COMMISSION STAFF WORKING DOCUMENT

Impact Assessment

Accompanying the document

Proposal for a Council Regulation

on the ECSEL Joint Undertaking

TABLE OF CONTENTS

Introduction.................................................................................................................................. 5

1........... Procedural Issues And Consultation Of Interested Parties................................................ 5

1.1........ Organisation and Timing.................................................................................................. 5

1.2........ Consultation of the IA Board.......................................................................................... 6

1.3........ Inter-service Impact Assessment Steering Group (IASG)................................................ 7

1.4........ Consultation and Expertise.............................................................................................. 7

1.5........ Results from the on-line public consultation...................................................................... 8

1.6........ Results from the study on future impact of ARTEMIS and ENIAC................................ 13

1.6.1..... Main findings................................................................................................................ 13

1.6.2..... Main recommendations................................................................................................. 14

1.7........ Stakeholders views - summary...................................................................................... 15

2........... Problem definition......................................................................................................... 16

2.1........ Electronic components: An important industry with significant growth and a massive economic footprint 18

2.2........ Embedded systems: driving innovation across industry................................................... 18

2.3........ Key technologies for addressing the societal challenges.................................................. 19

2.4........ Technological and economic context............................................................................. 19

2.4.1..... Fierce global competition and changing business models................................................ 20

2.4.2..... Declining market shares of production........................................................................... 20

2.4.3..... High costs of R&D&I and fragmented European landscape........................................... 21

2.4.4..... Fast-paced innovation, seizing the opportunities ahead................................................... 21

2.5........ Achievements and lessons learned from the current ENIAC and ARTEMIS JUs............ 23

2.5.1..... Governance and objectives........................................................................................... 23

2.5.2..... Achievements............................................................................................................... 24

2.5.3..... Issues in meeting the initial objectives............................................................................. 26

2.6........ Key problems and their drivers..................................................................................... 27

2.7........ Who is affected and how.............................................................................................. 31

2.8........ The need for public intervention..................................................................................... 31

2.9........ The right to act............................................................................................................. 32

2.10...... Subsidiarity................................................................................................................... 32

2.11...... Baseline scenario.......................................................................................................... 33

3........... Objectives.................................................................................................................... 33

3.1........ General Objectives....................................................................................................... 33

3.2........ Specific Objectives....................................................................................................... 34

3.3........ Operational Objectives................................................................................................. 39

3.4........ How do objectives relate to the problem statement........................................................ 45

4........... Policy Options.............................................................................................................. 45

4.1........ Options........................................................................................................................ 45

4.1.1..... Option (a) Baseline - Business-as-usual: continue within Horizon 2020 with renewed ENIAC and ARTEMIS JUs.................................................................................................................................... 46

4.1.2..... Option (b) Zero Option: use of the collaborative research projects under the EU Framework Programme Horizon 2020............................................................................................................................ 47

4.1.3..... Adapting the scope of the new JTI................................................................................ 47

4.1.4..... Option (c) Implement a contractual Public-Private Partnership....................................... 47

4.1.5..... Options (d) and (e) Implement a new institutional Public-Private Partnership.................. 48

4.2........ Discarded options......................................................................................................... 48

4.2.1..... No action at all............................................................................................................. 48

4.2.2..... Early winding-up........................................................................................................... 49

4.3........ Proposed budget.......................................................................................................... 49

4.3.1..... Operational budget....................................................................................................... 49

4.3.2..... Administrative budget................................................................................................... 50

5........... Analysis of the Impact................................................................................................... 51

5.1........ General impact............................................................................................................. 51

5.1.1..... Economic impact.......................................................................................................... 52

5.1.1.1.. Competitiveness and investment.................................................................................... 52

5.1.1.2.. Research and innovation............................................................................................... 52

5.1.1.3.. Stakeholders................................................................................................................ 52

5.1.1.4.. Estimated leverage effect............................................................................................... 53

5.1.2..... Societal impact............................................................................................................. 54

5.1.2.1.. Employment................................................................................................................. 54

5.1.2.2.. Addressing societal challenges....................................................................................... 54

5.1.3..... Environmental impact.................................................................................................... 55

5.1.3.1.. Energy efficiency........................................................................................................... 55

5.1.3.2.. Recycling and materials................................................................................................. 55

5.2........ Impact of options.......................................................................................................... 55

5.2.1..... Impact of bi- or tripartite initiative.................................................................................. 55

5.2.2..... Impact of joining forces................................................................................................. 56

5.2.3..... Specific impact on the various stakeholders................................................................... 56

6........... Preferred policy option................................................................................................. 58

6.1........ Comparing the options.................................................................................................. 58

6.2........ Implementation and governance.................................................................................... 60

7........... Evaluation and monitoring............................................................................................. 63

7.1........ Mid-term and final evaluations....................................................................................... 63

7.2........ Monitoring the JTI progress.......................................................................................... 64

7.3........ Monitoring the JU operations progress.......................................................................... 65

Annex 1 – Context of the initiative............................................................................................... 66

Annex 2 – Recommendations from the two interim evaluations..................................................... 78

Annex 3 – Profiles of the ENIAC and ARTEMIS JUs and EPoSS ETP....................................... 82

Annex 4 – Final report of the study on the future impact of ARTEMIS and ENIAC...................... 93

Annex 5 – Sources..................................................................................................................... 94

Annex 6 – Glossary of Terms...................................................................................................... 98

Introduction

This document is the impact assessment for a Joint Technology Initiative (JTI) on electronic components and systems set up as a Joint Undertaking on the basis of Article 187 TFEU. It is proposed as part of the implementation of the EU Framework Programme for Research and Innovation Horizon 2020 [1].

Under the Seventh Framework Programme, two Joint Undertakings (JU) ENIAC and ARTEMIS were established respectively in the field of nanoelectronics and embedded computing systems. The objective of those initiatives was to increase and leverage private and public investments in research and innovation in two complementary domains of high importance for the entire industrial fabric in Europe. Their profiles and achievements to date are described in Annex 2.

Building on the experience gained with ENIAC and ARTEMIS, the present initiative is based on a simplified single structure, a focused scope of actions reinforcing the synergies between the areas of electronic components and embedded systems and a major simplification of the implementation modalities. The initiative is a central pillar of the EU's strategy for electronic components and systems in Europe. The strategy aims at drawing more than a €100 billion of additional private investment in innovation and production in the field, creating more than 250 000 induced jobs in the next 7 years, and ensuring the best use of electronics to spur growth across the economy.

The procedure that was followed is in accordance with the Commission's guidelines for ex-ante impact assessments [2].

1. Procedural Issues And Consultation Of Interested Parties

1.1. Organisation and Timing

The consultations on the new initiative in the field of electronic components and systems started in early 2011 and ran until March 2013. This included:

· Identification and analysis of economic data, carrying out literature searches and assessing results from R&D projects;

· Participating in the inter-service Impact Assessment Steering Group from June 2012 to December 2012;

· Carrying out a study on "Future Impact of ENIAC and ARTEMIS" from 16 July 2012 to 15 December 2012;

· Launching the second interim evaluation of ENIAC and ARTEMIS JUs on 10 September 2012;

· Organising and analysing stakeholder consultations:

· Public consultation on "Future Joint Technology Initiative(s) on electronic components and embedded systems", open between 20 July 2012 and 12 October 2012;

· Meetings with representatives of Member States and associated countries held on 6 July, 21 September, 18 October and 5 December 2012, 31 January and 3 March 2013;

· Consultation meetings with representatives of the 3 ETPs (AENEAS, EPoSS and ARTEMIS-IA) together on 18 February and 23 November 2011, 30 March and 18 October 2012, 5 February, 4th March, and 12th June 2013;

· Bilateral meetings with Member States that provide the highest contributions to ENIAC and ARTEMIS JUs: France on 3 October 2012, Germany on 12 October 2012, Austria on 17 November 2012, the Netherlands on 19 October 2012 and Italy on 26 November 2012; and

· Discussion with high-level representatives of industrial and academic stakeholders at the "European Nanoelectronics Forum 2012" in Munich on 20-21 November 2012.

1.2. Consultation of the IA Board

The Impact Assessment Board assessed the draft version of the present impact assessment and issued its opinion on 27 February 2013. The Impact Assessment Board approved the Impact Assessment Report and suggested certain improvements and modifications.

The Impact Assessment report was amended in line with these suggestions. In particular

· Information on the 2nd interim evaluation of the ARTEMIS and ENIAC JU is included and an assessment of the various options along the key recommendations of the 1st and 2nd interim evaluation is incorporated;

· The description of the policy options is improved;

· The impact of the options is assessed against the baseline option;

· The section on monitoring and evaluation is strengthened; and

· The structure of the Impact Assessment Report is improved with the detailed description of the context given Annex 1 to the report.

