THE ECONOMIC IMPACT OF HUAWEI IN EUROPE - NOVEMBER 2020 - Oxford Economics
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THE ECONOMIC IMPACT OF HUAWEI IN EUROPE NOVEMBER 2020
The economic impact of Huawei in Europe
TABLE OF CONTENTS
Executive summary4
1. Introduction6
2. Our methodology8
3. The economic impact of Huawei10
3.1 Huawei’s contribution to Gross Domestic Product 10
3.2 Contribution to employment 12
3.3 Contribution to taxes 13
3.4 Contribution across Europe 14
4. Huawei’s long-term investment in R&D16
4.1 The importance of R&D in Europe 16
4.2 Huawei’s contribution to European R&D 17
Appendix: Methodology 20
1
The economic impact of Huawei in Europe
HUAWEI’S ECONOMIC IMPACT
THROUGHOUT EUROPE
TOTAL EUROPEAN ECONOMIC IMPACT
Total Direct Indirect Induced
Total contribution to Total jobs supported in 2019
Europe’s GDP in 2019
224,300
€16.4 billion 13,800
€7.3 bn
€6.3 bn
€2.8 bn 112,000
98,500
Average annual
growth rate,
2015-2019
(in real terms)
19% Average annual growth rate,
2015-2019
17%
Total tax revenues raised
in Europe in 2019 €6.6 Average annual growth
rate, 2015-2019 17%
billion (in real terms)
This equates to the average salaries of around 151,200 teachers.
RESEARCH & DEVELOPMENT
€12.7
billion,
23 R&D
institutions
Global R&D budget in 2018/19 of
making Huawei the fifth-largest R&D investor in
the world that year, having ranked in the top 10
across Europe each year since 2016.
Note: Totals may not sum due to rounding 1. European Commission (2019) The 2019 EU Industrial R&D Investment Scoreboard
2
The economic impact of Huawei in Europe
3
The economic impact of Huawei in Europe
EXECUTIVE SUMMARY
At the heart of the European Commission’s growth agenda
is the goal to create a “Europe fit for the digital age”. The
enormous social and economic disruption caused by the
coronavirus pandemic in 2020 has re-emphasised this focus,
with the Commission recognising that “new technologies have
kept our businesses and public services running, and made sure
that trade could continue flowing”.1
€16.4 billion
The Commission has identified its digital growth initiatives as
key to relaunching the European economy, not least as a motor
for innovation and job creation. Artificial intelligence has been
identified as an area of strategic priority, and the Commission
has acknowledged the crucial role digital technologies will play
Huawei’s total contribution in achieving the carbon-neutrality commitments that are set out
to European GDP in the European Union’s Green Deal. The digital strategy requires
in 2019 through better connectivity, world-leading digital service provision, and
its direct, indirect, cyber security. Huawei’s goods and services, as well as its large-
and induced channels. scale investment in Research and Development (R&D), mean it
plays an important role in helping Europe build this digital future.
HUAWEI’S CONTRIBUTION TO THE EUROPEAN ECONOMY
In this study, commissioned by Huawei and carried out by
Oxford Economics, Huawei’s total economic impact is measured
in terms of its annual contributions to European GDP, jobs,
and taxes. These are stimulated by Huawei’s operations within
Europe, as well as the company’s spending on European
suppliers from other parts of the world.
We find that in 2019, Huawei supported a total contribution to
€6.3 billion
European GDP of €16.4 billion. This total is made up of three
channels of impact:
• A direct contribution of €2.8 billion—generated by Huawei’s
Total European tax own European operations, which (for the purposes of this
revenues supported study) include the EU-27, the United Kingdom, Iceland,
by Huawei activities Switzerland, and Norway.
in 2019. • An indirect contribution of €7.3 billion—stimulated through
the procurement of European goods and services by Huawei’s
worldwide operations.
Of this total, Huawei itself
contributed around €1.6 billion. • A further induced contribution of €6.3 billion—generated by
Huawei staff and all employees in Huawei’s European supply
chain, as they spend their wages in the wider economy on
activities such as retail, leisure, and healthcare.
