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  • The innovation pace of Swedish sub-suppliers decline at an alarming rate

    11/15/2016

    The German and Swedish Automotive industry have been admired and well-respected worldwide for their prestigious car brands such as Mercedes, BMW, Audi, Volvo and SAAB, so much so that for many years these brands were synonymous with safety and robustness. This industry introduced many innovative solutions and were the leading drivers for implementing high safety and comfort standards in road vehicles especially in personal cars.

    The global successes of the Swedish Auto industry were the catalyst for the emergence and growth of highly innovative Swedish sub-suppliers that quickly became world renown for their innovations. Many products from these supplies were and are integrated in numerous car brands worldwide. Two examples of such successful sub-suppliers are Autoliv and Haldex.

    Now I am sure that most of you are aware of the dismantling of the SAAB brand and the recent (2010) acquisition of the Volvo brand by the Chinese carmaker Zhejiang Geely Holding Group. I am equally sure that you are all aware of the successes of the Asian (especially Japanese and Korean) automotive industry in gaining similar high quality status compared to their European counterparts. The question I am curious about is how are the Swedish suppliers coping with this changing map and are they as innovative as they were in the early parts of 2000, where the Swedish car brands were at their peak.

    To get some answers, I made a sample investigation of the patenting activity (as a qualitative measure of the innovation rate) of the auto industry suppliers in one specific product areas of car interiors such as seats, seatbelts, passenger comfort etc. I intentionally excluded the automobile manufacturers and limited my investigation to the last 15 years. The plots below summarize my findings by comparing the patenting activity of the Swedish suppliers with those of the global sub-suppliers as well as with their German counterparts.

    grafen1

    grafen2

    A quick glans at these plots clearly indicates that the innovation activities of the Swedish sub-supplier have been declining at an alarming rate to reach less than 30% of their activities during the “golden years” of the early 2000. Dropping from an average of 70 patents/year in year 2000 to around 20 patents/year in the last few years. In contrast, the patenting activities of global sub-suppliers have been following a very healthy growth trajectory reaching double the rate during the same period. Increasing from a modest average of 3200 patents/year in the early 2000 to around 6000 patents/year in the last few years. Finally, one can note that German suppliers have been patenting at a rather stable although slightly declining rate but the rate of decline is nowhere near the decline of the Swedish suppliers.

    This observed doubling of the global innovation activities of the Auto industry sub-suppliers is attributed solely to the aggressive patenting strategy of the Asian suppliers represented by China, Korea and Japan. These suppliers are also patenting at a very high rate in Europe, which is a clear indication that these Asian suppliers see the European market as a high potential market.
    It would be very interesting to investigate in more depth the main causes of this very distinct decline of the Swedish supplier activities and for that matter even the German suppliers. Some of the questions that need to be answered or investigated are:
    •Is the decline in Sweden a direct consequence of the changing Automotive scene in Sweden, or is it caused by the globalization of the Auto industry in general?
    •Why are not the German suppliers as affected by the changing market as much as the Swedish counterpart? Is this because the German suppliers have their own Auto industry in place? or are there other fundamental reasons?
    •Are the German and Swedish supplies changing their strategy and maybe moving into other domains of the supply chain of the Auto industry e.g. Going into new areas such as IoT (Internet of Things) or new materials etc.?
    •Is it too late for the European suppliers to act to keep their Asian counterparts at bay? Or Are they doing anything about it?
    I would like to finish with the main conclusion of a recent analysis report jointly issued by the EUIPO (Intellectual Property Office of the EU) and EPO (the European Patent Office)
     //http://documents.epo.org/projects/babylon/eponet.nsf/0/419858BEA3CFDD08C12580560035B7B0/$File/ipr_intensive_industries_report_en.pdf//

    During the period 2011-2013, the European IPR intensive industries generated:
    •60 million direct jobs corresponding to 27.8% of all jobs in the EU
    •Business worth €5.7 trillion corresponding to 42% of the total economic activity (GDP) in the EU.

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