Inside IPC: Europe is Racing to Build Defense Autonomy with Alison James

A remarkable transformation is sweeping through European defense policy, creating new opportunities and challenges for the electronics industry. In this revealing conversation with Alison James, Senior Director Europe, Government Relations at IPC, we explore the European Union's dramatic shift in defense strategy, which she describes as a genuine "sea change" in approach.

The EU has moved with unprecedented speed to modify debt ceiling rules, creating essential "fiscal space" for member states to increase defense investments. This comes alongside proposals for simplification and joint procurement programs expected by June - lightning fast by European standards. What's driving this urgency? Growing recognition of critical vulnerabilities in Europe's electronics supply chain at a time when technology increasingly determines military capability.

IPC's timely new report reveals that electronics will comprise around 25% of defense systems' value by 2035. This data-rich study highlights why Europe must strengthen its electronics industrial base to achieve even modest autonomy in defense production. The goal isn't complete manufacturing independence but establishing what Alison calls a "minimum autonomy threshold" to address the most critical vulnerabilities.

For electronics manufacturers, particularly EMS companies, many deriving 10-30% of business from defense contracts, these developments present significant opportunities alongside challenges. While European companies maintain strong relationships with American partners, uncertainty around tariffs creates planning anxiety. As Alison astutely notes, "Businesses need certainty," something in short supply during this geopolitical realignment.

Looking ahead, IPC continues building coalitions across the European electronics ecosystem to advocate with one voice for policies supporting technological sovereignty. Understanding the "silicon system" beneath emerging technologies like AI becomes increasingly crucial as Europe reconsiders its place in the global technology landscape. Join us for this illuminating discussion on how defense priorities are reshaping the electronics industry's future.

EMS@C-Level Live at APEX is sponsored by global inspection leaders Koh Young (https://www.kohyoung.com) and Creative Electron (https://creativeelectron.com)

EMS@C-Level is hosted by global inspection leaders Koh Young (https://www.kohyoung.com) and Global Electronics Association (https://www.electronics.org)

You can see video versions of all of the EMS@C-Level pods on our YouTube playlist.

Transcript

Introduction with Alison James

Philip Stoten 0:08

Hello, I'm Philip Stoughton. I'm here on the last day of APEX, we're on the CoYoung booth and I'm talking to Alison James from IPC. Alison, great to see you again. Thanks for stopping by to chat. Last time we spoke, I think it was at Electronica, and I thought, okay, it's only a few months, not much will have happened. But a lot has happened. A lot has happened in politics. Let's focus initially on what's been happening in Europe and this kind of shift in thinking around defense expenditure, the European Union raising the rule or changing the rules with respect to debt ceilings. That's a big deal.

Alison James, Senior Director Europe, Government Relations at IPC 0:48

Phil, it's a very big deal. So we met in November and a lot of this has taken place over the last two weeks.

Philip Stoten 0:56

Almost on a weekly and a monthly basis.

Alison James, Senior Director Europe, Government Relations at IPC 0:58

Something else is happening, because we're in this, you know different time and geopolitical times. But defense, there's been a sea change. It's been coming for a while, but obviously the situation has been made clearer in the last weeks that Europe needs to be more self-sufficient, and then we could see that when they need to, the European Union can rally pretty quickly, and they did. They've recognized, of course, we need to be more self-sufficient in defense. So indeed, this week we need to be more self-sufficient in defense.

Alison James, Senior Director Europe, Government Relations at IPC 1:27

So indeed, this week all of these proposals have been made and we still have to see the implementation and how the focus will be on implementation. The Council from memory should be meeting today, so there should be discussions in the European Council. But it's a huge move for Europe. It really is. As you said, it's allowing the member states to have the fiscal space that they can invest in defence.

Alison James, Senior Director Europe, Government Relations at IPC 1:48

They couldn't do that previously. We've got these strict competition rules. There's also a directional white paper looking to the future of European defence. We'll be again wanting to work with that. But this is yeah, it's really a sea change in Europe, recognising that in critical areas we need more autonomy. We've heard that before, we've been talking about it at a European level, but now we're starting to see in key areas, the implementation.

