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It is tempting to dwell on the glories of the past; to walk past Turin’s ubiquitous symbols of political and industrial power and imagine them in their heyday. Seductive as it may be, the times they are a-changin’. Sweatshops find new purpose as centres of retail and events; industrial workshops become start-up incubators; warehouses hubs for research and development. Behind the very facade of those symbols, the currents of industrial transformation are flowing. 

Manufacturing remains the beating heart of Piemonte’s economy and still accounts for a quarter of the regional output, employing 553,000 people. However, some of the major producers that made the fortunes of Piemonte’s economy have been weakening, most obviously Fiat, now part of the Stellantis group, whose outlook on its local operations remains uncertain. 

Those currents are flowing at a deeper level too. With digitisation sealing the supremacy of electronics over mechanics, local manufacturers, who have pioneered and mastered the mechanical, must now swap bolts for microchips, or find ways to integrate the two. 

After years of laissez-faire — which ultimately meant the offshoring of most production to low-cost hubs — manufacturing is back at the top of the European political agenda. With its industrial heritage, talent and capital pool, as well as infrastructure endowment, Piemonte has embarked on a journey to embrace the perks and perils of this industrial transformation and thus succeed in fast-growing, cutting-edge sectors that can generate new growth and employment. 

Lab for industrial transformation

The region has become a laboratory for industrial transition. Arguably the most ambitious initiative in this direction is the creation of an institute founded in Turin by the Italian government to perform transformative application-oriented research in artificial intelligence: Artificial Intelligence for Industry, or AI4I. 

“The fact that AI4I is setting up in Turin has a symbolic value for a research centre that aims to flesh out how AI is transforming manufacturing,” says Fabio Pammolli, AI4I president. Launched in May, the institute is in the process of setting up with the ambition of recruiting international talent and performing cutting-edge research. “Our first challenge is to adopt a model oriented to address industrial problems,” says Mr Pammolli.

AI4I plugs into a higher education and research landscape that has traditionally been one of the strengths of Piemonte’s ecosystem. There are four main universities in the region, with more than 131,000 enrolled students in the 2022/2023 academic year, and around 115,000 in Turin alone. In a world thirsty for graduates in science, technology, engineering and mathematics (Stem), around half of the region’s students are studying Stem subjects, according to figures from Sisform, the observatory on the regional education system. 

The region also features 200 public and private research and development (R&D) centres and seven innovation clusters. It all comes at a price point that is noteworthy for a G7 economy. According to fDi Benchmark,  senior engineers in Turin earn on average 10.7% less than their peers in Barcelona, 16% less than in Lyon, just across the Alps, 42% less than in Stuttgart and 15% more than in Katowice. The region also features 200 public and private research and development (R&D) centres and seven innovation clusters. 

Capital availability

Piemonte also has a deep pool of capital. Its banking system is particularly strong and features two of Italy’s three largest bank foundations, Fondazione Compagnia di San Paolo (FCSP) and Fondazione Cassa di Risparmio di Torino (CRT). Set up as philanthropic institutions to foster regional development, these foundations play a key role in the support of the regional economy and society. FCSP had assets under management (AUM) worth €8.3bn at the end of December 2023; and CRT had €3.6bn AUM, according to figures from both foundations. 

FCSP and CTR are now contributing to the industrial transition of Piemonte’s economy. Among other initiatives, FCSP and CRT are both shareholders of Liftt, a venture capital fund that launched in 2019 with the aim of investing in technologies and research with a strong industrial application angle. 

“At this moment, we are seeing the local ecosystem change and this will become more evident in the next few years,” says CEO Giovanni Tesoriere. Liftt has raised €104.7m to date and has completed 51 investments in innovative start-ups and small and medium-sized enterprises (SMEs). 

Infrastructure is another selling point of the local industrial ecosystem. Piemonte sits at the intersection of Europe’s Genoa–Rotterdam and Lisbon–Kyiv railway corridors that crisscross the continent, boasting 20 logistics parks and easy access to the international airports in Turin and Milan, as well as the port in Genoa.

Looking for new industrial beacons

Despite its strengths, Piemonte’s industrial transition will be easier said than done. Its manufacturing fabric is made up of SMEs that have traditionally worked with a limited number of big clients. Their capacity to embrace change at a time when their clients in legacy industry face headwinds may be constrained, points out Guido Ceresole, head of technology, research and innovation at the Turin Industrial Union. 

“It’s also important that companies that are at the top of the new emerging value chains become catalysts for SMEs and support them on their transformation journey,” he says. 

Some of the main companies in sectors like aerospace (see page 7) and semiconductors (see page 10) are already taking the burden off the shoulders of automotive. In research published in 2021, Italian development bank CDP singled out five regional excellences that can drive Piemonte’s economic growth moving forward and therefore act as economic catalysts: manufacturing 4.0, sustainable chemistry, design and creative industries, logistics and the Turin metropolitan area as a whole. 

Energy may also become another catalyst because Turin saw the birth of Newcleo, a start-up sensation developing small modular nuclear reactors that has raised €535m since its launch in 2021. With nuclear energy forbidden in Italy, the company is moving its headquarters to Paris from London, from where it has a better chance to chase future business opportunities in France and elsewhere. 

However, it retains an R&D hub of 300 people in Turin, where its CEO, Stefano Buono, is also based. 

“Piemonte has an extraordinary industrial capacity that for decades was almost exclusive at the service of the automotive industry,” Mr Buono says. The region has already rapidly managed to pivot into other key sectors and its pool of knowledge and talent is something we want to make the most of ourselves.” 

While new value chains consolidate around major original equipment manufacturers, support for the industrial transition is also coming through different routes. “We managed to put in practice cross-sectorial contamination,” says Enrico Pisino, the head of Competence Industry Manufacturing 4.0, an initiative by the Polytechnic University of Turin in collaboration with 21 industrial partners which is supporting the industrial transition of local firms. “If we manage to grow inter-sectoral teams with experts from different sectors, we can accelerate the technological transfer because we don’t start from scratch from research, but we start from sectors that have already deployed those technologies.”

In the new normal of the global economy, in the midst of multiple disruptions, the future is no longer a projection of the past. Innovation and new ideas will determine the future trajectory of Piemonte’s economy. Just as its industrial landmarks hint to a season that is no more, they may well hold the seeds of a new industrial golden era that has yet to be.

This article is part of the Special Report:
Piemonte's next industrial horizons
Read more articles from the report