1.3. Inter-service Impact Assessment Steering Group (IASG)

The IASG was set up jointly with DG RTD's services dealing with the JTIs in their areas of responsibility (Innovative Medicines Initiative, Clean Sky, Fuel Cells & Hydrogen, and Bio-based Industries). The meetings of the IASG in 2012 contributed to the planning, coordination and discussion of the impact assessment reports of the new JTIs being considered under Horizon 2020. Besides DG RTD and CONNECT, the IASG gathered many services including SG, LS, BUDG, AGRI, COMP, EMPL, ENER, ENTR, ENV, ESTAT, HR, MARKT, MOVE, SANCO.

1.4. Consultation and Expertise

The impact assessment report draws on the extensive consultations with stakeholders from the electronic components and systems sector and with Member States as listed above. It also draws on the results of studies and evaluations of the current JUs and on the work of the High-Level Group on Key Enabling Technologies (KETs) [3].

The study about the Future Impact of ENIAC and ARTEMIS [4] examined notably the scope of the new initiative and the means to maximise its impact on technology progress and on competitiveness and growth for the European industry. The main results of the study are summarised below in Section 1.6.

In total more than 20 meetings were held with stakeholders.

In the meetings with representatives of the European Technology Platforms ARTEMIS, ENIAC and EPoSS, each representing some hundreds stakeholders, the desired scope of the new initiative was reviewed in detail. This resulted in the publication of a High Level Strategic Research and Innovation Agenda of the ICT Components and Systems Industry [5].

Public authorities were consulted through an informal "Public Authorities Reflection Group" set up in mid-2012. All Member States and Associated Countries to the Framework Programme were invited through the FP7 ICT Committee and the Public Authorities Boards of ARTEMIS and ENIAC JU. Fifteen States were regularly represented in these meetings. The consultation of Member States was essential as one of the options for the implementation of the JTI is a tripartite model in which the Member States financially contribute, similarly to the current ARTEMIS and ENIAC JUs.

A public consultation was launched on 20 July 2012. It was on-line for twelve weeks until 12 October 2012. The analysis of the contributions was published at the end of November 2012 [6]. A summary report is given in Section 1.5. Through the public consultation, the views from a wide set of stakeholders were obtained. Special attention was given to solicit opinions on the participation of SMEs.

Structures of the relevant industry associations and statistics of participations in ARTEMIS and ENIAC calls for proposals were analysed with respect to the SME participation/participant profiles. The objective was to assess whether the policy put forward has a positive impact on SMEs and provides effective incentives to facilitate SME participation.

For the economic analysis underpinning the problem definition, the report draws primarily on public domain data and recent studies conducted by the Commission. As indicated above this context is provided in Annex 1.

1.5. Results from the on-line public consultation

The on-line consultation was conducted through the institutional platform (IPM) of the European Commission between 20 July and 12 October 2012. It consisted of 21 questions covering the policy and economic context, the assessment of the current ENIAC and ARTEMIS initiatives, potential improvements and the model for future initiative(s) under Horizon 2020 as well as related performance indicators. The consultation was widely publicised through several institutional channels and repeated e-mailing campaigns to over 1,000 contacts representative of all stakeholder categories.

The consultation received 151 contributions. Figure 1 shows the distribution between categories of respondents.

Figure 1 – Respondents to the public consultation

Companies and research organisations constitute more than 85% of the respondents. The representational goal of the consultation is thus achieved. The contributions originated in a large majority from the 23 European countries involved in the current JTIs, with more than 1/4 of the respondents from Germany and France. The industrial associations currently member of the ARTEMIS and ENIAC JUs responded for their constituencies (representing respectively 206 and 126 members) which gives their views more weight.

The respondents are active in all major sectors in which the use of electronic components and embedded systems is essential, showing the relevance of their views. Also, 60% of respondents have applied for funding from one or both of the current initiatives and half of them received funding. The highest degree of familiarity with the current JTIs is by industry and RTOs. Half of the contributors are involved in activities related to systems while semiconductor design and manufacturing is of interest to roughly 2/3 of the respondents. The large semiconductor companies that replied participate in both current JTIs. Half of the respondents are active in communications and computing.

Key directions for action and areas to tackle include the need for:

· Investing more in R&D&I and manufacturing,

· Increasing Europe's technology portfolio, and

· Strengthening the innovation ecosystem.

According to the respondents, this can be achieved by:

· Improving coordination of activities between EU and Member States, and

· Providing the financial means to compete at a global level

in order to:

· Achieve critical mass required for disruptive and/or breakthrough research,

· Provide level-playing field conditions to foster European competitiveness in the sector, and

· Provide public support for large-scale investments in research and innovation.

These latter three areas are strongly advocated by private companies. The highest priority for industry is to strengthen cooperation between the public and private sectors. Overall there is the expectation that the JTI will increase the European market share in electronic components and embedded systems.

How to implement and improve a future initiative?

Figure 2 shows that there is a balanced opinion regarding the different implementation options for a future JTI. The two industrial associations involved in the current JTIs least favour the bipartite JTI (irrelevant and neutral respectively) as it would pool a too small budget and has the same administrative burden as the tripartite JTI. The comments by the respondents indicate that their opinion is largely based on their experience with the current JTIs. They may not have fully grasped the impact of the potential improvements considered for a future initiative which may explain the somewhat lower scoring of the improved tripartite JTI.

Figure 2 - Implementation model for future JTI

In Figure 3, the responses on potential improvements for a future JTI show a general agreement on the high importance of lighter financial rules and decision-making. The need for specific rules for participation in innovation activities (supporting higher TRLs) received a less strong support. The views on the single point of contact ("one-stop shop") are mixed although a majority of SMEs and academics expressed a strong desire. This reflects a need for simplification of administrative procedures.

Figure 3 - Potential improvements

There is strong support for multi-annual commitments by Member States, for better synchronisation of procedures, for simplification and reduction of national rules, and for industry to keep research activities in Europe. The European Union should invest more in the electronic components and systems. Support for the latter view is followed closely by the wish to see more investment by Member States and also by industry (all above 60% of opinions).

Ex-post evaluation of JTIs' achievements

The evaluation of the two existing JTIs is positive in all criteria and is consistent between ARTEMIS and ENIAC as shown in Figure 4 and Figure 5.

Figure 4 - ARTEMIS achievements

Figure 5 - ENIAC achievements

AENEAS indicates that 'the level of cooperation and collaboration is actually high in the domain'. There is generally a more positive opinion on the role of the JTI in bringing together the relevant stakeholders in the spirit of open innovation. The latter reflects mostly the strong agreement from the large companies in both initiatives.

Timeframe for impact

The evaluation of the coverage and the impact of the future JTI along the innovation chain (see Figure 6 and Figure 7) show an overwhelming support for projects with TRLs between 2 to 7 or 8 and a relatively short term impact at 2-5 years. It also shows the need for continuous support of upstream research to help new concepts emerge.

Figure 6 - TRL range

Figure 7 - Distance to market

System integration receives, by far, the highest rating as a priority theme for the future JTI focus, while design and prototyping/demonstrators is in second place. Large companies favour demonstrators, SMEs prefer prototyping. The majority of respondents, including the industrial associations, are in favour of a programme that is more roadmap-driven.

SMEs' position in the future initiative

SMEs are particularly keen on improving time-to-market. For them, the role of the JTI is to improve cooperation and coordination of the private sector on innovative demonstrators.

There is a general favourable opinion on the necessity of facilitating access to financing for SMEs. All stakeholders, except large companies, support higher funding rates for SMEs. Favourable rules for the participation of SMEs are seen as strongly effective, though this view is not strongly shared by large companies and RTOs.

1.6. Results from the study on future impact of ARTEMIS and ENIAC

The study [4] was conducted by a team of experts with extensive experience in the field of the current JTIs. The study consisted of desk research and about 30 interviews of a representative sample of stakeholders involved in the ARTEMIS and ENIAC JUs.

1.6.1. Main findings

According to the study team, the JTIs definitely need to be continued. There is a need to continue to support the European electronic components and systems industry in order to strengthen the position of the industry in global value chains and to reinforce the European innovation system in the global innovation network.

Figure 8 - Value chain coverage of ARTEMIS and ENIAC

As shown in Figure 8 there are complementarities and strong links between the various parts of the value chain covered by ENIAC and ARTEMIS. These links are set to grow as the components industry seeks to capture opportunities in the higher parts of the value chain. Embedded systems suppliers also seek to better exploit possibilities brought by the increasing performance and functionalities of components. Continued focused research and innovation actions along the tracks of the current two JTIs are needed. These actions should be led by appropriate stakeholders including SMEs.

Integration of operations of the two JTIs is advisable. This would involve setting up an efficient and effective one-stop-shop for managing programmes for the European electronic components and systems industry. Integration furthermore creates scope for cross-cutting activities. Large parts of the current research agendas could benefit from more strategic focusing.

1.6.2. Main recommendations

The recommendations on the shaping of the future JTI initiative are divided into two major groups: the first concerns the development of the research and innovation agenda and the second group deals with how to implement this agenda and related governance/funding issues.

Developing the research and innovation agenda:

To further develop the research and innovation agenda a number of conclusions can be drawn:

1. Focus on key areas from the double perspective of positioning EU industry in the global value chain(s) and strengthening the relevant parts of the European innovation ecosystem. In terms of building a research and innovation agenda, this has several consequences:

· Maintain a clear focus on the European value added for the stakeholders (industry, Member States, research organisations and the relevant regions) to deliver more than the sum of national or single firm interests.