IPC's Defense Report and Electronics Value

Alison James, Senior Director Europe, Government Relations at IPC 2:13

So actually we released a report this week on defense, knowing that the white paper was coming. You know that last year we issued a report on securing the European Union's electronics ecosystem and in that we talked about all of the critical infrastructure, the areas in which Europe has vulnerabilities in the electronic supply chain. So that was across eight critical sectors. And this time we honed in on the defense sector specifically and we issued so really it was a data study with Décision again Decision our partner, the French consultancy, who work a lot for the European Commission, and it's a really good report. It's giving a data-rich report on the value of electronics where we'll be by 2035, 25% of the value of defense systems will be electronics.

Philip Stoten 3:01

Yeah, I was going to say it's a huge. It's actually a huge electronics-led industry. I mean, technology is driving most of the way things are done.

Alison James, Senior Director Europe, Government Relations at IPC 3:11

Yeah, it is, and yet we continue to have many vulnerabilities that we know in Europe in the electronics value chain. So I think the message again is, as we look to build our defence industrial base, let's make sure that we're taking account of our own electronics base's. Make sure that we're taking account of our own electronics base and making sure that we're building that up so that we can meet our own needs, because it's a vulnerability.

Fast-Tracking European Defense Programs

Philip Stoten 3:31

Yeah, in the short term, there seems to be a bit of a renegotiation of the US-European relationship and that's definitely having an impact, not just from an EU standpoint, but country by country, and we're seeing countries increase their defence budget, kind of one by one, so they're all having a response to this. So it looks like it's going to happen pretty quickly in terms of defence requirements, in terms of budgets increasing and orders being placed, in terms of budgets increasing and orders being placed With respect to the European Union, the European government. Will that be able to keep pace? There's kind of a sense that things go a little bit slower. I mean, I know things happen here much faster because one signature and it's done. But there's a requirement for due diligence, but there's also a requirement to move quite quickly.

Alison James, Senior Director Europe, Government Relations at IPC 4:28

So I think in the defence area they're really moving quickly. You know, we had a little bit of a precedent with the European Chips Act which by European standards was fast. There's also a downside to that, because with the Chips Act there was no real industry consultation before that happened.

Philip Stoten 4:43

So there's a flip side In the defense area.

Alison James, Senior Director Europe, Government Relations at IPC 4:45

They've also moved very, very quickly. We were able to get our paper in during the process, which was very good, but they're speeding things up.

Alison James, Senior Director Europe, Government Relations at IPC 4:53

So already by June there will be another proposal for simplification and omnibus for the defense area. They've got that triggering of enabling fiscal space would happen immediately. And then there's another program which enables joint procurement amongst member states and again proposals would be coming in quickly and that would run for a couple of years. So these are fast-tracked. They're really fast-tracked programs so we can move quickly when we need to in Europe. But it's quite unusual, and for Europe this is fast, this is a fast enabling of resources.

EMS Companies and Tariff Uncertainty

Philip Stoten 5:30

We've seen quite a few European EMS companies here, which I think has been really interesting, and quite a few of them taking part in the EMS Leadership Summit. That was nice to see. A lot of them are very positive about, uh, about this news with respect to defense. A lot of them have, you know, somewhere between 10 and 30 percent of their business perhaps in the defense sector. So, um, I think that's interesting, but it it's good to see, at least on a company to company level, that level. There's really good relationships between the US and Europe and European companies are still looking to the Americas as an investment opportunity. They just can't decide where at the moment because they're not sure where the tariffs are going to fall.

Alison James, Senior Director Europe, Government Relations at IPC 6:14

It's created a lot of uncertainty. The trade environment now is. Businesses need certainty right and this is what everybody's finding right now with tariffs also, with regulation and simplification, it's a lack. Of None of this can happen overnight. Industrial bases are built around tariff structures and existing tariff structures, so changing that or not knowing if it's changing has massive impact. We feel it in Europe also with the tariffs on steel and aluminium and the European Union's response to that.

Alison James, Senior Director Europe, Government Relations at IPC 6:46

I think which has been delayed Again. Uncertainty this is the climate that we're in at the moment it's not easy for businesses.

