, Estonia is leveraging AI to streamline public services, creating a more efficient and citizen-friendly experience. In 2024, the Estonian government allocated €85 million for establishing three top-level AI research centers in order to spark a “new era of AI-driven innovation and growth by 2030.”
Estonia’s many feats in AI development began even before the OpenAI leap. The adoption of AI by businesses in Estonia is reported to have almost doubled from 3 to 5 percent in the two years preceding the time OpenAI took the market by storm.
Denmark
Renowned for its wind energy sector, Denmark utilizes AI and drone technology to optimize turbine performance and improve its green economy. This maximizes energy generation and contributes to a more sustainable future. “We expect that artificial intelligence and drones can prevent the need for downtime of the turbines, by fully automating the inspection,” says Jesper Smit, CEO of Quali Drone, which supplies the drone hardware for the research project. “This means greener energy for the benefit of the climate and less ships with technicians needing to be sent offshore.”
That’s not all. Denmark is applying AI in other highly digitized application areas such as healthcare, agriculture, finance, robotics, and acoustics, according to a new white paper.
Sweden
Healthcare, defense, public administration, engineering and financial services are the areas Sweden thrive in AI deployment. A 2022 research found that over half of companies in Sweden were already making use of deep learning. A whopping 71 percent of the companies were already deploying machine learning too.
Known for AI-powered medical diagnostics, Sweden is already “researching new ways of making diagnoses using digitisation and artificial intelligence, with particular focus on solutions for resource-limited countries,” according to Johan Lundin, a Professor of Medical Technology that specializes in digital diagnostics at the Sweden Department of Global Public Health. “We are developing mobile microscopes and combining these with cloud-based artificial intelligence,” says Lundin in 2019.
United Kingdom
The United Kingdom, on the other hand, is a hub for financial technology (FinTech). UK, the leading European country in this sector, is also ranked number one among global Fintech hubs even as far back as 2016. The kingdom, which is building on the commanding role of the capital city, London, is actively exploring AI in many use cases.
According to financial technology expert Leah Zitter, the Bank of England (BoE) is leading the charge in AI adoption among central banks. The bank has been building its innovation credentials for over a decade. It’s established its own lab and deploying AI for tasks ranging from chatbot interactions to real-time economic forecasting.
Germany
Germany is considered a rising star in the European AI landscape. AI startups in the country, half of which are in Berlin, once ranked the fourth largest AI hub globally, are deploying the technology in various fields. These include customer support and communication, sales and marketing, computer vision, image recognition and software development.
Finland
Finland is renowned in the field of artificial intelligence for education (AIEd), so much so that experts in education and disruptive technologies in the country believe that in a few years, universities in the country will become ‘’learning platforms.” Championing education, Finland is integrating AI into personalized learning platforms, tailoring educational experiences to individual student needs and fostering a more effective learning environment
Netherlands
Netherlands is a global logistics powerhouse. Already, it’s employing AI in mobility, transport and logistics. This is resulting in a smarter supply chain management, fleet navigation, route planning, and mapping solutions for efficient product delivery. Logistics startups like Here, XoSight, Bluejay Eindhoven, Softec, Plotwise, and Marine Performance Systems are already deploying AI in their value chain.
Luxembourg
Another hub for financial services, Luxembourg is using AI in Fintech for regulatory compliance and risk assessment, strengthening financial stability and mitigating potential risks. Noteworthy is the use of AI in “credit scoring based on machine learning […] for automating loan decisions for corporate and retail customers,” according to industry analysts at DLA Piper.
The Benefits of AI for EU Firms
Compared to the US and China, Europe is still a shockingly small player in artificial intelligence. For example, there are few or almost no European projects that are comparable to ChatGPT, or companies that can compete with Apple, Meta or Alibaba. The advantages of AI optimization for EU companies are undeniable:
Tapping in the booming global AI economy
McKinsey already predicted that AI could lead to global GDP growth translating to an additional $13 trillion by 2030. With the EU’s comprehensive regulatory framework now in place, the time is ripe to adopt this technology within the European ecosystem.
The new ethical framework is expected to facilitate a flexible implementation process. AI-powered automation can streamline processes, reduce human error, and boost overall efficiency.
Improved Decision-Making Across Multiple Sectors
AI algorithms analyze vast quantities of data to generate insights that empower informed business decisions. To illustrate the diversity of AI’s application areas, the articles takes a look at different industries and how AI can improve their processes:
Manufacturing industry: Through predictive maintenance, AI can help to reduce machine downtime by predicting when maintenance is required. In addition, AI in the production line can contribute to quality assurance by identifying and sorting out defective products.