· To maximise impact, address the whole innovation chain including higher TRLs (avoiding the so-called valley of death). This becomes even more important with the growing costs and risks of investment at higher TRLs. This may require an increasing involvement of users (firms and/or public organisations, e.g. automotive, aerospace, or healthcare and energy sectors) in the new JTI.

· Balancing short term and long term interests and ensuring that each stakeholder group has its own role (industry for the market orientation, science for the longer term opportunities and public government for the general public interest) will be key issues.

2. A full integration of the research agendas of the two JTIs is not advised although there is a clear need to have continuity from electronic components to systems so as to avoid important gaps in the value chain. There are significant areas of synergy and some overlaps between the fields covered by the two running JTIs. Developments in technology (interdisciplinary fields) and markets (e.g. the further integration of complete systems on a chip) increase the importance of these synergy areas. It is therefore essential to create scope for cross-cutting activities between the agendas of the two running JTIs.

3. Agility and flexibility are needed. As the speed of developments increases and technological barriers narrow, the ability to respond fast – and not to "protect" obsolete trajectories – is needed. In line with the previous point, the new JTIs should create room for identifying and responding to new needs and opportunities which may come in parallel to the envisioned roadmaps.

4. The participation of SMEs is better than generally perceived (Figure 9) but needs strengthening. SMEs may actually benefit from clearly recognisable focus areas in the research agenda that are linked to specific parts of the industry value chain.

Figure 9 - SME participation in ARTEMIS and ENIAC projects

Implementing the research and innovation agenda:

With regard to the implementation of the research agendas and issues of governance and funding, the following conclusions were drawn:

1. Both the stakeholder analysis and the evaluation of the scenarios show a strong preference for a "one-stop-shop" organisation. Stakeholder preferences, the SWOT-analyses and the analysis underpinning the scenarios all confirm the need for continuation of the present tripartite model in which European Union and Member States' funding come together with industry funding[1]. The actual implementation of the tripartite model might be improved by integrating funding commitments from the Union with those of the Member States (and possible other sources in the future).

2. Continue working on aligning research agendas and priorities from a multi-level governance perspective to include regional and other funding (loans, etc.) options. Unified operations and making the one-stop-shop work requires considerable effort of coordination. It will require from industry an effort to focus and prioritise taking into account its own interests, the public interest, a visionary medium to longer term technological outlook and market opportunities. To achieve such a focus, high quality strategic analysis will be required including the identification of cross-cutting activities and relevant multi-level alignment of funding.

3. Moving the programmes closer to the market (e.g. by supporting higher TRLs in the form of pilots and other close to market initiatives) requires a highly professional and strategic management of the programmes as the supported activities become deeper entangled in the competitive operations of firms.

1.7. Stakeholders views - summary

From the above it can be seen that stakeholders consider the two existing JTIs in ICT as being of high value.

The current initiatives ENIAC and ARTEMIS JU involve industrial stakeholders (both large companies and SMEs) and the research community (universities and RTOs) from across Europe. Member States are directly involved in the governance structures and contribute financially. The industrial and research communities are represented through the industrial associations AENEAS and ARTEMIS-IA.

The consultations show that all actors are motivated and committed to the JTIs. According to industry, the JTIs helped bringing together relevant stakeholders and facilitated cooperation in the implementation of the industrial Strategic Research Agendas. The JTIs pooled private resources and public funds from Member States and the European Union.

For the new JTI, all stakeholders strongly support the following two main specific objectives:

· Achieve critical mass by pooling public and private resources; and

· Provide public support for large scale demonstrators and pilots.

The new initiative should facilitate efficient transnational research and support cooperation on innovation across value chains closer to the market. The design of complex electronic components and systems should be covered as well as manufacturing and technology development.

Member States insist on the most effective spending of public money in the interests of their national industries and research communities. All participating Member States acknowledge the importance of a strong industry in electronic components and systems. Member States showed interest in participating in a tripartite model, where the level of funding requires pooling of resources and stronger alignment of strategies at regional, national and EU level.

Some Member States are aware of the difficulties currently faced by participants, notably through the application of national eligibility criteria and the lack of synchronisation and alignment of national contracting and funding terms. Differences in national agreements create different terms of participation amongst the beneficiaries and lead to inefficiencies. This is a main difficulty signalled by stakeholders regarding the tripartite model for the JTI.

For SMEs ease of participation is of paramount importance. They strongly favour more targeted support, an opinion that is shared by the Member States.

The need for multi-annual financial commitments of public authorities is equally highlighted.

These various opinions have been taken into account when considering the options for the new JTI in electronic components and systems as set out in the remainder of this report.

2. Problem definition

The next Framework Programme for Research and Innovation, Horizon 2020 [1], states the strategic importance of ICT for Europe and the ambition for building on Europe's strengths to boost innovation and grow business. ICT plays an essential role as it provides the key basic infrastructures, technologies and systems for economic and social prosperity and as it is at the origin of new private and public products and services. European industry needs to remain at the cutting edge of technological developments in ICT as many technologies enter a new disruptive phase. This opens new opportunities. Electronic components and systems are at the core of all ICT products and services, and apart from being a significant industry by itself, are at the origin of many productivity improvements. They fuel innovation across the economy and have a key role in addressing societal challenges.

To address its aims, Horizon 2020 is structured around three complementary and interlinked priorities - Excellent Science, Industrial Leadership, and Societal Challenges. Within Industrial Leadership support is foreseen for research and innovation to achieve industrial leadership in key enabling technologies – including electronic components and systems. Important market failures such as private sector underinvestment in R&D and insufficient financing for growth of innovative SMEs will be addressed.

Two specific activity lines within the Industrial Leadership of Horizon 2020 concern the electronic components and systems:

· A new generation of components and systems: engineering of advanced and smart embedded components and systems. The objective is to maintain and reinforce European leadership in technologies related to smart embedded components and systems. It includes micro-nano-bio systems, organic electronics, large area integration, underlying technologies for the Internet of Things (IoT) including platforms to support the delivery of advanced services, smart integrated systems, systems of systems and complex systems engineering.

· Micro- and nanoelectronics and photonics: The objective is to build on the excellence of Europe in this key enabling technology and support the competitiveness and market leadership of its industry. Activities will include research and innovation on design, advanced processes, pilot lines for fabrication, related production technologies and demonstration actions to validate technology developments and innovative business models.

The specific objective 'Leadership in enabling and industrial technologies' will follow a more technology-driven approach to develop enabling technologies that can be used in multiple areas, industries and services. Applications of these technologies to meet societal challenges will be supported together with the Societal Challenges priority. Stakeholders representing the different perspectives must be fully involved in priority setting and its implementation. In certain cases, jointly funded public-private partnerships are to be set up.

The preamble to Horizon 2020 states that 'a greater impact should also be achieved by combining Horizon 2020 and private sector funds within public-private partnerships in key areas where research and innovation could contribute to Europe's wider competitiveness goals and help tackle societal challenges. The public-private partnerships in the form of Joint Technology Initiatives launched under Decision No 1982/2006/EC of the European Parliament and of the Council of 18 December 2006 concerning the Seventh Framework programme of the European Community for research, technological development and demonstration activities (2007-13) may be continued using more fit-for-purpose structures' The set-up of a Joint Undertaking for R&D&I in electronic components and systems is an essential pillar for an EU-wide strategy to attract more private investment in support of an industry-driven European roadmap for leadership in the field.

2.1. Electronic components: An important industry with significant growth and a massive economic footprint

The electronics value chains already support an important part of the worldwide economy. This proportion will continue to increase as electronics becomes even more prominent in society and as products and services more heavily embed digital technologies. The figures below underline the importance of the sector:

· The worldwide value of the industry addressed by this initiative is in the order of some €230 billion ($300 billion) for the semiconductor industry and around €1.600 billion for the electronic systems.

· Despite the recent financial and economic setbacks, the worldwide market for semiconductor components (Figure 10) has continued to grow by 5% per annum from the beginning of the millennium. Further growth of the same magnitude has been predicted for the remaining part of the current decade [7].

Figure 10 - Worldwide market

· Progress in semiconductors[2] is the main driver behind the high growth rates of the digital sector which has today a total value of around €3.000 billion worldwide.

· In Europe, more than 200.000 people are directly employed in the semiconductor sector alone with a growing shortage of skills.

· The impact of electronics on the whole economy, from automotive to health, energy, aerospace or agro industries amounts to 10% of the worldwide GDP.

· As an example, with the increasing electrification of cars and the move towards greener vehicles, electronics will represent more than half of the value of the car by 2020. It already represents more than a third of the value in today's medium and high range cars.

In brief, electronics is at the centre of improved productivity and sustainability of modern manufacturing, higher value products and innovation in services in all sectors.