1
European Commission (2020) Communication from the Commission to the European Parliament, The European Council, The
Council, The European Economic and Social Committee and the Committee of the Regions Europe’s moment: Repair and Prepare
4 for the Next Generation (COM/2020/456 final). p.8The economic impact of Huawei in Europe
As part of this large economic footprint, we estimate that Huawei
224,300
supported around 224,300 jobs in Europe in 2019. This includes
some 13,800 jobs directly supported by Huawei’s own operations,
112,000 people employed indirectly in its European supply chains,
and a further 98,500 jobs supported by the economic activity
induced by all employees’ wage-related expenditure. Total number of
European jobs that
Huawei also generated €6.6 billion in tax revenues for were supported by
European authorities in 2019. Of this total, some €1.6 billion Huawei in 2019.
was paid directly by Huawei, while €2.5 billion and €2.5 billion
were generated through the company’s indirect and induced
contributions, respectively. The total tax contribution in 2019
equates to the average salaries of around 151,200 teachers in
Europe.
Huawei’s impact in Europe has grown markedly over the last
five years. Its contribution to GDP increased by an average of
19.1% per year, in real terms, between 2015 and 2019. The total
employment and real tax contributions associated with Huawei’s
activities in Europe grew by an average annual rate of 17.1% and
16.8% over the same period.
HUAWEI’S ROLE IN RESEARCH AND DEVELOPMENT
The European Commission has recognised R&D as a vital
component for realising both sustained economic growth and
wider improvements to European quality of life. The Commission
recently announced €100 billion of public funding for research
and innovation in the science and technology fields, via its
Horizon Europe programme.2
Huawei has established itself over the past decade as a world
leader in R&D, investing a global R&D budget of €12.7 billion
in 2018/19.3 This made Huawei the fifth-largest R&D investor
in the world that year, having ranked in the top 10 each year
since 2016. The company also topped the ranking for patent
applications to the European Patent Office in 2019.
Huawei currently operates 23 research sites across Europe,
and has invested more than $1 billion in its Innovation Research
Programme, which was established in Europe in 2010. Over 100
research institutions and universities have been involved, with
funding allocated across a diverse range of disciplines. Huawei
also supports the Horizon 2020 initiative (a precursor to Horizon
Europe), in research areas such as 5G, autonomous vehicles, and
cloud computing. Huawei has stated that it sees Europe as its
second home-base, and that it wants to “contribute to Europe’s
technology leadership in the world”.4
2
European Commission (2017) Horizon Europe The Next EU Research & Innovation Programme (2021-2027). Available from
https://ec.europa.eu/info/sites/info/files/research_and_innovation/strategy_on_research_and_innovation/presentations/horizon_
europe_en_investing_to_shape_our_future.pdf [Accessed 09 June 2020]. €100 billion is in 2019 prices. 5
3
European Commission (2019) The 2019 EU Industrial R&D Investment Scoreboard
4
Huawei (2020) The Win-win Relationship Between the EU and Huawei. Available from https://www.huawei.eu/story/win-win-
relationship-between-eu-and-huawei [Accessed 09 June 2020]The economic impact of Huawei in Europe
1. INTRODUCTION
One of the core objectives of better. A fairer digital business assessment. We estimate
the new European Commission environment will promote Huawei’s contribution to the
is creating “Europe fit for the competition and boost Gross Domestic Product
digital age”. This is a Europe productivity. And research and (GDP) of the above European
which citizens and businesses development in core areas, economies, the number of
benefit from technology, the including AI, communications jobs Huawei supports, and the
digital economy is both fair technology and cybersecurity value of taxes generated by
and competitive, and society will enable European companies Huawei’s activity.
operates in an open, to remain globally competitive.
democratic and sustainable Huawei also makes an
manner.5 In particular, the Digital solutions are also important contribution to
Commission’s digital strategy seen as pivotal to delivering innovation in Europe, through
prioritises excellence in Artificial the European Green Deal, largescale research and
Intelligence (AI). It recognizes which commits the EU development spending, which
AI’s potential to bring many to climate-neutrality by is highlighted in this report.
benefits, from better healthcare, 2050. The Commission
safer and cleaner transport, sees digital technologies The report structure is as
more efficiency in production playing a supportive role follows:
and more sustainability in in environmental policies
resource consumption. such as waste management • Chapter 2 sets out the
methodology of our
and recycling, and possibly
economic impact assessment.