Healthcare: Artificial intelligence enables monitoring of chronically ill patients in the form of so-called wearables. NLP technologies (Natural Language Processing) also help doctors make decisions. Machine learning helps evaluate X-ray images and leads to more precise diagnoses.
Retail: From creating personalized advertising campaigns to optimizing inventory, AI is helping retailers make better decisions. An example of this is how Amazon’s inventory management tool helps predict sales trends to ensure the right amount of inventory.
AI Can Streamline Workflows
AI is making tangible improvements to daily work routines across various sectors. Here’s a glimpse into how AI is boosting efficiency:
Meetings made easy: Gone are the days of laborious appointment scheduling and post-meeting note-taking. AI tools can now automatically schedule meetings, summarize discussions in real-time, and distribute them to participants, streamlining communication and saving valuable time. A typical application in this case is Otter.ai, based in Mountain View, California.
Design on fast forward: Generative design tools are revolutionizing the design process. Imagine brainstorming an initial concept and having AI create multiple variations, all while assessing them against your specific goals and requirements. This eliminates the need for time-consuming iterations and allows designers to explore possibilities much faster.
Recruitment revolution: Large companies with high hiring volumes are leveraging AI to streamline the application process. AI can analyze resumes, shortlist qualified candidates, and even conduct initial interviews, freeing up valuable time for human recruiters to focus on more nuanced interactions with the most promising candidates.
Note: The new EU AI Act places use of AI in recruitment at high risk category. Deploying AI in this process, would need to meet regulatory standards.
Challenges on the Road
AI adoption for EU companies is not smooth sailing, especially after the EU AI Act legislation which places some AI use cases in the unacceptable and high risk categories.
New AI and Digital Regulations
At the end of June 2023, more than 150 executives from Europe’s largest companies took pen to paper in an open letter. They protested to European Union lawmakers that plans to regulate artificial intelligence risked harming the EU’s competitiveness. “In our assessment, the draft legislation would jeopardize Europe’s competitiveness and technological sovereignty without effectively tackling the challenges we are and will be facing,” part of the letter reads, as reported by the CNN. Among the signatories are the French aeronautics leader Airbus, the Dutch beer giant Heineken and the German Siemens, among others.
Like the GDPR, the AI Act, which is expected to be enacted this year, was designed as a horizontal regulation. It will regulate any artificial intelligence system in contact with the European market, regardless of where the platform is established.
The scope of this law is vast, affecting many economic sectors, such as financial services, education, employment, industrial AI, medical devices, the automotive industry, and entertainment. Many analysts and stakeholders believe Europe’s competitiveness in the digital age depends on the AI Act.
“For Europe to become a global digital powerhouse, we need companies that can lead on AI innovation also using foundation models and GPAI,” reads another joint letter signed by heads of European companies and stakeholders like Digital Europe, Afnom, Bitkom, among others. “Let’s not regulate them out of existence before they get a chance to scale, or force them to leave.”
In recent years, the EU Commission has also launched a wave of digital policy legislative proposals like the Data Act that companies are already having to deal with.
Lack of a venture capital ecosystem
Europe is still a shockingly small player in global AI probably because it doesn’t have a venture capital ecosystem comparable to that of the USA. At the same time, the continent lacks the close coordination between industry, research and government that characterizes the Chinese model, for example.
The level of investment in Europe remains very low. Germany has promised to double government funding for AI research to €500 million per year. However, that would still only be a sixth of Washington’s spending in 2022. In the USA, there will be private AI investments of $47 billion, according to Coin Geek.
On the other hand, proving it’s a double edged sword, the AI law passed by the European Parliament can also lead to the creation of a predictable environment for AI developers in the EU. However, it is also conceivable that strict regulatory frameworks could nip promising ideas in the bud.
Loss of competitive advantage
Faced with excessive regulatory constraints, a lot of companies concerned could be tempted to relocate their research and development activities to regions of the world, where regulations offer a more welcoming environment for innovation.
This relocation could lead to a real drain of talent and investment. This can destabilize the local ecosystem and weaken the competitive position of the country or region of origin on the global AI scene. Furthermore, this geographic redistribution of AI activities could worsen existing disparities between regions, strengthening already powerful AI “hubs” and limiting the diversity and diffusion of innovation globally.
Unequal access to technology
SMEs and independent researchers could be penalized due to the potentially costly regulatory constraints that would make these technologies out of reach for those without the significant resources of large companies.
Such regulation could widen the digital divide between the richest and most powerful players who could continue to use and benefit from AI, and smaller players who could be left behind.