2.2. Embedded systems: driving innovation across industry

Embedded ICT systems include the software, computing and networking technologies that are specifically designed in order to be integrated in all types of products and services such as but not limited to cars, planes, home appliances, medical equipment, factories or energy equipment. Their requirements depend on the physical systems in which they are embedded and often include efficient energy consumption, high safety and dependability features, and the ability to respond in real time as well as stringent size constraints. Embedded systems are the technology that enables the whole economy and society to benefit fully from ICT progress.

An important part of embedded systems is developed by end user companies such as automotive, energy, aerospace or engineering companies. However there is also a large community of suppliers of such systems, mostly SMEs but equally large companies. A rough estimate shows that there are more than two million people in the EU employed to develop, implement and maintain embedded systems mainly in user industry.

In 2010, the global embedded systems market accounted for around €850 billion. The overall industry is growing quickly (12% per year) and should reach €1.5 trillion in revenue by 2015. It is part of key markets of European industry. For example, between 7% and 12% in civil avionic costs are in embedded systems (hardware, software services) and up to 35% of R&D cost is in embedded systems. The figures are even higher in automotive with 25% of vehicle cost in embedded systems and 80% of product innovation coming from embedded systems.

2.3. Key technologies for addressing the societal challenges

Electronics components and systems are not only found in PCs and mobile devices; they also include the sensors, cameras and actuators in all types of artefacts including the smart grids for lower energy consumption or implants and sophisticated medical equipment for healthcare. They provide the building blocks for security systems, for safety and energy efficiency of transport systems and for food safety and environmental monitoring.

Nowadays there is not a single societal challenge in which electronics is not at the basis of innovative solutions to address that challenge.

2.4. Technological and economic context

Europe is facing two main challenges in the field of electronic components and systems:

· The need to be in control of the key elements of the value chain, i.e. "components and systems design", "components manufacturing", and "integration of electronic components into final products". The electronics value chain extends beyond manufacturing of chips and includes the whole user industry from automotive to aerospace up to web-based services. Each of its elements is essential to ensure sustainability of value creation from electronics in Europe[3].

· The need to cover the full innovation chain as e.g. highlighted by the KET report [3]. While there is excellent research capacity in Europe, the steps to innovation and industrial production need to be strengthened so that businesses and citizens can fully benefit from leading-edge technologies.

If Europe loses its electronics manufacturing capability/capacity the relevant supply chains and design activities may shift outside Europe and the competitiveness of the whole economic fabric depending on electronics will be at risk. To ensure control of the value chains and improve its innovation system, Europe needs to overcome following difficulties (see Annex 1 for further details):

· Fierce global competition and changing business models;

· Declining market shares of production;

· High costs of R&D&I and fragmented European landscape; and

· Fast-paced innovation, seizing the opportunities ahead.

2.4.1. Fierce global competition and changing business models

In electronics, a shift of production to Asia has been a major trend in the last 5 years as illustrated in Figure 11 [7]. This trend is reinforced by changing business models resulting in new industrial actors emerging with the foundry model. Foundries now already account for nearly 10% of the worldwide production and these are mainly located in Asia.

Figure 11 - Regional share of IC production

2.4.2. Declining market shares of production

Europe is home to 3 large European IDMs ranked 8th, 13th and 14th for worldwide sales in 2012 [8]. However, the market share of European semiconductor companies is declining and is presently below 10% as shown in Figure 12 [7].

Figure 12 - European semiconductor market shares

2.4.3. High costs of R&D&I and fragmented European landscape

Mastering complexity requires heavy investment in R&D&I and spending huge capital in production and design facilities as research on devices and production are intimately intertwined. Such investments can only be justified by volume production in particular through commoditisation (e.g. mass market products). This has led to a concentration of industry. It is estimated that nowadays a semiconductor company must capture a 10% share of the worldwide market to afford the investment to keep up with the state-of-the-art technology development.

Two main factors explain Europe's weaker position in this field. Those are underinvestment and fragmentation of efforts. Although in absolute terms investments by EU companies is in the order of billions of euros, investments remain relatively modest compared to the worldwide competition.

2.4.4. Fast-paced innovation, seizing the opportunities ahead

As illustrated in Figure 13 and Figure 14, the European industry and the affiliated research and innovation partners are well positioned in critical industrial areas. Europe has world leading companies in electronic components and systems in automotive [9], industrial automation, energy applications and communications. However, it is relatively absent in computer and consumer related components and systems that constitute a large part of the market [9].

Figure 13 - European markets

Figure 14 - Shares of automotive semiconductors

The outlook for embedded systems in Europe is challenged by two main factors. Firstly, generic ICT platforms at devices, applications and content level are mostly dominated by non-EU actors (e.g. operating systems, smartphones, and web-platforms for e-commerce or social networks). Secondly, embedded systems are increasingly networked and connected to the Internet[4] leading to new business opportunities but also to the entry of new players. The blurring of barriers between sectors such as the web industry and the embedded systems supply industry however also creates new opportunities. Seizing these will require notably more cross-sector sharing of tools and technologies that are today separate. Furthermore it will require more interaction between software development, hardware development and end-users.

The close relationship between the electronic components industry and the industrial fabric and the proximity with systems integrators is therefore of paramount importance for Europe. At the same time, R&D in Europe needs to keep pace with worldwide competition. If the manufacturing industry would start to lose ground in Europe, R&D&I may disappear as well and with it the whole ecosystem, including the user industries.

2.5. Achievements and lessons learned from the current ENIAC and ARTEMIS JUs

2.5.1. Governance and objectives

Both the ARTEMIS and ENIAC JUs were set-up under the Article 171 of the Treaty (now Article 187 of the TFEU) along with the other JTIs (IMI, CleanSky and FCH). Both ENIAC and ARTEMIS JUs are tripartite initiatives mobilising funding from the EU, Member States and private members.

ENIAC and ARTEMIS JUs have similar governance structures as shown in Figure 15 [10].

Figure 15 – Current JUs governance structure

The governance structure has four bodies as follows:

· Governing Board – The Governing Board has overall responsibility for implementing and supervising the execution of the JTI programme and takes all decisions of a strategic nature. 50% of the voting rights are for the Industrial Association and 50% for the public authorities (Commission and participating States). The distribution of the votes for the public authorities is established annually in proportion to the funds committed to the JTI's activities.

· Industry and Research Committee – It is inter alia responsible for the drafting of the multiannual strategic plan and the annual work programme.

· Public Authorities Board – Composed of national public authorities and the Commission. It is inter alia responsible for decisions on the allocation of public funds following open calls for proposals.

· The Executive Director – He/she is the legal representative of the Joint Undertaking and ensures its day-to-day management. A Secretariat supports the Executive Director in all his/her tasks.

The objectives of ENIAC and ARTEMIS JUs essentially are:

· To define and implement a research agenda in their fields.

· To support activities required for the implementation of the research agenda notably by awarding funding to participants in selected projects following competitive calls for proposals.

· To promote a public-private partnership aiming at mobilising and pooling public and private resources to increase the overall R&D investment in their fields.

· To achieve synergy and coordination of European R&D efforts.

· To promote the involvement of SMEs in its activities.

2.5.2. Achievements

Two interim evaluations of the current ARTEMIS and ENIAC JUs [11, 12] were completed in 2010 and 2012. Both interim evaluations confirmed that the original motivations for the establishment of the ARTEMIS and ENIAC JU are still valid and acknowledge the significant value and achievements obtained. Both evaluations highlight the crucial role of the Strategic Research Agenda (SRA). If the first evaluation was focused on addressing issues related to the start-up of the JUs, the second evaluation assessed the concrete impact of the two JUs. Many of the recommendations relate to the 'next generation JUs'. These recommendations have been discussed in the design of the new JU with the stakeholders and have been taken into account in the current Impact Assessment (see in particular in Section 2.6 and 3). The recommendations relate to e.g. the support of innovation-related actions (addressing higher TRLs), the use of a simpler financial regulation in line with the recommendations made by the 'Ideal house' group [13] and the need for appropriate metrics to measure the impact and the success of projects and the initiative as a whole. The second interim evaluation published its final report in May 2013.

In the period 2008-2011, the two JUs supported a total of 84 projects (44 for ARTEMIS JU and 40 for ENIAC JU). Annex 2 gives an overview of their results.

As reported by the ENIAC JU, the impact and leverage of the initiative on the semiconductor industry is observed in the following achievements:

· It defined and implemented a Strategic Research Agenda strengthening the relevant areas in which Europe improved its competitiveness by directing funding to the priority subjects, in particular to "Energy Efficiency" (29%) and "Materials, Equipment and Manufacturing" (25%).

· The first projects approaching completion in 2012 demonstrated significant advances of the state of the art in their respective fields, strengthening the global competitive position of the European industry.

· It leveraged the public investments, increasing the amounts contributed by the ENIAC Member States by a factor of 2.5 (from €62 million in 2008 to €150 million in 2012) and the EU contributions by a factor of 3.5 (from €35 million in 2008 to €125 million in 2012). The private sector increased its contributions by a factor of 5 (from about €110 million in 2008 to an estimate amount exceeding €550 million in 2012).