Integral to this vision is a reducing net CO2 emissions.
deeper and more digital • Chapter 3 presents the
single market, that will boost Delivering on the Commission’s results of the assessment,
productivity and raise living digital agenda will require the highlighting contributions to
standards in a more digitalised input and assistance of digital GDP, employment and taxes
society. The disruption caused technology leaders. Huawei between 2015 and 2019.
by the coronavirus pandemic in makes a very significant
2020 has in some ways slowed contribution to the European • Finally, Chapter 4 highlights
the contributions that
its progress, but in other economy through the goods
Huawei makes to innovation,
ways has served to further and services it provides to
through the company’s
emphasise its importance. businesses and households,
investment in R&D.
the investment it makes in
The Commission identified innovation and skills and the
several factors as central to a economic activity it stimulates
successful digital transition in in the European economy.
Europe.6 Better connectivity
will increase the scope of the 1.1 STRUCTURE OF THIS
digital economy and digital REPORT
society, allowing businesses
and individuals to operate This report provides an
effectively online, everywhere. estimation of Huawei’s
Technology security will need economic contribution to the
to improve and keep pace European Union (27 member
with an ever larger and more states), Iceland, Norway,
complex digital infrastructure. Switzerland and the United
Access to data will enable Kingdom. This is done using a
businesses to grow, and to standard analytical framework,
understand their markets known as an economic impact
5
European Commission (2020). Shaping Europe’s Digital Future. Available from https://ec.europa.eu/commission/presscorner/detail/
en/fs_20_278 [Accessed 4 July 2020]
6 6
European Commission (2020) Communication from the Commission to the European Parliament, The European Council, The
Council, The European Economic and Social Committee and the Committee of the Regions Europe’s moment: Repair and Prepare
for the Next Generation (COM/2020/456 final).The economic impact of Huawei in Europe
7The economic impact of Huawei in Europe
2. OUR METHODOLOGY
The impact of Huawei’s Fig. 1: Schematic of Huawei’s economic contribution to the
operations in Europe is European economy
assessed using a standard
analytical framework, known Huawei employs lots of
as an economic impact DIRECT staff. Its operations
assessment. This involves IMPACT generate GDP and tax
quantifying the impact of for the authorities.
three types of expenditure
associated with Huawei’s
activities in Europe (also
summarised in Fig. 1): It also spends money with suppliers who employ
• Direct impact relates to staff, generate GDP and pay taxes. They use other
suppliers in turn.
the operational expenditure INDIRECT
that Huawei undertakes in IMPACT
running its own activities. It
encompasses the economic
activity and employment
generated at its sites across
the EU, Iceland, Norway,
Switzerland and the
United Kingdom. Employees (including of the suppliers) spend
their wages in the wider economy, generating
• Indirect impact is the INDUCED more GDP, jobs and tax revenues.
economic activity and IMPACT
employment stimulated by
the supply chain spending
on European goods and
services by Huawei’s
European and global
operations. Added together, these three effects—direct,
indirect, induced—comprise the total economic
• Induced impact comprises
TOTAL impact of Huawei.
the wider economic IMPACT
benefits that arise from
the payments of wages by
Huawei and the businesses
in its supply chain to their
own employees, who spend In addition, Huawei’s activities and services have wider
their earnings in retail, effects, boosting activity elsewhere in the economy.
leisure and other outlets. These—such as R&D spillovers or training—represent
This impact also captures CATALYTIC the wider benefits that governments, consumers and
the economic activity IMPACT society derive.
stimulated in the supply
chains of those outlets.
8The economic impact of Huawei in Europe
The sum of these channels that output. GDP measures companies with a global
makes up the total of Huawei’s the total economic output footprint, such as Huawei, and
expenditure impacts. The of the country and is used to highlights the international
results are presented on a gross measure the rate of economic nature of its supply chain (as
basis, meaning they do not growth. GDP equals the sum illustrated in Fig. 2). A detailed
control for any displacement of GVA and taxes minus methodology discussion is in
of activity from Huawei’s subsidies on production. the Appendix to this report.
competitors or other firms.
Nor do they consider what the • Employment, as measured It should also be noted that
resources currently used in on a headcount basis. this report only assesses the
supporting Huawei’s economic economic activity that is
footprint could otherwise be • Tax revenue flowing to supported by the expenditure
productively diverted towards. national governments. Huawei makes in Europe.
Huawei’s economic contribution Of course, the products and
is measured using three metrics: While most economic impact services Huawei provides to
studies assess these effects businesses and customers also
• GDP—or more specifically, based only on spending play a role in each country’s
the gross value added that occurs within the digital infrastructure—and their
(GVA) contribution to GDP. country of interest, this provision will therefore have
This contribution to GDP is report goes further by an economic effect, potentially
defined as the value of the assessing the impact of increasing the overall
output produced, minus the Huawei’s global activities on productivity of Europe’s
expenditure on inputs of European economies. This economy. This report does not
bought-in goods and services is a more comprehensive attempt to quantify the scale
used up in the production of approach that is suited to of these dynamic impacts.
