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Business Finland rolls out 5G industrial initiative

Finland is incentivising technology businesses to invest in 5G research and development to create export opportunities

The Finnish government has approved a plan to roll out a multibillion-euro initiative to spur the development of 5G technologies for export.

Business Finland’s 5G Project Initiative (5G-PI) has already attracted private partners such as Nokia Corporation. It is targeting the development of advanced innovations, including new 5G technologies for mobile data connections that can deliver faster transfer rates to consumers.

Nokia is providing an initial €50m to the project, and Business Finland’s opening capital contribution is €20m. Technology Industries of Finland (TIF/ Teknologiateollisuus), a central organisation for IT enterprises in the country, has also joined 5G-PI as a senior industry partner.

The 5G-PI project is being structured to focus on industrial 5G and serve as a hub for specialised research and development (R&D). To this end, Business Finland is looking to use the R&D value in the 5G-PI vehicle to attract the cream of Finland’s IT-5G innovators and talent to develop next-generation systems that can drive Finnish 5G exports in the future.

“Our focus is on industrial 5G,” said Pertti Lukander, Finland lead at Nokia Bell Labs. “We will create networks to meet the needs of mines, factories, ports and airports. As part of the initiative, we will develop hardware and software capabilities to suit industrial environments.”

Apart from Nokia, the envisaged industrial 5G ecosystem will include Finnish technology firms and innovation centres attached to institutes of higher education.

The key priority is to convert the fruits of indigenous innovation in the industrial 5G domain into a multibillion-euro export product that will add a stronger dynamic to Finland’s economic growth.

The roll-out of 5G-PI was preceded by an open invitation competition organised by Business Finland in January 2021. The competition, directed at leading 5G-IT innovators, invited Finland’s multinational companies to tackle significant future challenges, nudging company chiefs in the direction of increasing research, development and innovation (RDI) investments in Finland.

Finnish companies responded to the challenge with industrial 5G innovations, applications and solutions ranging from enhancing safety within Finland’s mining and construction activities, to improving efficiencies in the workplace and the environment.

Nokia’s offering within the framework of the competition concentrated on creating functional networks that can be installed in mine galleries to enable machinery and equipment to operate automatically, said Lukander.

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“Industrial 5G innovations can improve efficiency and occupational safety at work and in mines,” he added. “Innovations add efficiencies to the use of natural resources by improving the precision of that work through automation.”

Lukander said Nokia’s long-term vision is to develop a model where the company takes the lead in creating ecosystems that can deliver next-generation innovations.

“Our hope is that within two to three years, our solutions can be expanded to cover an entire business sector, whether that be mines, factory environments or ports elsewhere in the world to create and provide efficiencies and joint automation solutions,” he said. “That is the big vision.”

5G-PI has the potential to help Finland achieve important targets by growing RDI investments to 4% of gross domestic product as part of the government’s industrial and digitisation reform programmes, said Heikki Kuutti Uusitalo, head of innovation policy at TIF.

“Big corporations employ a lot of people and engage in large-scale innovation activities,” he said. “Because of the procurement, purchasing power and collaboration of leading companies in the Business Finland initiative, part of the funding they will receive will also pass down to local small to medium-sized enterprises, institutes of higher education and research institutions.”

The financial investments earmarked by Business Finland under the 5G-PI programme are so substantial that large companies will be interested in competing for the funding, said Uusitalo.

“This is not necessarily the case with smaller project funding rounds,” he added. “It is possible that the costs of application and administration would result in investments being overlooked entirely. However, these small-scale funding interventions have a significant impact on other companies. In this sense, the initiative for the leading companies is a win-win situation.”

Nokia’s scaled-up RDI activities within the industrial 5G domain means the company will need to recruit a significant amount of new engineering skills and software talent.  

Finland as a tech hub

Finland’s capacity to drive growth in the industrial 5G, digital, artificial intelligence (AI) and robotics segments is linked to parallel initiatives to enhance the country’s reputation as a European technology hub for foreign direct inward investments. 

Recent changes to Finland’s corporate tax system will enable foreign companies operating in the country to take advantage of new tax relief incentives aimed at lowering the costs of research and development projects, while strengthening employee engagement through tax-free share schemes.

The tax changes will help to bolster R&D investments by companies, indigenous and foreign, in a post-Covid-19 pandemic landscape, said Antti Aumo, head of Invest in Finland, the industrial development arm of Business Finland. 

“For the national economy to recover, companies need to renew their operations during and after the pandemic,” he said. “Research and development activities are a key component for this. The new tax laws support companies’ innovation projects by bringing tax relief to joint research and development efforts. In addition, the tax-free share system will help strengthen the commitment of their skilled workforces.”

Despite the Nordic states’ perceived international reputation for being highly taxed and expensive locations for foreign companies to operate from, Finland’s 20% corporate tax rate is the lowest of any country in the region and among the most moderate across the European Union (EU).

Finland’s new corporate tax amendments law, introduced in January 2021, offers companies a 150% tax deduction for joint R&D projects during the period 2021-2025. This means companies can qualify for an additional tax deduction of 50%, on top of the existing 100% discount, on the costs of research and innovation projects carried out in collaboration with Finnish universities and research institutes.

The 150% so-called “super deduction” is available for all companies operating in Finland, both native and international. Importantly, the tax relief does not constitute state aid under EU rules, said Miika Wires, client director at the Finnish Tax Administration (Vero). 

“The new 50% additional tax deduction is significant, even on a global scale,” said Wires. “Lots of countries around the world offer some form of research and development incentives, but they vary greatly. This makes them rather challenging to benchmark. Compared to our Nordic neighbours, Finland is doing very well in this regard.”

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