· It engaged the whole ecosystem, allowing the countries with smaller national programmes in nanoelectronics to contribute to a combined level equivalent to the three leading nations.

· It created opportunities to contribute for the SMEs that represent the majority of the participating organizations with 41%, inducing collaboration of the large industry (29% of the participating organizations) and the academic and industrial research (30%).

· The project proposal, submission and evaluation mechanisms allow to execute the whole cycle within 7-9 months.

· It is thus far the only mechanism that already engaged in implementing the KET policy to the extent to which they are compatible with the existing regulations, rules and procedures, playing the role of a catalyst federating all contributors towards re-engaging the European semiconductor industry on a path of profitable growth.

· It induced a new quality of collaboration between the stakeholders that resulted in remarkable progress in the past and provides a solid basis for the future strategic perspectives.

As reported by the ARTEMIS JU, the following achievements are highlighted:

· The distribution of investment over the 8 ARTEMIS Strategic Research Agenda Sub-Programmes shows a large take-up of safety-critical systems (with 32%) and architectures (with 26%). Safety-critical systems are significant because of its high importance for the transport and health industries, attracting larger projects with directly relevant outcomes for industry. In the area of architectures fundamental technologies (especially for low-power-multi-core architectures) are introduced in industrial applications (i.e. respecting high system reliability demands).

· After four Calls, ARTEMIS JU has running projects representing a total R&D&I investment of €708 million, comprising €228 million national contributions, €116 million contribution by the EU and €363 million from industry.

· ARTEMIS JU has achieved its high-level goals of reducing fragmentation by enlarging the typical project 'footprint' at a European level.

· Creation of ARTEMIS JU "Centre of Innovation Excellence" (CoIE) - a formalization of the "Self-sustaining Innovation Ecosystem" concept. To date, there are three such CoIEs, notably on safety-critical (electronic) engineering, on process automation and on energy-efficiency in intelligent buildings.

· Two of these CoIEs are the kernel of two corresponding "ARTEMIS Innovation Pilot Projects" (AIPPs) that were selected in 2012.

· Of the 586 unique entities participating in ARTEMIS JU projects the high level of SME participation (36%) was made possible by the national contribution, favourable to SMEs and the emergence of local ARTEMIS networks supportive of SME integration, such as the ARTEMIS "mirrors" in Austria, Hungary, Denmark and Spain ("Prometeo").

As can be seen from the above, overall the two JUs demonstrated that they play a significant role as a catalyst in stimulating ambitious projects and increasing the engagement of the private sector. The JUs provide a framework in which national and European public authorities can combine support for topics of strategic importance. This capability has been convincingly demonstrated by the ENIAC JU in successfully jump-starting the implementation of the KET recommendations in nanoelectronics and by the ARTEMIS JU's in its first trial of large Artemis Innovation Pilot Projects within their call for proposals in 2012.

2.5.3. Issues in meeting the initial objectives

Besides the successes mentioned above, there are some particular problems faced by the JUs in meeting their objectives. The second interim evaluation identified a gap in the value chain existing at the system level, in disruptive product innovation and in computing and operating platform infrastructures. 'Europe's ability to meet such [related] challenges is threatened by significant 'gaps' – not only in research or general technological competence, but most significantly in the industrial value chain'. Considering the interdependence of activities in ENIAC and ARTEMIS JU for putting products in the market, these findings clearly outline the need to address the whole value chain in the future initiative(s). On a general level, both interim evaluations of the ENIAC and ARTEMIS JUs identify the need to ensure that the initiatives implement an over-arching European strategy.

During the period 2008-2012, the total spending by the Member States participating in the initiatives amounts to respectively 395 M€ and 228 M€ for ENIAC JU and ARTEMIS JU. This is well below the 792 M€ and 738 M€ initially foreseen. In the case of the ENIAC JU the spending of the Member States is below the 1.8 MS/JU ratio indicated in the Council regulations.

Regarding the tripartite construction of both JUs, one important challenge ahead is in aligning content and procedure with the expectations and processes of the participating Member States. The experience so far however shows that it was possible to a certain extent to meet the objectives although with a ramping up slower than originally foreseen.

In addition to the above further more operational observations can be drawn from the present set-up:

· There is a lack of synchronisation of national procedures (for both contracting and payments) creating delays in the implementation of projects.

· The obligation for the participants to conclude two grant agreements (JU and national) constitutes an administrative burden.

· The variety of national eligibility criteria has an impact on the way consortia are built.

· The 'hard-coded' dependency between national commitments and the EU (1.8 ratio) hampered the EU budget execution when national contributions were low or when national funding rates deviated from the anticipated public funding ratio: 1/3 (JU) and 2/3 (national) ratio, in particular in the case of ENIAC pilot lines.

· Requirements of the EU Framework Financial Rules put a significant burden on the operations of the JU.

Those difficulties however were no show-stoppers but required continuous efforts from all parties to make the system work. Any future initiative would greatly benefit from addressing these up-front through a simplified operating model in line with the overall simplification goals as proposed in Horizon 2020.

2.6. Key problems and their drivers

In their analysis the interim evaluation panels of the ARTEMIS and ENIAC JU identified several issues to be addressed in the implementation of the Joint Undertakings in order to strengthen and improve their relevance, effectiveness, efficiency, and research quality. For completeness a succinct table is presented below where recommendations are bundled into six categories.

Table 1 - Synthetic presentation of the recommendations from the two interim evaluations [11, 12]

Recommendations || Ref[5] || Constituency

An integrated European strategy

A mid- to long-term overarching EU research, development and innovation strategy in Electronic Components and Systems (ECS) should be clearly defined and used as a key 'driver' for funding decisions. || 2-17 || European Commission

Place greater emphasis on strategic, European aims in proposal evaluation & selection processes. Improve the match of the project portfolio to strategic European aims and ensure optimum coverage of key areas defined in the overarching EU ECS strategy and the work plans derived from such a strategy. || 1-16 2-1 || Joint Undertakings and Industrial Associations

ARTEMIS & ENIAC should continue their initiatives to be more closely aligned with ITEA2 and CATRENE, respectively, retaining some flexibility over the assignment of the most appropriate funding stream. || 1-18 2-7 || JTI-EUREKA coordination

Allow for a more efficient implementation

Future JUs in these domains to continue the tripartite JTI model. || 1-1 || All

Construct/draft the new Council Regulations, as a PPP with reduced Financial Regulations and Staff Regulations. || 1-9 2-8 || European Commission

Regulations should allow JTIs to support innovation-related activities other than R&D. || 1-10 || European Commission

The ENIAC & ARTEMIS JUs, along with the European Technology Platform (ETP) on Smart Systems Integration (EPoSS), should be integrated into one legal entity. || 2-6 || European Commission

Improved governance and strategic planning

Focus the JU Governing Board on strategic issues and reduce its administrative burden in order to attract participation from high-level industry representatives. || 2-9 || Joint Undertakings

Engage better with the JTI constituencies so as to promote and facilitate participation in project proposals, especially by SMEs. AENEAS, should play a more active role in the definition of the overall objectives and strategy of the ENIAC JU and keep up to date the Strategic Research Agenda. || 1-8 2-2 || Industrial Associations

Lead the preparation of action plans for achievement of innovation ecosystem aims, making reference to what has been funded before with the intent of demonstrating novelty as well as re-use of results obtained in previous projects. || 1-7 2-4 || Industrial Associations, Joint Undertakings

Specific support mechanisms for enhancing the project management processes in JU projects should be developed and implemented. Management costs should be 100% funded by the EC for all JU projects. || 2-14 || Joint Undertakings and European Commission

Establish a mechanism for recovering some of their operation costs from non-member beneficiaries of the JUs. || 1-13 1-15 || European Commission, Joint Undertakings

Strengthened commitment and alignment with priorities of Member States

Member States should commit to a multi-annual funding system. || 1-2 2-12 || Member States

Compliance with the JTI Council Regulations || 1-3 || Member States

Give early annual indication of support for specific topics. || 1-5 || Member States

Harmonisation of conditions of participation

Regulations should allow JTIs to accept funding from other sources || 1-11 || European Commission

Member State participation rules, funding rates and procedures should be harmonised wherever possible. Regulations should allow the EU to make additional financial contributions for strategic purposes, projects which are mission-critical. An ‘early warning system’ to identify mismatches in funding of member states should be implemented. || 1-4 2-10 || Member States

The proportion of funding for projects targeting generic applications and services (applications projects) should be increased || 2-5 || ARTEMIS JU and Industrial Association

Streamlined operations including better monitoring and evaluation

Establish processes to give early feedback to proposers. || 1-17 || Joint Undertakings

JU projects should be subject to only one joint JU and MS project review and reporting process. || 2-15 || Joint Undertakings and Member States

Lead the establishment of processes to monitor progress toward JU objectives. || 1-6 || Industrial Associations

Appropriate metrics and data gathering for measuring the impact and success of projects should be developed and used to support assessment of the benefits of these JUs. || 1-14 2-16 || European Commission, Joint Undertakings

ENIAC should monitor more closely and rigorously the actual and planned exploitation of project results, and the measures put in place by project partners to achieve such planned exploitation. A detailed deployment and commercialisation strategy for ARTEMIS project results should be defined. || 2-3 || Joint Undertakings

An integrated European strategy in electronic components and systems

The second interim evaluation recommended that the JTIs need an overarching European research strategy. Such a strategy would reduce fragmentation, avoid duplication of efforts, allow the development of a sustainable electronic components and systems industrial ecosystem and provide a means to address cross-cutting issues where components and embedded software interact. Furthermore such a strategy would allow a better positioning of different existing instruments including relevant EUREKA clusters and provide an effective means for European stakeholders to keep pace with technology, to get access to advanced components and to consolidate leadership in electronic systems for key economic sectors.