Fig. 2: Our Global Impact Model captures how Huawei’s contribution spans economies
Standard approach … … plus global linkages
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9The economic impact of Huawei in Europe
3. T
HE ECONOMIC IMPACT
OF HUAWEI
This chapter analyses 3.1 HUAWEI’S CONTRIBUTION TO GROSS DOMESTIC PRODUCT
Huawei’s economic
contribution in Europe, which Huawei has made an impact €1.8 billion in 2015 to €2.8
we assess through three on the European economy billion in 2019, a growth rate
channels. We first estimate in a variety of ways. of around 11.4% annually,
the direct contribution that Its contribution to GDP has in real terms. To put this in
Huawei makes through its grown sharply since 2015, from comparison, the comparable
European operations. We €8.1 billion in 2015 to €16.4 annual growth rate for the
then consider the money billion in 2019 (Fig. 3). This rise European economy for this
the company spends with its of €8.2 billion (in real terms) same period was around
Europe-based suppliers of corresponds to an average 2.0%, and the corresponding
goods and services, which growth per year of 19.1%.7 figure for the manufacturing
itself stimulates further sector was 2.1%. The hi-
spending in the wider supply Huawei’s direct contribution tech manufacturing sector
chain. The third channel to GDP is the value added and telecommunications
is the consumer spending through its own operations. equipment manufacturing
this activity supports in Between 2015 and 2019 sector both grew more quickly
the European market, Huawei contributed an over the period, at 5.2% and
funded by the wages paid average of €2.4 billion (in 4.4% per year respectively, in
to Huawei’s employees and real terms) per year to the real terms, but were still by
those employed along its European economy. This far outstripped by Huawei’s
supply chain. contribution grew from growth rate.8
The results are presented Fig. 3: Contribution to GDP by Huawei, 2015-19
firstly in aggregate, for € billion (2019 prices)
the whole of Europe, split
18
into separate sections for
Induced GDP €16.4 bn
GDP, employment and tax
16
contributions. We then move
Indirect GDP
on to break down the country-
14
by-country distribution of that Direct GDP €13.0 bn 6.3
impact in 2019. 12
€10.8 bn €11.1 bn
5.0
10
4.2 4.3
€8.1 bn
8
3.1 7.3
6 5.4
4.3 4.4
4
3.2
2
2.4 2.4 2.7 2.8
1.8
0
2015 2016 2017 2018 2019
Source: Oxford Economics
7
All figures throughout this report are presented in 2019 prices.
8
“Hi-tech” equipment includes computers and computer-related equipment, electronic components and boards, consumer
10 electronics, technical testing equipment, clocks and watches, photographic equipment, and optical equipment.The economic impact of Huawei in Europe
In conducting its operations, rate of 22.8%. The largest billion in wages; we also
Huawei purchased goods impact in 2019 was seen in the estimate that an additional
and services from a large and manufacturing sector, which €15.4 billion was paid to
complex global supply chain. accounted for 47% of Huawei’s workers who were employed in
The ‘indirect’ economic impact total indirect impact in 2019, firms along Huawei’s European
this has on the European equivalent to €3.4 billion supply chain.
economy relates to both the (see Fig. 4). The next largest
procurement spending of contributions were made in The induced GDP contribution
Huawei’s European operations the wholesale & retail sector has risen from €3.1 billion in
and the share of its global (€1.4 billion, or 19% of the 2015 to €6.3 billion in 2019,
procurement spending that total) and business services which is an average annual
goes to European suppliers.9 (€0.9 billion, or 13% of the growth rate of 19.2%. The
This amounted to €30.7 billion total).11 average contribution over
between 2015 and 2019, with that five-year period was
€9.1 billion, or 30% of the total, The final channel of economic €4.6 billion, in 2019 prices.
