On behalf of the Network for the Future of Industry (Netzwerk Zukunft der Industrie e.V.), Prognos AG has presented a study on Germany’s industrial resilience and strategic sovereignty. The study highlights which segments of the value chain in four key industries vital to our current and future prosperity—automotive, energy transition technologies, microelectronics, and defense—are dominated by countries that, as trading partners, could exploit their dominant position for political gain either now or in the near future.

We are dangerously dependent on raw materials, their processing, and trade

The study concludes:

When it comes to raw materials, Germany and Europe are dependent on China for more than 90 percent of their supply in some cases, such as rare earths or graphite.

In the global division of labor, Germany and Europe have lost many key capabilities to other countries, particularly China, such as the extraction of raw material deposits and the processing of raw materials into industrial-grade materials.

There is a lack of capacity and manufacturing expertise for economically or strategically critical links in the value chain—from the extraction of raw materials to the production of specific intermediate products; for example,

• China possesses outstanding expertise in the construction of manufacturing facilities for lithium-ion batteries for electric vehicles.
• Although Europe consumes about 20 percent of the microchips manufactured globally, only about 10 percent of these chips are produced here. There is an extremely high level of dependence on memory chips and state-of-the-art “leading-edge chips,” which are required for AI applications, among other things.
• Over 90 percent of permanent magnets for wind power are imported from China. Chinese companies often act as general contractors and hold an outstanding market position in this sector as well (including gigafactories for battery cells).

A coordinated strategy is needed across the entire value chain

In a joint statement, IG Metall and the BDI note that Germany remains highly vulnerable without coordination of the various activities of the government, companies, and their employees. “The security and prosperity of our country stand or fall on market-based access to raw materials and processing capacities, to intermediate and final products, and to reliable supply and production chains.”

In a joint statement, the industry association and the labor union called on the federal government and the EU to adopt an ambitious economic policy strategy:

1. Based on a thorough assessment of critical dependencies, a transparent process must be initiated to reduce these dependencies across the entire value chain. Key objectives require political decisions. Since markets cannot accurately “price in” security risks in advance, they alone cannot provide comprehensive security solutions.
2. To concretely shape the security policy requirement for greater resilience across the entire economy, we need a multi-year work program with a clear strategy for trade, finance, and economic policy. This must be based on coordination between the government and stakeholders. It would be advisable for the government to engage in structured consultation with the business community in areas of critical dependencies.
3. The coordination of measures between the EU and the member states must be significantly improved across the various stakeholders. General framework regulations at the EU level without clear funding through EU programs—or with only partial national funding—will not lead to satisfactory results.