Provide a legal base for a more efficient implementation

Both interim evaluations recommended the implementation of the future JTI on a legal basis that is better attuned to the specificities of Public-Private Partnerships with a lighter administrative overhead and greater flexibility.

Improved governance and strategic planning

Both interim evaluations observed that the Governing Board spend too much time on operational monitoring and too little time on discussing strategic issues. The second interim evaluation noted that the administrative burden should be reduced in order to attract the participation from high-level industry representatives. Improved governance and the involvement of high-level industry representative will result in better and strategic planning that will engage stakeholders and better reflect the research priorities including those from the Member States. In this context the second interim evaluation report also indicated that industrial associations should play a more active role in the definition of the overall objectives and strategy of the JTIs and should engage more actively with stakeholders so as to promote and facilitate participation in project proposals, especially by SMEs, and develop and keep up-to-date the Strategic Research Agenda.

Strengthened commitment and alignment with priorities of Member States

Both interim evaluations recommended that Member States should commit to a multi-annual funding system. This would allow for strategic agenda setting (see above) and allow stakeholders to plan ahead. The latter is essential considering the size of the investments and the need for sustaining research over a longer period of time.

Harmonisation of conditions for participation

The interim evaluations highlighted the need for harmonisation between national procedures and criteria among the participating Member States. Member State participation rules, funding rates and procedures should be harmonised and synchronised wherever possible, adopting best practice as the guiding principle.

Streamlined operations including better monitoring and evaluation

Both interim evaluations recommended various recommendations as to how to streamline operations and provide for a better monitoring and evaluation. In particular it is recommended that the evaluation and selection process should be reviewed to improve the match of the project portfolio with the overarching strategy (see above). Appropriate metrics/key performance indicators should facilitate the evaluation of the progress towards the set objectives. The JUs are notably requested to improve the check of the exploitation plan at the proposal level and its follow-up along the life of the project and beyond. Furthermore the need for participants to sign two grant agreements (with the JU and the Member State) may delay the start of the projects. Projects supported in the JTI should be subject to only one (i.e. the JU) project review and reporting process.

2.7. Who is affected and how

The initiative targets the competitiveness of the European electronic components and systems industry. Industrial stakeholders are the primary actors. The initiative will support existing companies in improving their competitiveness and in growing/maintaining their manufacturing base. It will moreover support the creation and growing of new companies, in particular in the domain of design. It furthermore targets industry that depends on electronics to innovate such as the automotive, medical equipment, aerospace and energy industries. This constitutes a large part of European industry.

It will affect the European citizens by providing the technologies that are needed to tackle key societal challenges. Citizens will e.g. have an increased choice of energy efficient products with improved functionalities and access to new related services.

2.8. The need for public intervention

The Horizon 2020 Framework Programme identified that 'ICT underpins innovation and competitiveness across a broad range of private and public markets and sectors, and enables scientific progress in all disciplines. To master increasingly complex and multidisciplinary technology and business chains in ICT, partnering, risk-sharing and mobilisation of critical mass across the Union are needed. Union level action helps industry address a single market perspective and achieve economies of scale and scope. Collaboration around common, open technology platforms with spill-over and leverage effects allow a wide range of stakeholders to benefit from new developments and apply further innovations.' This is getting truer as both hardware and software are intimately integrated in powerful systems giving more value to the system integrators. This requires much closer cooperation along the whole development value chain [6]. As indicated in section 2.4, this line of argumentation equally applies to electronic components and systems.

Through Horizon 2020 in general and Joint Technology Initiatives in particular, private companies can collaborate with partners across Europe at a scale that is not possible at national level [14]. In the public consultation both industrial and academic actors endorsed the need for support to collaborate at different stages of the innovation chain in order to ensure that research results actually reach the market and are not shelved in academic or industry research labs [6].

A public intervention is required to counter the threats and address the weaknesses hindering the development of this industrial sector in Europe (cf. SWOT analysis in Annex 1). Public support to collaborative research and innovation involving industry and academia will assist to:

· Maintain European public research teams at the leading edge in electronic components and systems and ensure the fast and broad industrial exploitation of technology leadership across Europe.

· Share the costs of risk-taking with the electronic components and systems industry in progressing the technology and its wider use given the huge spill-over on growth and jobs across the economy and the impact on addressing the societal challenges ahead.

· Join forces. Member States have their own priorities in promoting their industry but the level of support needed for this industry is beyond their individual resources. Fragmentation leads to duplication in R&D efforts. Furthermore only a few world leading clusters with significant industrial activity in electronic components and embedded systems exist in Europe. Hence 'EU players need to join forces. Better cooperation based on collaborative working and sharing between large OEMs companies and technology providers accelerate the product innovation on both sides … by coordinating business focus, research projects clusters provide a regional support network for SMEs through cooperation between academia and large OEMs industry.' [15]

· Reinforce the existing European clusters in electronic components and the actively support of the creation of new clusters is needed to place Europe on a comparable footing to other players worldwide [16]. There is a need for action at the European level in order to pool resources and bring actors together, to provide the right level of scope and significant means to strengthen the industry. This support needs to provide a sustainable and adequate solution for Europe to face international competition.

· Structure and coordinate research and innovation, to ensure that also in the future there will be a manufacturing base in Europe and that European actors, especially users, have access to the latest technology developments and infrastructures. To reach this goal, it is critical to effectively leverage public funding at European and national levels.

2.9. The right to act

This European initiative is proposed in the context of the implementation of Horizon 2020, in particular the Commission's proposal [17] states that:

'Joint Undertakings established in FP7 under Article 187 of the Treaty, for which further support may be provided under the above conditions[6] are: the Innovative Medicines Initiative (IMI), Clean Sky, Single European Sky ATM Research (SESAR), Fuel Cells and Hydrogen (FCH), and Embedded computing systems (ARTEMIS) and Nanoelectronics (ENIAC). The latter two may be combined into a single initiative.'

2.10. Subsidiarity

The current ARTEMIS and ENIAC JUs provided a major opportunity to cooperate across Europe, create critical mass and leverage investments. Both interim evaluations [11, 12] strongly recommended continuing a similar initiative under Horizon 2020 considering that no single organisation or Member State could possibly address all the challenges of this industry. Therefore, a coordinated action at European level is deemed to be the most appropriate approach.

The budgetary impact and EU contribution of this initiative are part of the global Horizon 2020 proposal and budget.

2.11. Baseline scenario

The baseline scenario is to implement the JTI on electronic components and systems by renewing the current ARTEMIS and ENIAC JU initiatives with the necessary adaptations to comply with the context of Horizon 2020. The two JUs could be set-up as 'PPP' bodies using a simplified financial regulation based on Article 209 FR. The necessary adaptations are notably concerning the rules for participation for Horizon 2020, e.g. the flat rate financing of participants,

As demonstrated through the various stakeholder consultations, there is a positive opinion in pursuing with public support to the sector, and industry is committed to invest significantly in Europe [18]. The renewal of the current initiatives would continue support for advanced electronic components and systems for the European industry and improve its competitiveness.

The baseline scenario is based on a status quo where no specific improvements beyond the above necessary adaptations are made.

In this baseline scenario a European strategy for micro- and nanoelectronics components and systems would rely on two separate initiatives that each have their own established dynamics and building on existing constituencies.

3. Objectives

3.1. General Objectives

The present initiative intends to go beyond the objectives of the current ENIAC and ARTEMIS JUs. The overall objectives of the present initiative are aligned with the European strategy on electronic components and systems, as recommended by the two interim evaluations (see Table 1). They translate in the following general objectives of the Joint Undertaking:

· to contribute to the development of a strong and globally competitive electronics components and systems industry in the Union;

· to ensure the availability of electronic components and systems for key markets and for addressing societal challenges, aiming at keeping Europe at the forefront of technology development, bridging the gap between research and exploitation, strengthening innovation capabilities and creating economic and employment growth in the Union;

· to align strategies with Member States to attract private investment and contribute to sound public finances by avoiding unnecessary duplication and fragmentation of efforts, and easing participation for actors involved in research and innovation;

· to maintain and grow semiconductor and smart system manufacturing capability in Europe, including leadership in manufacturing equipment and materials processing;

· to secure a commanding position in design and systems engineering including embedded technologies;

· to provide access for all stakeholders to a world-class infrastructure for the design and manufacture of electronic components and embedded/cyber-physical and smart systems;

· to build a dynamic ecosystem involving innovative SMEs, strengthening existing clusters and nurturing the creation of new clusters in promising new areas.

