Angela Merkel: Europe should make its own chips and electric car batteries

German Chancellor Angela Merkel wants countries in the European Union to boost their technological capabilities and push more aggressively into areas such as battery manufacturing for electric cars and cloud computing.

Merkel, who is serving her fourth and final term as leader of Europe’s manufacturing powerhouse, said in an interview with the Financial Times that Europe must compete aggressively with tech companies in the United States and Asia.

“I believe that chips should be manufactured in the European Union, that Europe should have its own hyperscalers and that it should be possible to produce battery cells,” she told the newspaper.

BERLIN, GERMANY - SEPTEMBER 20: (L-R) German Finance Minister Olaf Scholz, German Chancellor Angela Merkel attend a press conference following a meeting of the "climate protection" government cabinet commission at the Futurium museum on September 20, 2019 in Berlin, Germany. The commission formulated a policy package on bringing down CO2 emissions in Germany. While Germany has made strong progress in expanding its renewable energy production over the last few decades, the government has come under criticism more recently for failing to do more to bring down greenhouse gas emissions. (Photo by Maja Hitij/Getty Images)

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The European Union has struggled for years to produce leading tech companies. It lacks an innovation hub on the scale of Silicon Valley, and the strategic government support afforded many tech companies in Asia.

Germany’s automotive giants currently have no choice but to rely on battery producers from South Korea and China to outfit most of their new electric vehicles. Volkswagen (VLKAF) is partnering with Sweden’s Northvolt to build a battery factory in Germany, but production is expected to start in late 2023 at the earliest.

US and Asian companies dominate chipmaking. And Europe has no hyperscalers, or companies that provide the internet infrastructure that underpin huge platforms such as Google (GOOGL), Facebook (FB) and Amazon (AMZN).

By suggesting that Europe, and not just Germany, should develop new tech capabilities, Merkel may be opening the door to the kind of industrial strategy favored by French President Emmanuel Macron.

Macron has been pushing for the creation and protection of European champions that can better compete with foreign rivals. Airbus (EADSF), which has facilities across the EU and competes with Boeing (BA), is one successful example.

But while calling for greater regional innovation and competitiveness, Merkel rejected the path taken by the Trump administration, which has sought to boost American interests by confronting China over trade, intellectual property protections and Beijing’s support for state-run enterprises.

“Do we in Germany and Europe want to dismantle all interconnected global supply chains?.?.?.?because of this economic competition?” She added: “In my opinion, complete isolation from China cannot be the answer.”

European Union Competition Commissioner Margrethe Vestager gives a at the EU headquarters in Brussels.

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Merkel also told the Financial Times that Europe should have the confidence to set global standards, such as the GDPR rules that have helped strengthen data protection around the world.

“I firmly believe that personal data does not belong to the state or to companies,” she said. “It must be ensured that the individual has sovereignty over their own data and can decide with whom and for what purpose they share it.”

The interview could foreshadow Merkel’s message to business and political leaders next week in Davos. The chancellor is scheduled to give a keynote address at the World Economic Forum in Switzerland on Thursday.