Philip Stoten 6:53

Yeah, I mean it's disruptive, but I was talking to a few EMS guys and they said to me hasn't it always been so? Haven't we always had disruption in this industry? This is special, hasn't it always been so? Haven't we always had disruption in this industry? But I think this is special. Yeah, this is a bit more than we're used to. With respect to tariffs coming out of Europe, is that something that's an EU decision rather than member states?

Alison James, Senior Director Europe, Government Relations at IPC 7:16

The member states still obviously have. So the European Union negotiates on behalf of the member states but obviously with the input of member states. So there can be If the member states don't agree then obviously there's no mandate to do that. So I know there have been issues now with the tariffs, also around alcohol and exports to the US and some member states obviously are big exporters.

Philip Stoten 7:36

Yeah, I'm so differently about it. They do.

Alison James, Senior Director Europe, Government Relations at IPC 7:38

And that often happens in the trade environment that the European Union can take a decision, but then the country that the EU is negotiating with can have separate relations with each member state. It can be divide and conquer.

Philip Stoten 7:50

Because they have different agendas. They do have different agendas and different export markets and products. Before we go, let's have a little bit of a run through of the IPC activity with respect to government relations that you have planned for this year.

Alison James, Senior Director Europe, Government Relations at IPC 8:05

So Currently there's a lot happening around defense with the release of our white paper and our industry paper this week.

Alison James, Senior Director Europe, Government Relations at IPC 8:13

We released it on Monday but that's a continuation of what we've been working on for a number of years now, which is really having this understanding in the European Union that we need to build up the electronics base. So that continues. That takes time. You know I think we talked about it in November that we've been working with a coalition of electronics associations and companies across the European Union because we all need to be speaking with one voice and that's important because we start coming up to a revision of the European Chips.

Philip Stoten 8:42

Act.

Alison James, Senior Director Europe, Government Relations at IPC 8:43

More and more issues are happening around technological sovereignty. There's more stock-taking. We were talking off-camera about AI earlier and, of course, there was the issue with importing AI. Chips divide and conquer again amongst member states. So what if you're set on AI? So many things are happening. That's increasing stock taking that we need a strong technology base in Europe. What happens is there's not always an understanding that technology means electronics underneath that. So there's really a lot of work to continue to do to make the case for a resilient, not making everything in Europe, but making it critical so having a minimum autonomy threshold of the supply chain, and that's what we're talking about.

Philip Stoten 9:25

Yeah, and that term silicon system is really important for people to understand. And when they look at AI, I think people look at AI as a software solution, but the hardware, the energy provision there's a lot behind that. One of the challenges for you is the fact that you've got to turn on a dime. You've got to be super agile, you've got to respond really quickly because things are just moving so fast now. Do you have the structure and the team there to be able to do that?

Alison James, Senior Director Europe, Government Relations at IPC 9:58

Yeah, we do, we do and we also have the knowledge and expertise of all of our companies. So, we're working in very close collaboration with the experts and in the companies. We know the policy environment, we know what to do with that, but the expertise comes from the companies and IPC, of course, is growing in Europe. We have a larger staff, so I think we have a very good team in place and a very good company structure in place in Europe.

Philip Stoten 10:26

I think what's really nice is you have the great team in Europe, but you have access to the rest of the team. So through the work you're doing with Chris Mitchell and with Richard, you're able to get a viewpoint on what's going on elsewhere, and that actually is hugely valuable.

Alison James, Senior Director Europe, Government Relations at IPC 10:37

That is hugely valuable because, knowing from our colleagues and from Chris and Richard he said what's happening in the US, what's happening in Asia, that really feeds the discussions that we have in Europe. Because we can say, on an evidence basis, we know what's happening in the supply chain we know where the vulnerabilities are yeah, yeah, absolutely.

Philip Stoten 10:54

We talk all the time, we work together, absolutely that enriches the the debate yeah, it does absolutely, allison. Thanks so much for stopping by to chat always a pleasure, and we'll be talking again soon and the world will have completely changed it will have give it another two weeks.

Alison James, Senior Director Europe, Government Relations at IPC 11:10

Thanks so much.

Philip Stoten 11:10

Thank you.