Tuesday, February 01, 2022

US and Chinese ICT and health firms lead global R&D

In December 2021 the European Commission published its annual review of business research and development — both in the Union and across the globe.

At a spending level, the EU remained second to the United States. American and European companies fell slightly to 20.3% and 37.8% respectively while Chinese companies continued to raise spending by reaching 15.5%.

At a global level in 2020 — the first year of the pandemic — business R&D was concentrated in four key sectors accounting for 77.4% of global R&D on the Scoreboard: ICT producers (22.9%), Health industries (20.8%), ICT services (18.6%) and Automotive (15.2%).

Amazon is the world's biggest business R&D spender.

However, it is not on the Scorecard as its "technology and content" expense includes more than R&D. Amazon's SEC (Securities and Exchange Commission) filing reveals a huge expenditure of $42.74bn in fiscal 2020 (11.1% of net sales) on 'technology and content' as compared to $35.93 billion in fiscal 2019. This compares with the top-ranking Alphabet (Google's parent) in the Global 2500 at €22.47bn ($25.62bn) in 2020.

The Commission reported that firms based in the US and China showed the largest R&D growth figures (9.1% and 18.1% respectively). It said "This is not surprising since the US has a large proportion of ICT and Health companies that were not affected by the pandemic and China has a particularly large share of ICT companies. In contrast, EU companies R&D investment fell by 2.2% which broke the positive trend observed over the past years (6.0% increase in the prior year). Japanese companies increased R&D by a modest 0.9% and the RoW group by 3.0%. The performance of the RoW (Rest of World) companies was driven by R&D increases from companies mainly based in Taiwan (10.0%) and South Korea (4.2%)."

In 2011 EU companies were investing in R&D twice as much as their US counterparts in the Automotive sector; half in the Health and ICT producers sectors and 5 times less in the ICT services sector. The Commission said the sectoral specialisation has sharpened over the last 10 years as in 2020 EU companies invested 3.2 times more than their US counterparts in the Automotive, 2.5 times less in Health, 3.3 times less in ICT producers and 7.9 times less in ICT services.

The Automotive sector accounts for 34% of total EU R&D and is dominated by Germany.

In 2020 only 5 EU countries had BERD (Business Expenditure Research and Development) rates of 2.9% of GDP and above. Ireland's rate was 1.6% when some multinational distortions were deleted from GDP.

Ireland

The chart below shows that Ireland has 27 companies on the Global 2500. However, most of these firms, led by Medtronic Medical Devices of the US — are Irish for tax avoidance purposes but they are controlled outside Ireland. The more neutral term for them is redomiciled companies.

The minimum R&D spend for the Global 2500 was €36.5m.

There are 3 Irish industrial firms among the 2,500: Kerry at the 466 rankings had a spend of €299m; GlenDimplex at 2,119 spent €46m; Glanbia at 2,298 had a spend of €41m.

The R&D can be located in one or several countries.

Ireland's two top domestic banks Bank of Ireland and Allied Irish Banks, have rankings of 589 and 595.

The EU 1000

The minimum spend for the EU 1000 is €2m.

Kerry had a rank of 99 and excluding the banks, the other Irish firms are GlenDimplex; Glanbia; Kingspan; Trinity Biotech; Smurfit Kappa, and Greencore, which mainly operates in the UK, had a spend of €2.8m.

The total number of Irish companies in the EU 1000 including the 2 banks is 9 compared with 63 Danish firms.

The main Asian countries account for 33.5% of Global business R&D