3.2. Specific Objectives

Specific objectives of the initiative aim at improving the European landscape in the electronic components and systems sector in order to remove roadblocks and to achieve the overarching objectives. They are:

· to structure and perform excellent research and innovation in the area ensuring optimal articulation between EU, national and regional investment programmes and industrial priorities;

· to mobilise and pool, when needed, public resources at regional, national and EU levels in support of electronic components and systems in Europe, creating critical mass and attracting private funding in the field;

· to facilitate multi-disciplinary research and innovation actions along the full innovation chain, covering Technology Readiness Levels 2 to 8, including manufacturing pilot lines and large scale application experiments, thereby reducing time to market and closing the gap between research and industrial exploitation;

· to bring together the actors in value chains, including users and SMEs, to address the inherent complexity in the design and manufacturing of electronic components and systems;

· to strengthen the ecosystem from component design to semiconductor manufacturing to embedded systems development to end users, from equipment and material suppliers to semiconductor manufacturers to systems engineering, from universities to RTOs to industry including SMEs; and

· to create and grow market opportunities for electronic components and systems in areas such as but not limited to automotive, transport, health, energy, security, telecommunications and digital media.

Going beyond the objectives of the current JUs, the initiative enlarges the scope of actions downstream in the innovation chains. It notably includes actions supporting focused platforms which will be widely accessible to further innovative developments, beyond the initial objectives of the current JUs. This will reinforce the leveraging effect of the initiative. The following table indicates the drivers underlying the proposed specific objectives and how these relate to the current JUs' objectives.

Table 2 - Links between the current JUs' objectives, recommendations from the two interim evaluations and the proposed JU specific objectives

New JU's objectives || Recommendations || ENIAC and ARTEMIS objectives

Structure and perform excellent research and innovation in the area ensuring optimal articulation between EU, national and regional investment programmes and industrial priorities || An integrated European strategy · Improve the match of the project portfolio to strategic European aims and ensure optimum coverage of key areas defined in the overarching EU ECS strategy and the work plans derived from such a strategy · ARTEMIS & ENIAC should continue their initiatives to be more closely aligned with ITEA2 and CATRENE, respectively, retaining some flexibility over the assignment of the most appropriate funding stream Allow for a more efficient implementation · Future JTIs in these domains to continue the tripartite JTI model Improved governance and strategic planning · Focus the JU Governing Board on strategic issues and reduce its administrative burden in order to attract participation from high-level industry representatives || Define and implement a research agenda in their fields Achieve synergy and coordination of European R&D efforts

Mobilise and pool, when needed, public resources at regional, national and EU levels in support of electronic components and systems in Europe, creating critical mass and attracting private funding in the field || Allow for a more efficient implementation · Future JTIs in these domains to continue the tripartite JTI model Strengthened commitment and alignment with priorities of Member States · Member States should commit to a multi-annual funding system · Give early annual indication of support for specific topics Harmonisation of conditions of participation · Member State participation rules, funding rates and procedures should be harmonised wherever possible. · Regulations should allow JTIs to accept funding from other sources · Regulations should allow the EU to make additional financial contributions for strategic purposes, projects which are mission-critical || Promote a public-private partnership aiming at mobilising and pooling public and private resources to increase the overall R&D investment in their fields

Facilitate multi-disciplinary research and innovation actions along the full innovation chain, covering Technology Readiness Levels 2 to 8, including manufacturing pilot lines and large scale application experiments, thereby reducing time to market and closing the gap between research and industrial exploitation || Allow for a more efficient implementation · Regulations should allow JTIs to support innovation-related activities other than R&D · The ENIAC & ARTEMIS JTIs, along with the European Technology Platform (ETP) on Smart Systems Integration (EPoSS), should be integrated into one legal entity Improved governance and strategic planning · Lead the preparation of action plans for achievement of innovation ecosystem aims, making reference to what has been funded before with the intent of demonstrating novelty as well as re-use of results obtained in previous projects · Specific support mechanisms for enhancing the project management processes in JTI projects should be developed and implemented. Management costs should be 100% funded by the EC for all JTI projects Streamlined operations including better monitoring and evaluation · ENIAC should monitor more closely and rigorously the actual and planned exploitation of project results, and the measures put in place by project partners to achieve such planned exploitation A detailed deployment and commercialisation strategy for ARTEMIS project results should be defined || Support activities required for the implementation of the research agenda notably by awarding funding to participants in selected projects following competitive calls for proposals

Bring together the actors in value chains, including users and SMEs, to address the inherent complexity in the design and manufacturing of electronic components and systems || An integrated European strategy · Improve the match of the project portfolio to strategic European aims and ensure optimum coverage of key areas defined in the overarching EU ECS strategy and the work plans derived from such a strategy Improved governance and strategic planning · Engage better with the JTI constituencies so as to promote and facilitate participation in project proposals, especially by SMEs || Promote the involvement of SMEs in its activities

Strengthen the ecosystem from component design to semiconductor manufacturing to embedded systems development to end users, from equipment and material suppliers to semiconductor manufacturers to systems engineering, from universities to RTOs to industry including SMEs || An integrated European strategy · Improve the match of the project portfolio to strategic European aims and ensure optimum coverage of key areas defined in the overarching EU ECS strategy and the work plans derived from such a strategy Allow for a more efficient implementation · The ENIAC & ARTEMIS JTIs, along with the European Technology Platform (ETP) on Smart Systems Integration (EPoSS), should be integrated into one legal entity Improved governance and strategic planning · Lead the preparation of action plans for achievement of innovation ecosystem aims, making reference to what has been funded before with the intent of demonstrating novelty as well as re-use of results obtained in previous projects || Promote a public-private partnership aiming at mobilising and pooling public and private resources to increase the overall R&D investment in their fields

Create and grow market opportunities for electronic components and systems in areas such as but not limited to automotive, transport, health, energy, security, telecommunications and digital media || Streamlined operations including better monitoring and evaluation · ENIAC should monitor more closely and rigorously the actual and planned exploitation of project results, and the measures put in place by project partners to achieve such planned exploitation A detailed deployment and commercialisation strategy for ARTEMIS project results should be defined || Define and implement a research agenda in their fields

3.3. Operational Objectives

Operational objectives include:

· to elaborate and keep an up-to-date industry-driven Strategic Research and Innovation Agenda (SRIA) for the European electronic components and systems industry;

· to implement the SRIA efficiently by initiating calls for proposals, evaluating proposals, awarding funding and monitoring projects including large scale pilot lines, technology platforms and application demonstrators selected through open, transparent and effective procedures, within the limits of available funds;

· to create synergies through closer and more strategic cooperation;

· to assist the exploitation of R&D&I results, supporting the development and growth of innovative SMEs in the sector;

· to ease the participation of R&D actors in projects with a truly European dimension, by ensuring simple and efficient rules and procedures;

· to provide access to state-of-the-art design and manufacturing infrastructures for electronic components and systems;

· to develop closer cooperation and ensure coordination/complementarity of European (in particular Horizon 2020), national and trans-national activities, bodies and stakeholders;

· to foster a comprehensive and fertile innovation environment in Europe; and

· to maintain a continuous stream of highly skilled graduates and trainees in the field, responding to growing industrial needs.

The following table indicates the drivers underlying the proposed operational objectives and how they relate to the current JUs' objectives.

Table 3 - Links between the current JUs' objectives, recommendations from the two interim evaluations and the proposed JU operational objectives

New JU's objectives || Recommendations || ENIAC and ARTEMIS objectives

Elaborate and keep an up-to-date industry-driven Strategic Research and Innovation Agenda (SRIA) for the European electronic components and systems industry || Allow for a more efficient implementation · The ENIAC & ARTEMIS JTIs, along with the European Technology Platform (ETP) on Smart Systems Integration (EPoSS), should be integrated into one legal entity Improved governance and strategic planning · AENEAS, should play a more active role in the definition of the overall objectives and strategy of the ENIAC JTI and keep up to date the Strategic Research Agenda || Define and implement a research agenda in their fields

Implement the SRIA efficiently by initiating calls for proposals, evaluating proposals, awarding funding and monitoring projects including large scale pilot lines, technology platforms and application demonstrators selected through open, transparent and effective procedures, within the limits of available funds || Allow for a more efficient implementation · Regulations should allow JTIs to support innovation-related activities other than R&D Improved governance and strategic planning · Lead the preparation of action plans for achievement of innovation ecosystem aims, making reference to what has been funded before with the intent of demonstrating novelty as well as re-use of results obtained in previous projects · Specific support mechanisms for enhancing the project management processes in JTI projects should be developed and implemented. Management costs should be 100% funded by the EC for all JTI projects Streamlined operations including better monitoring and evaluation · Lead the establishment of processes to monitor progress toward JTI objectives · Appropriate metrics and data gathering for measuring the impact and success of projects should be developed and used to support assessment of the benefits of these JTIs || Support activities required for the implementation of the research agenda notably by awarding funding to participants in selected projects following competitive calls for proposals