occurring in 2019.10 impact is generated by Of the €6.3 billion induced
workers spending the wages contribution to GDP in 2019,
This procurement resulted in they earned from Huawei 20% was generated in the
an average, annual indirect and in its supply chain. These rent & real estate sector. The
impact on the European wages are spent on goods next largest recipients were
economy of €4.9 billion, and services, including rents, the wholesale & retail sectors,
between 2015 and 2019. leisure and retail, and this manufacturing and the health,
This included a €7.3 billion spending adds value, supports care & education sector, all of
contribution to GDP in 2019, jobs and generates taxes in which accounted for around
up from €3.2 billion in 2015 those sectors too. Between 13% of the total.12
(in 2019 prices), representing 2015 and 2019, we estimate
a real average annual growth Huawei paid its staff €7.3
Fig. 4: Breakdown of indirect and induced GDP by sector, 2019
€ billion
4.5
Induced GDP Total Induced GDP: €6.3 billion
4.0
0.8 Indirect GDP Total Indirect GDP: €7.3 billion
3.5
3.0
2.5
2.0
2.0
0.8
3.4
1.5
0.6
1.0
1.4 1.2
0.8 1.2
0.5 0.9
0.2 0.2
0.0
Manufacturing Wholesale Business rental & Health, care Other
& retail services real estate & education
Source: Oxford Economics
9
For the purpose of analysis, we estimate only the global procurement spending in Huawei’s 12 largest European markets.
10
This estimate of procurement for the wider industry is based on data from the OECD.
11
“Business services” include some aimed at individuals as well as businesses, such as legal services, or travel and reservation services. 11
In addition, the induced channel includes business-to-business transactions further “up” the supply chain, not just the final round of
business-to-consumer transactions.
12
As tax-funded activity is excluded from the induced channel, the figure for health, care and education relates to private provision only.The economic impact of Huawei in Europe
3.2 CONTRIBUTION TO EMPLOYMENT
Huawei supports a large Fig. 5: Contribution to employment by Huawei, 2015-19
number of jobs in Europe, Headcount, thousands
both directly and through 250
its supply chain. In 2019, Induced jobs 224.3
Huawei directly employed Indirect jobs
13,800 workers across Europe 200
(see Figure 5). This was up Direct jobs
166.6 98.5
from 10,700 in 2015, a rise of 146.4 145.9
150
3,100 or 29% over five years.
119.1 74.1
The corresponding average
65.3 65.0
annual growth rate was 6.5%; 100
around five times the average 52.2
112.0
growth rate for employment
50 67.1 78.9
in Europe, which was around 68.0
56.3
1.3% per annum over the
same period. 10.7 13.2 13.8 13.6 13.8
0
2015 2016 2017 2018 2019
Source: Oxford Economics
Fig. 6: Breakdown of indirect and induced employment by sector, 2019
Headcount, thousands
60
Induced jobs Total Induced jobs: 98,500
50 11.9
Indirect jobs Total Indirect jobs: 112,000
40
18.2
30
32.6
11.0
43.4
20
28.8 19.7
10 18.0 5.0
11.6
4.8 5.3
0
Manufacturing Wholesale Business Health, care Transport Other
& retail services & education services
Source: Oxford Economics
12The economic impact of Huawei in Europe
Looking down through 3.3 CONTRIBUTION TO TAXES
Huawei’s supply chain, we
estimate 112,000 jobs were Huawei’s economic activity Huawei paid an estimated
supported indirectly in 2019, generates a range of tax €1.6 billion in direct taxes
up 98.9% from 56,300 in 2015. revenues for European to European authorities in
The average annual growth authorities, from corporation 2019.13 The taxation generated
rate in jobs supported via the tax paid directly by Huawei by the indirect and induced
indirect impact between 2015 to sales taxes generated by channels was even larger at
and 2019 was 18.8%. With a consumer spending. The total €2.5 billion each. Huawei’s
similar sectoral distribution amount of tax supported by direct taxes contribution
to Huawei’s indirect impact Huawei’s activities between alone is equivalent to the
on GDP, the majority of these 2015 and 2019 totalled around average salaries of around
jobs supported in 2019 were €25.0 billion, an average of 40,600 teachers; if the taxes
in Manufacturing (39% of the about €5.0 billion per year. The generated through the indirect
total, or 43,400), followed by yearly amount paid has nearly and induced channel are also
Wholesale & Retail (26% of the doubled from €3.5 billion in included the number rises to
total, or 28,800) and Business 2015 to €6.6 billion in 2019. around 151,200 teachers.14
Services (16% of the total, or (see Fig. 7)
18,000) (see Fig. 6).