Security and ethics
Finally, although regulation aims to minimize the risks linked to AI, too strict regulation could paradoxically increase certain risks. For example, if regulations discourage the use of certain AI technologies, companies could turn to less secure or less ethical technologies.
While regulation of AI is necessary, striking the right balance is crucial to ensure fair market access. This will protect individuals and society as a whole, while enabling innovation and progress.
Recommendations for Promoting AI Innovation
The importance in the AI transition to ensure Europe’s competitiveness is highlighted by Peter Breuer, senior partner and AI expert from McKinsey’s Cologne office. He says,
“The creation and implementation of AI will determine the competitiveness of European companies, especially in the B2B sector, where they are strong. After pilot testing and initial trials, they need to take the next step and implement AI technologies on a larger scale and develop the necessary skills among both managers and technology professionals. Europe’s growth and prosperity depend on this being successful across sectors and countries – in the economy as well as on the government side.”
To play catch up with the global AI pioneers and ensure socially accepted AI development, international industry analysts at McKinsey, Jacques Bughin, James Manyika, Jeongmin Seong, Lari Hämäläinen, Eric Hazan, and Eckart Windhagen, say Europe must focus on five points:
- build a vibrant ecosystem of deep tech and AI startup companies developing new AI-based business models.
- accelerate the European firms’ digital transformation and embrace AI innovations.
- enhance the progress made by the digital single market.
- build the right talent and skills to realize the AI potential.
- steer society through a very difficult transition phase that requires a fierce and steep digital transformation.
A Call to Action: A European Response to the AI Race
The global AI landscape is a battlefield. The US and China are locked in a fierce competition, leaving Europe at risk of falling behind and never getting back up to finish the race. While Europe already has pockets of innovation and a regulatory framework, albeit controversial, it lacks the investment, the brains and the concerted ecosystem, working hand in hand with regulators to truly compete.
In the rapidly evolving landscape of artificial intelligence, European firms stand at a critical juncture. To truly thrive in this AI wave, they must embrace a multifaceted strategy that encompasses bold investment, collaborative partnerships, and a commitment to ethical innovation.
Firstly, European companies cannot afford to hesitate. They must boldly invest in AI research, development, and implementation. This investment is not just about staying competitive; it’s about shaping the future of industries and societies. With the right resources and commitment, European firms can lead the charge in developing groundbreaking AI technologies that have the power to transform lives and drive economic growth.
However, investment alone is not enough. European companies need the support of funding and investment mechanisms to accelerate their AI initiatives. Access to capital is essential for scaling up projects, attracting top talent, and fostering a culture of innovation. With the right financial backing, European firms can unlock their full potential and drive meaningful progress in the AI space.
Moreover, breaking down the silos between industry, academia, and government is paramount. Collaboration across these sectors is essential for sharing knowledge, resources, and best practices. By working together, European stakeholders can leverage their collective expertise to tackle complex challenges and seize opportunities in the AI ecosystem.
At the same time, Europe has a unique opportunity to lead the way in ethical AI development. While innovation is crucial, it must be accompanied by a strong commitment to ethical principles and responsible use. By prioritizing ethics, European firms can build trust with consumers, regulators, and society at large, laying the foundation for sustainable growth and long-term success.
In conclusion, European firms have the potential to become global leaders in AI. By embracing a comprehensive approach that combines investment, collaboration, and ethical principles, they can chart a course towards a future where AI drives prosperity, innovation, and positive societal impact.
References
McKinsey (2019). Studie belegt: In der KI hat Europa riesigen Nachholbedarf. Available at https://www.mckinsey.com/de/news/presse/2019-02-11-ai-in-europe-l-mgi. Retrieved on April 22, 2024.
Massinon, L. and Nickel, C. (2021).
Artificial Intelligence in the Luxembourg Financial Sector, DLA Piper. Available at https://www.dlapiper.com/es-pr/insights/publications/2021/03/artificial-intelligence-in-the-luxembourg-fs. Retrieved on April 22, 2024.
Digital Europe (2023). Joint statement: Let’s give AI in Europe a fighting chance. Available at https://www.digitaleurope.org/news/joint-statement-lets-give-ai-in-europe-a-fighting-chance/. Retrieved on April 22, 2024.
Thormundsson, B. (2024). Artificial intelligence (AI) adoption, risks, and challenges – statistics & facts, Statista. Available at https://www.statista.com/topics/10548/artificial-intelligence-ai-adoption-risks-and-challenges/#topicOverview. Retrieved on April 21, 2024.
