How Italy can relaunch itself in Ai, biotech, space and strategic sectors

Three moves can serve to reverse the course: the first is to create a National Fund for AI on the French 'Tibi' or German 'Zukunftsfonds' model. It should be public-private, oriented towards scalable projects and equipped with tax incentives and de-risking mechanisms to attract institutional capital.

The second pillar is talent. We need a national strategy to attract and bring back to Italy the best Italian researchers abroad, offering competitive packages in universities, start-ups and research centres. Accelerators specialised in AI - from Milan to Turin - must be strengthened, as must training in schools and universities.

Finally, the infrastructure issue: more investment is needed in public clouds, data repositories interoperable with the European space, and vouchers for the adoption of AI solutions in SMEs and public administration.

Italy has excellent brains, top laboratories and a high scientific output, but fails to transform these assets into economic and industrial power. The Covid-19 had turned the spotlight on Italy's potential: biologists, doctors and geneticists as protagonists in the scientific and clinical response to the emergency. But the wave soon deflated. Despite an excellent performance in terms of publications, the number of patents remains modest. The sector suffers from a low level of innovation, and private investment is still half that of France and four times less than in Germany.

The legislation is among the most restrictive in Europe: Italy has placed very strict limits on gene therapy on humans, genetic editing in agriculture and the cultivation of GMOs. The result? The best laboratories seek alternative routes, and start-ups migrate to more open countries, such as the US or the UK.

What to do? First: double or triple public investment, focusing on high-potential sectors. The first stages of the chain - university spin-offs, biotech start-ups - should be financed through matching grants and public-private co-investment funds, inspired by the British Patent Box.

Second: commercialise research, which today is still too anchored to the academic phase. Reform is needed in universities, rewarding those who manage to turn discoveries into patents, licences or businesses. The public tendering system should introduce result-based mechanisms, pushing the public sector to become an engine of innovation.

Thirdly, to intervene in the regulatory framework with the creation of 'Innovation Zones' around the most promising districts where new applications can be tested and marketed under a simplified regime. But the decisive step would be to open a bipartisan political table to overcome the most obsolete bans on GMOs and genome editing, balancing ethical concerns with the economic and health benefits of innovation.

Second in Europe for the number of microelectronic companies, Italy boasts a robust industrial fabric on the 'front-end' side, powered by SMEs, joint ventures (such as STMicroelectronics) and research centres. However, there is a lack of major national players in the strategic nodes of the global value chain: chips below 10 nanometres, fabless companies, EDA software, advanced packaging.

The government has initiated countermeasures: 4 billion allocated with the PNRR, adhesion to the European Chips Act and the birth of the Chips.IT Foundation at the University of Pavia. Italy also participates in the main international fora - from the World Semiconductor Council to the Trade and Technology Council - but still produces few patents (3 times fewer than France, 5 compared to Germany) and fails to retain innovation on the ground.

The re-launch comes from three fronts. Firstly, creating a national 'Catalyst Fund' to support the scale-up of high-potential SMEs in key segments (from automotive to aerospace), involving large Italian companies such as Leonardo or Enel in co-investment or guaranteed procurement logics.

Second: strengthen university poles of excellence (Pavia, Milan Polytechnic, Turin) with targeted training programmes in microelectronics and specialised incubators, linked to the European design platform envisaged by the Chips Act.

Third: attract foreign investors in segments that are currently absent, such as EDA or testing, by offering preferential access to Italian funds, infrastructure, and industrial buyers.

Italy has left a historical mark in space: it was the fifth nation in the world to launch a satellite (San Marco I) and contributed to the International Space Station. On the industrial front, the joint venture between Leonardo and Thales has created the largest satellite manufacturer in continental Europe. On the scientific side, the country actively participates in space missions, invests in the Galileo system and joins international alliances such as the Artemis Agreements.

However, the present shows shadows: 88% of funds come from the State, with a private contribution that is still modest compared to France, Germany or the United Kingdom, where the private sector covers over 50% of space expenditure. Italy also suffers from the absence of its own orbital launch site and a limited military capacity on advanced technologies such as directed energy weapons or jamming systems.

The relaunch passes through three levers. First, support space defence start-ups with financial incentives, bureaucratic simplifications and stable public contracts. Fundamental is the reduction of exorbitant insurance costs that hinder the growth of start-ups.

Second, strengthen research on dual-use technologies, in synergy with the European strategy and NATO programmes such as DIANA.

Third, to play a leading role in the development of IRIS², the European alternative to Starlink: incentives and technology transfers are needed to enable Leonardo and Italian SMEs to enter the European satellite connectivity value chain. Only in this way can Italy regain a place among the protagonists of the new space race.

Italy has all the cards to be one of Europe's leading players in the quantum world. Centres such as the Istituto Nazionale di Ricerca Metrologica (INRIM), the CNR and numerous universities are leading projects. The National Cybersecurity Agency has already begun to integrate these systems into its security protocols.

But the good news ends there. The investment gap is dramatic: public funds are 12% of France's, less than 8% of Germany's, and just 6% of the UK's. The private ecosystem is almost non-existent, with venture capital still absent and no mature companies able to compete in the production of quantum hardware. There is a lack of national infrastructure for the quantum cloud, and even access to existing machines involves long waits.

There are three priorities. First, more public resources are needed to create a national quantum innovation hub, with cloud access, hardware development and technology transfer.

Second, the private sector must be involved in mixed consortia to reduce investment risk and promote industrial spin-offs, following the German example of the 'Quantum Flagship'.

Thirdly, it is essential to build skills chains: masters, doctorates, industrial internships. Without a unified strategy, Italy will continue to train talent that then feeds research in other countries.

The fragmentation of the current Italian innovation ecosystem risks thwarting talent, resources and ambitions. Initiatives exist - from the PNRR to CDP Venture, from ministerial funds to the Innovation Fund - but they often operate in the absence of a unified vision. If Italy really wants to play a leading role in the global race for critical technologies, it needs a solid, permanent and long-term-oriented steering committee.

The example to be followed is the German SPRIND: a national agency for frontier innovation, autonomous in its methods and ambitious in its goals, capable of funding high-risk, high-impact projects, with streamlined procedures and strong integration between research, business and defence. This is a model that could be replicated with the creation of an Italian Emerging Technology Agency (IETA), capable of coordinating the development of AI, biotech, semiconductors, space and quantum with appropriate instruments and stable resources.

In the meantime, the government could start by strengthening CDP's Deep-Tech division, endowing it with a strategic mission and operational autonomy, and then evolving it into an independent entity. Because the challenge is not only technological: it is institutional. And winning it means deciding today where we want Italy to be in the next twenty years.

(*) Harvard Belfer Center researcher and former BCG Consultant