Fig. 7: Contribution to taxes by Huawei, 2015-19
The number of jobs supported € billion (2019 prices)
by Huawei’s induced impact
8
on the European economy
has also grown substantially Induced tax
7
over our period of analysis. 6.6
In 2019, this totalled 98,500 Indirect tax
jobs, up from 52,200 in 2015, 6
Direct tax 5.5
which represent an average 2.5
annual growth rate of 17.2%. 5 4.6 4.7
More than half of these jobs 2.0
were in three sectors of the 4 1.7 1.7
3.5
economy: health, care &
education, wholesale & retail 3 1.3 2.5
and manufacturing. 1.8
1.5 1.5
2
Combining the above 1.1
channels, the total number of 1
jobs supported by Huawei has 1.5 1.5 1.7 1.6
1.2
risen from 119,100 in 2015 to
0
224,300 in 2019, a growth rate 2015 2016 2017 2018 2019
of 88.2% or 17.1% per annum. Source: Oxford Economics
Identifiable corporate and employee taxes as reported by Huawei.
13
Based on OECD data on lower secondary teachers for 21 countries and ONS data for secondary teachers for the United Kingdom. For
14
countries with no available data, we estimated teachers’ salaries using the relationship between teachers’ salaries and GDP per capita. 13The economic impact of Huawei in Europe
3.4 CONTRIBUTION ACROSS EUROPE
Huawei’s economic footprint Fig. 8: Huawei’s total contribution to Europe’s GDP by
spreads across every county country, 2019
in Europe. Germany was the
largest beneficiary in 2019, with
a €3.7 billion contribution. It was
followed by the United Kingdom,
with €3.6 billion, and France
with €1.8 billion (see Fig. 8). In
18 of the 31 countries analysed,
contributions to national GDP
were greater than €100 million.
Relative to the size of GDP,
Huawei’s largest impact was in
Hungary, where its contribution Total GVA impact
was equivalent to 0.49% of GDP (€ bn)
in 2019. This was followed by >3.0
Switzerland, with a contribution
equivalent to 0.22% of GDP and 1.0–3.0
the United Kingdom at 0.16%. 0.5–1.0
0.15–0.5
Huawei’s employment footprint
across Europe is distributed 0.0–0.15
differently to its GDP impact.
The top three beneficiaries in Fig. 9: Huawei’s total contribution to Europe’s employment
absolute terms were the United by country, 2019
Kingdom, with 51,100 jobs
supported in 2019, Germany
(44,800) and Hungary (21,500).
These three countries accounted
for more than half of all jobs
supported by Huawei in Europe
that year (Fig. 9).
In relative terms, Hungary
benefited most from Huawei’s
employment footprint. The
jobs supported by Huawei
accounted for 0.45% of Total jobs impact
Hungary’s total employment (000s)
in 2019. Switzerland was the
>25
second largest beneficiary,
where Huawei accounted for 10–25
0.22% of total employment. The 5.0–10
United Kingdom saw 0.16% of all
1.5–5.0
employment associated in some
way with Huawei’s operations. 0–1.5
14The economic impact of Huawei in Europe
15The economic impact of Huawei in Europe
4. H
UAWEI’S LONG-TERM
INVESTMENT IN R&D
In the previous chapter we 4.1 THE IMPORTANCE OF R&D IN EUROPE
assessed the contribution
Huawei made to the European R&D comprises a great diversity As such, the social benefits
economy in 2019, through of activities and disciplines, of investment in R&D can
its operations and supply ranging from basic (i.e. early outweigh the private benefits.15
chain spending. In fact, the stage) scientific pursuits in Recent research, looking at
company plays a much larger academia to specific, technical historical data from US firms,
role in the European economy problem solving in product suggests the wider social
by stimulating its long-term development. The knowledge benefits resulting from R&D
productive potential. Huawei’s gained through R&D is a were roughly four times higher
largescale investment in R&D cornerstone of innovation and a than the private benefits that
and its active collaboration key driver of economic growth. accrue to those making the
with stakeholders in investment. It also found that
industry and academia to The benefits of R&D are often spillovers were particularly
tackle the world’s most felt through the positive large during periods of rapid
pressing technological and “spillover effects” it creates technological innovation.16
communications challenges, in an economy, as businesses
builds a long-lasting platform and individuals that are not The EU’s digital strategy
for innovation-driven growth. involved in R&D investments recognises this importance
In this chapter we assess are still able to reap its of sustained and broad-
Huawei’s contribution to rewards. Such spillovers based R&D investment to its
European R&D. might occur through the international competitiveness.
sharing of knowledge through The European Commission’s
academia or skilled personnel, flagship R&D programme,
the dissemination of new Horizon Europe, has
technology through supply committed €100 billion of
chains, or the competitive public funding for digital
imitation and innovation research and innovation
of new technological between 2021 and 2027.17
breakthroughs. For these This builds on the success of
reasons, R&D investments the Commission’s precursor
lead to a general increase in programme, Horizon 2020,
the productive capabilities of which invested €80 billion to
an economy and provide a businesses and individuals
boost to long run growth and between 2014 and 2020.18
improved standards of living.