Create synergies through closer and more strategic cooperation || An integrated European strategy · Place greater emphasis on strategic, European aims in proposal evaluation and selection processes Improve the match of the project portfolio to strategic European aims and ensure optimum coverage of key areas defined in the overarching EU ECS strategy and the work plans derived from such a strategy Allow for a more efficient implementation · The ENIAC & ARTEMIS JTIs, along with the European Technology Platform (ETP) on Smart Systems Integration (EPoSS), should be integrated into one legal entity Improved governance and strategic planning · Focus the JU Governing Board on strategic issues and reduce its administrative burden in order to attract participation from high-level industry representatives || Achieve synergy and coordination of European R&D efforts

Assist the exploitation of R&D&I results, supporting the development and growth of innovative SMEs in the sector || Improved governance and strategic planning · Engage better with the JTI constituencies so as to promote and facilitate participation in project proposals, especially by SMEs · Lead the preparation of action plans for achievement of innovation ecosystem aims, making reference to what has been funded before with the intent of demonstrating novelty as well as re-use of results obtained in previous projects Streamlines operations including better monitoring and evaluation · ENIAC should monitor more closely and rigorously the actual and planned exploitation of project results, and the measures put in place by project partners to achieve such planned exploitation A detailed deployment and commercialisation strategy for ARTEMIS project results should be defined. || Promote the involvement of SMEs in its activities

Ease the participation of R&D actors in projects with a truly European dimension, by ensuring simple and efficient rules and procedures || Allow for a more efficient implementation · Construct/draft the new Council Regulations, as a PPP with reduced, alternative Financial Regulations and Staff Regulations Strengthened commitment and alignment with priorities of Member States · Member State participation rules, funding rates and procedures should be harmonised wherever possible Streamlined operations including better monitoring and evaluation · Establish processes to give early feedback to proposers · JTI projects should be subject to only one joint JTI and MS project review and reporting process ||

Provide access to state-of-the-art design and manufacturing infrastructures for electronic components and systems || Allow for a more efficient implementation · Regulations should allow JTIs to support innovation-related activities other than R&D Harmonisation of conditions of participation · The proportion of funding for projects targeting generic applications and services (Applications projects) should be increased ||

Develop closer cooperation and ensure coordination/complementarity of European (in particular Horizon 2020), national and trans-national activities, bodies and stakeholders || An integrated European strategy · ARTEMIS & ENIAC should continue their initiatives to be more closely aligned with ITEA2 and CATRENE, respectively, retaining some flexibility over the assignment of the most appropriate funding stream · Allow for a more efficient implementation · Future JTIs in these domains to continue the tripartite JTI model Strengthened commitment and alignment with priorities of Member States · Give early annual indication of support for specific topics Improved governance and strategic planning · Focus the JU Governing Board on strategic issues and reduce its administrative burden in order to attract participation from high-level industry representatives · Engage better with the JTI constituencies so as to promote and facilitate participation in project proposals, especially by SMEs || Promote a public-private partnership aiming at mobilising and pooling public and private resources to increase the overall R&D investment in their fields

Foster a comprehensive and fertile innovation environment in Europe || Allow for a more efficient implementation · Regulations should allow JTIs to support innovation-related activities other than R&D Improved governance and strategic planning · Lead the preparation of action plans for achievement of innovation ecosystem aims, making reference to what has been funded before with the intent of demonstrating novelty as well as re-use of results obtained in previous projects An integrated European strategy · A mid- to long-term overarching EU research, development and innovation strategy in Electronic Components and Systems (ECS) should be clearly defined and used as a key 'driver' for funding decisions · Improve the match of the project portfolio to strategic European aims and ensure optimum coverage of key areas defined in the overarching EU ECS strategy and the work plans derived from such a strategy ||

Maintain a continuous stream of highly skilled graduates and trainees in the field, responding to growing industrial needs || ||

3.4. How do objectives relate to the problem statement

In Figure 16, the objectives are mapped onto the problem statements and their drivers.

It shows that actions have been identified in order to address each major problem area. While it is recognized that the scope of a JTI can only partially respond to the overall economic challenges with which the electronic components and systems sector is faced, there is significant room for addressing main market failures in Europe such as under-investments and fragmentation of the strategies.

Combined with an efficient implementation, the targets set for the new initiative will provide better conditions for a more competitive European industry by fostering innovation in essential fields of the European economy.

Figure 16 - Objectives matching the problem drivers

4. Policy Options

4.1. Options

Article 19.3 of Horizon 2020 Framework Programme [1] describes the criteria to set up public-private partnerships. Public-private partnerships can be implemented either through a institutional or through a contractual agreement. An institutional PPP shall only be implemented where the scope of the objectives pursued and the scale of the resources required justify it.

Public-private partnerships shall be identified in an open and transparent way based on all of the following criteria:

(a) the added value of action at Union level;

(b) the scale of impact on industrial competitiveness, sustainable growth and socio-economic issues;

(c) the long-term commitment from all partners based on a shared vision and clearly defined objectives;

(d) the scale of the resources involved and the ability to leverage additional investments in research and innovation; and

(e) a clear definition of roles for each of the partners and agreed key performance indicators over the period chosen.

A public-private partnership is an adequate tool to address the electronic components and systems sector.

In this context five main policy options are identified for implementing the JTI on electronic components and systems:

· Rely on the existing ENIAC and ARTEMIS initiatives by renewing and adapting their mandate in the new context of Horizon 2020 (baseline scenario – see Section 2.11);

· Undertake the planned activities without a dedicated PPP using the standard practices foreseen for collaborative projects under Horizon 2020;

· Launch a single new PPP replacing the existing ENIAC and ARTEMIS, which could take the form of:

· A contractual PPP (without a dedicated legal entity);

· A bipartite institutional PPP (a dedicated legal entity without Member State participation); or

· A tripartite institutional PPP (a dedicated legal entity with Member State participation).

4.1.1. Option (a) Baseline - Business-as-usual: continue within Horizon 2020 with renewed ENIAC and ARTEMIS JUs

Considering the continued support of the Member States this baseline option capitalises on the experience gained in the ENIAC and ARTEMIS JUs and renews their present scope and set-up. Member States would have the option to renew or terminate their membership. The existing Industry Associations constituting the private part of the PPPs would continue to be involved.

This option requires the adoption of new Council Regulations to provide the legal basis to implement both ENIAC and ARTEMIS JUs' renewed objectives and new rules under Horizon 2020. This would provide an opportunity to improve the governance structures and simplify their modus operandi.

4.1.2. Option (b) Zero Option: use of the collaborative research projects under the EU Framework Programme Horizon 2020

This option allows the current JUs to accomplish their mandates by 2017, i.e. within the existing JU's no new activities after 2013 and a winding up in 2017. All running projects launched from 2008 to 2013 will continue to be supported by the current JUs. In this option all future public support at the EU level for electronic components and systems would happen within Horizon 2020 and no dedicated PPP body would be set up.

This option does not necessitate a new legal act. The R&D&I activities would be implemented through the standard EU funding programmes.

4.1.3. Adapting the scope of the new JTI

The Commission indicated in its report on the first interim evaluation of the JTIs [19] that there is a need for pooling resources in a joint JU in covering electronic components and systems. It stated that 'the Commission does not rule out that activities in areas addressed by ARTEMIS and ENIAC might be dealt with by a single JTI in the future. This might even cover a larger part of the value chain, addressing the burning issue of the trade-off between hardware and software and balancing technology-push and application-pull priorities. In addition, this would help increase the efficiency of the operational set-up'.

'Experience has shown that it is very difficult to exclude topics from one or other programme when exploring detailed options beyond high-level principles. Indeed, a large number of research subjects are addressed by both programmes (in the application and technology fields) '.

Therefore, the following options are built on the strategic need to adapt the scope of the new JTI to encompass the full value chains for the electronic components and systems.

4.1.4. Option (c) Implement a contractual Public-Private Partnership

This option considers the setting up of a contractual PPP according to Article 19.2(b) of Horizon 2020.

As in the zero option, no dedicated legal act is needed and there is no specific involvement of Member States beyond the standard governance of Horizon 2020. With this option, there would be an SRA proposed by industry and a budget earmarked for the area. The European Commission services or an executive agency would manage the calls for proposals and the monitoring of projects. The work programmes would be elaborated by industry and approved by the Commission. There would be a contractual arrangement signed by the European Commission and relevant private partners.

4.1.5. Options (d) and (e) Implement a new institutional Public-Private Partnership

The institutional PPP is based on Article 19.2(a) of Horizon 2020. As in option (a), the JTI has to be implemented through a dedicated legal act based on Article 187 TFEU. In this case a single new Joint Undertaking with a budget ceiling would be established.

There are two ways to consider a new institutional PPP: with or without Member States participation.

Option (d) Implement a bipartite institutional Public-Private Partnership

A bipartite PPP involving private stakeholders and the EU (through the Commission) is a concept put forward by the European Commission for implementing long-term complex initiatives in other fields[7]. The operations are run as in the current initiatives but with EU contributions only. The Member States