Europe's technology players spent the summer discarding divisions and shedding staff. So, adiós to Philips handsets! Auf wiedersehen Ericsson mobiles! Bon voyage, Psion handhelds. And would the last consumer electronics hardware maker to leave Europe please remember to turn out the lights?

The continent remains strong, however, in digital television set-top boxes, flat screen monitors and smart cards. Despite its recent travails, Alcatel, the French telecoms equipment supplier, controls about 40 per cent of the global market in Digital Subscriber Line (DSL) equipment for fast internet connections.

And there is always - always - Nokia, the great anomaly of European tech stocks. But some of this flatters to deceive. The DSL modem sector appears to have gone from cutting edge to commodity without first passing through a sustainable mass market. And the paucity of the European share of new niches, such as MP3 music players and digital cameras, underlines the point.

The trend to outsource or abandon indigenous production of branded consumer electronics goods appears unquestionable, irreversible and ubiquitous. Inventory is sin; software, services and intellectual property are salvation.

The arguments in favour of "virtual" rather than "physical" technology sectors are well rehearsed. The US is a bigger single market. The Far East has lower labour costs. The Japanese have corporate know-how. It is hardly surprising that the likes of Research in Motion, the US maker of Blackberry e-mail pagers, or Toshiba, which recently unveiled its first PDA (personal digital assistant), are expanding into new markets even as European firms sound the retreat. It would be mad, surely, for Europeans to compete globally in rapid-lead-time industries where margins get squeezed and demand forecasts shrink almost daily.

Except that in sectors such as fashion, luxury goods and cars, European brands not only compete in manufacturing but out-perform zones which appear to have cost, scale and management structure on their side. Historically, European consumer firms have been stronger when they have focused on styling and brand values rather than price and volume.

The secret of Nokia's success in an industry rapidly imitating the PC sector as a "zero profit" zone has as much to do with the elegance of its in-house designs as it does with supply chain or marketing initiatives. Any move to change that would be a drastic signal indeed.

It should be a badge of shame that a European designed the revolutionary iMac computer for a US company (Apple), but European hardware makers continue to crank out the same pug-ugly grey boxes. For a while, Palm seemed to grasp the aspirations of technology consumers by selling upmarket accessories. Then it flooded the market and suddenly Palm PDAs looked a whole lot less exclusive.

If you look like a commodity, then don't be surprised if that is how you are viewed. Utility computing makes sense in a business context. But for consumers, aspirations, values, aesthetics and branding will only grow in importance as technology becomes integrated into the everyday.

Software is almost inevitably bound up with functionality rather than any of these values. For all the economic logic behind outsourcing, it is a long-term gamble. If you don't agree, name one consumer software company which has developed into a consumer brand.

Email Carlos Grande at carlos.grande@ft.com