These initiatives will help to
counteract the sluggish trends
in R&D investment by European
organisations over the past two
decades. In 2018, total spending
on R&D as a percentage of GDP
for the EU-28 was 2.03% (Fig.
12), far below the levels seen in
South Korea, Japan, the USA
and China.
15
Social benefits are the sum of the private returns and the spillover effects on the economy.
16
Lucking, Bloom and Van Reenen (2020) Have R&D Spillovers Declined in the 21st Century? Available from: https://onlinelibrary.
wiley.com/doi/10.1111/1475-5890.12195 [Accessed 4 July 2020]
16 17
European Commission (2018) EU funding for Research and Innovation 2021-2027. Available from: https://ec.europa.eu/commission/
publications/research-and-innovation-including-horizon-europe-iter-and-euratom-legal-texts-and-factsheets_en [Accessed 3 July 2020]
18
Source: European Commission (2020). What is Horizon 2020. Available at: https://ec.europa.eu/programmes/horizon2020/what-
horizon-2020 [Accessed 3 July 2020]The economic impact of Huawei in Europe
Fig. 10: Total expenditure on R&D, percentage of GDP 2000-201819
% of GDP
5.0
EU-28 USA China South Korea Japan
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
0
0
0
0
0
0
0
0
0
20
0
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
Source: OECD
4.2 HUAWEI’S CONTRIBUTION TO EUROPEAN R&D
Huawei is amongst the world’s Fig. 11: Huawei’s investment on R&D, according to EU R&D
most prominent investors in Investment Scoreboard, 2014/15-2018/19
R&D. According to the 2019 € billion (Nominal prices)
EU Industrial R&D Investment
14
Scoreboard, published by the
European Commission, Huawei
invested €12.7 billion globally 12 12.7
in 2018/19 (see Fig. 11).20 After 11.3
ranking in the top 10 since 10
10.4
2016, this placed Huawei fifth
on the international R&D 8
scoreboard. Its investment 8.4
represents 1.5% of the total 6
global investment of the top
2,500 investing companies. 4 5.4
2
0
2014/15 2015/16 2016/17 2017/18 2018/19
Source: European Commision (EU Industrial Scoreboard 2015–2019). Data is intended to
refer to the fiscal year, though due to accounting practices, data may refer to accounts
published late in the previous year, or mid of the following year
19
OECD (2020) Gross domestic spending on R&D. Available from: https://data.oecd.org/rd/gross-domestic-spending-on-r-d.htm
[Accessed 4 July 2020] Chart refers to Gross Domestic Spending on R&D, defined as the total expenditure (current and capital) on
R&D within a country by resident companies, research institutes, universities and government laboratories. 17
20
European Commission (2019) The 2019 EU Industrial R&D Investment ScoreboardThe economic impact of Huawei in Europe
Huawei is also one of the In 2020, Huawei celebrates Huawei’s strategic emphasis
world’s largest patent holders. the 10-year anniversary of its on R&D means it can play an
As of the end of 2019, it held Huawei Innovation Research important role in helping the
over 80,000 valid patents Program. In that time, the European Commission realise
worldwide, with more than programme has invested its own digital strategy over
3,500 applications registered more than US $1 billion with the coming years. Huawei is
in the European Patent Office over 100 universities and actively engaged in several
in 2019, more than any other research institutions around Horizon 2020 projects, in a
company. Its investment in the world.23 As well as funding wide array of research areas
European R&D was evidenced opportunities, it provides long- such as 5G, cloud computing
that year by a rapid escalation term research partnerships and self-driving cars.
in patent activity, with to universities and research Through these, and further
European Patent applications institutes engaged in fields R&D initiatives in the future,
up by more than 40% from the such as communication Huawei’s investment in Europe
year before (see Fig. 12). technology and computer presents opportunities for
science engineering. In Europe, long-term growth.