PwC (N.D.). Sizing the prize
PwC’s Global Artificial Intelligence Study: Exploiting the AI Revolution. Available at https://www.pwc.com/gx/en/issues/data-and-analytics/publications/artificial-intelligence-study.html. Retrieved on April 21, 2024.
Manyika, J. et al (2018). AI, automation, and the future of work: Ten things to solve for, McKinsey. Available at https://www.mckinsey.com/featured-insights/future-of-work/ai-automation-and-the-future-of-work-ten-things-to-solve-for. Retrieved on April 21, 2024.
Rivero-Moreno, Y. et al (2023). Robotic Surgery: A Comprehensive Review of the Literature and Current Trends, Research Gate. Available at https://www.researchgate.net/publication/372607087_Robotic_Surgery_A_Comprehensive_Review_of_the_Literature_and_Current_Trends. Retrieved on April 21, 2024.
Invest Estonia (2023). AI Adoption Among Estonia’s Businesses Has Almost Doubled in Two Years, Even Before the ChatGPT Leap. Available at https://investinestonia.com/ai-adoption-among-estonias-businesses-has-almost-doubled-in-two-years-not-taking-into-account-chatgpt/. Retrieved on April 22, 2024.
Roberts, H. et al. The Chinese approach to artificial intelligence: an analysis of policy, ethics, and regulation. AI & Soc 36, 59–77 (2021). Available at https://doi.org/10.1007/s00146-020-00992-2. Retrieved on April 22, 2024.
Sheehan, M. (2023). China’s AI Regulations and How They Get Made, Carnegie Endowment for International Peace. Available at https://carnegieendowment.org/2023/07/10/china-s-ai-regulations-and-how-they-get-made-pub-9011. Retrieved on April 22, 2024.
ERR (2024). Estonia to invest €85M in boosting AI uptake across public, private sectors. Available at https://news.err.ee/1609250613/estonia-to-invest-85m-in-boosting-ai-uptake-across-public-private-sectors. Retrieved on April 22, 2024.
Thormundsson, B. (2024). Rate of usage of artificial intelligence (AI) programs within companies and organizations in Sweden in 2022, by technology, Statista. Available at https://www.statista.com/statistics/1373446/sweden-ai-technologies-used/. Retrieved on April 22, 2024.
Invest in Denmark (2022). The business case for responsible AI – How Denmark is Staying, Denmark Ministry of Foreign Affairs. Available at https://investindk.com/insights/ethicalaibusiness. Retrieved on April 22, 2024.
Energy Cluster Denmark (2023). New drone technology uses Artificial Intelligence to examine offshore wind turbine blades. Available at https://www.energycluster.dk/en/new-drone-technology-uses-artificial-intelligence-to-examine-offshore-wind-turbine-blades/. Retrieved on April 22, 2024.
Zitter, L. (2023). How the Bank of England Uses AI for FinTech Innovation, C2C Global. Available at https://www.c2cglobal.com/articles/how-the-bank-of-england-uses-ai-for-fintech-innovation-234. Retrieved on April 22, 2024.
Kelly, J. (2016). These are the world’s fintech hubs, World Economic Forum. Available at https://www.weforum.org/agenda/2016/08/these-are-the-worlds-fintech-hubs/. Retrieved on April 22, 2024.
Sher, G. and Benchlouch, A. (2023). The privacy paradox with AI, Reuters. Available at https://www.reuters.com/legal/legalindustry/privacy-paradox-with-ai-2023-10-31/. Retrieved on April 21, 2024.
McKinsey (2024). Deploying generative AI in US state governments: Pilot, scale, adopt. Available at https://www.mckinsey.com/industries/public-sector/our-insights/deploying-generative-ai-in-us-state-governments-pilot-scale-adopt. Retrieved on April 21, 2024.
Tracxn (2024). AI in Logistics Startups in Netherlands. Available at https://tracxn.com/d/explore/ai-in-logistics-startups-in-netherlands/__uq-yWiw0MFzbgLuKprE-Wl5FO89ucjq8EWLOSW6uoJM/companies. Retrieved on April 22, 2024.
Fabian (2017). The German Artificial Intelligence Landscape, Medium. Available at https://medium.com/@bootstrappingme/the-german-artificial-intelligence-landscape-b3708b325124. Retrieved on April 22, 2024.
Lasse Rouhiainen (2022). How Finland Adapts to the Future of Artificial Intelligence. Available at https://lasserouhiainen.com/how-finland-adapts-to-the-future-of-artificial-intelligence/. Retrieved on April 22, 2024.
Karolinska Institute (2019). Artificial intelligence for medical diagnostics. Available at https://news.ki.se/artificial-intelligence-for-medical-diagnostics. Retrieved on April 22, 2024.