Huawei is particularly active its collaborative relationship
in the field of 5G, evidenced with industry and academia
by its cumulative US $4 billion is facilitated through its 23
R&D investment in this space research sites, which are
between 2009 and 2019. 21 managed by the Huawei
Huawei’s standard-essential European Research Institute in
patents for 5G account for Leuven, Belgium.24
20% of the world’s total, and
the 21,000 5G-related patents
over the last decade are the
most in the industry.22
Fig. 12: Huawei’s patent applications to European Patent
Office, 2015-2019
Number of patents
4,000
Rank = 1
3,500
3,524
3,000
Rank = 2
Rank = 2 Rank = 1
2,500
2,485
Rank = 4 2,390 2,398
2,000
1,953
1,500
1,000
500
0
2015 2016 2017 2018 2019
Source: European Patent Office
21
Source: Huawei
22
A standard-essential patent is “a patent that is necessarily practiced by any implementation of a technology standard”. European
18 Commission (2017) Licensing Terms of Standard Essential Patents p.8.
23
Source: Huawei
24
Huawei (2020) Innovation for Europe Delivering on EU plans for our digital future. Available from https://www.huawei.eu/file-
download/download/public/2541 [Accessed 09 June 2020]The economic impact of Huawei in Europe
19The economic impact of Huawei in Europe
APPENDIX: METHODOLOGY
METHODOLOGY FOR The model used captures The induced sales figures for
CAPTURING DIRECT IMPACTS the impact of transactions each year were worked in two
between, as well as within, stages. The impact relating
Estimates of the direct each European economy. In to spending by employees
impact of Huawei—including addition, a “rest of the world” in Huawei’s supply chain
its contribution to GDP, sector is included, to capture was worked out alongside
jobs supported, and taxes the impact of supply chains the indirect impact, taking
paid by the businesses and flowing out of Europe but then Huawei’s procurement as the
employees—were largely based back in. starting point. This calculation
on information provided directly used an extended part of the
by the company, and from third Purchases by Huawei’s input-output model, which
parties licensed to distribute worldwide operations, from takes into account the pattern
corporate financial information. suppliers based in 12 key of European household
European markets, were consumption as well as intra-
provided by Huawei.26 This industry transactions. The
METHODOLOGY FOR procurement spending impact relating to spending
CAPTURING THE INDIRECT was split into a pattern of by Huawei’s own employees
AND INDUCED IMPACTS purchases, by type of product was modelled separately, using
and location of supplier, taking estimates of their spending
To estimate Huawei’s indirect into account information power—the company wage
and induced GDP impacts, in the multi-country input- bill net of employees’ tax and
Oxford Economics utilised output table for the “hi-tech social security contributions—
an input-output model of the goods manufacturing” sector, as the starting point. The two
European economy, using the of which Huawei is a part. estimates of induced sales, on
latest OECD Inter-Country However, as purchases from an industry-by-industry basis,
Input-Output Table as its European suppliers based were added together and the
starting point.25 in the other 19 countries induced GDP and jobs impacts
could not be captured, the estimated from there.
An input-output model gives a indirect impacts arrived at
snapshot of an economy at any in this study are likely to Finally, tax contributions were
point in time. The model shows underestimate the true values estimated taking into account
the major spending flows from and should therefore be seen sales, GDP and employment
“final demand” (i.e. consumer as conservative estimates. by industrial sector, and
spending, government applying various appropriate
spending, investment, and Each year’s data was fed tax-to-expenditure and tax-to-
exports to the rest of the world); into the model to arrive at income ratios, sourced from
intermediate spending patterns total sales throughout the the OECD, Eurostat and other
(i.e. what each sector buys from European supply chain, by official datasets.
every other sector – the supply sector of supplier, for the
chain in other words); how year concerned. The indirect
much of that spending stays contribution to GDP was
within the economy; and the worked out from there, using
distribution of income between GDP-to-sales ratios for each
employment income and industry, taken from the
other income (mainly profits). OECD I-O table. The indirect
In essence, an input-output employment impact was
model is a table which shows calculated in turn from there,
who buys what from whom in using GDP-to-jobs ratios for
the economy. each industry for that year.27
25
https://www.oecd.org/sti/ind/inter-country-input-output-tables.htm
26
The 12 markets were: Denmark, Finland, France, Germany, Hungary, Italy, the Netherlands, Poland, Spain, Sweden, Switzerland and the UK.
20 27
Based on GDP and employment data also sourced from the OECD.The economic impact of Huawei in Europe
OXFORD ECONOMICS
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and assess their economic, social and assessments and projections shown.
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