Europe is actively launching a chip campaign, chasing the US and China, looking for a new dawn for the future?

Summer in Europe is usually a time of rest and relaxation to prepare for a busy fall and winter. However, things are very different this year, as the European electronics industry is eager to welcome a wave of huge investments in semiconductor production, in order to catch up with the "two giants" of the US and China.

EU actively launches 'chip campaign', new dawn or technology desert? (Source: https: eetimes.eu)

Semiconductor chips are the “brains” of electronic devices, used in everything from children's toys, home appliances, smartphones, to electric cars and sophisticated weapons.

Where is Europe?

Almost all of the raw materials needed to make chips are now produced in China. Taiwan, home to many of the world's leading chipmakers, accounts for more than half of global chip production, while many of the world's biggest chip designers, such as Nvidia, and device makers like Apple, are from the United States.

The Semiconductor Industry Association, a US trade group, said US companies accounted for 48% of the global chip industry last year. South Korea, home to the giant Samsung, was second with 14%. And Europe was in third place with a 9% share.

The semiconductor supply chain is suffering from an unprecedented shortage, due to the long-term impact of disruptions during the Covid-19 pandemic. The crisis has spurred governments to act, with the US and China soon entering a fierce competition for dominance and introducing increasingly tough measures to secure their supply chains.

As for Europe, after the chaos in the global chip supply chain after the pandemic, they have noticed the dependence of European electronics manufacturers on the ecosystem of Asian semiconductor manufacturers, furthermore, the increasing risk of geopolitical risks … Europe has started to act with billion-dollar plans.

With the aim of strengthening the semiconductor ecosystem and self-sufficiency in Europe's supply chains this decade, all 22 EU member states adopted a joint statement on semiconductor technology in December 2020. This initiative led to the European Chip Act, which was first proposed in February 2022 and passed into law on July 25.

The European Chip Act aims to double the region's share of global semiconductor production from 10% to 20% by 2030. The €43 billion will come from direct investments from the EU, member states and public-private partnerships, and another €11 billion will come from the European Chip Act.

Most recently, on August 10, European Commissioner for Internal Market Thierry Breton said that the EU is planning to invest more than 100 billion Euros (110 billion USD) in developing the semiconductor manufacturing industry to reduce dependence on imports.

“I announce that we intend to invest more than 100 billion euros in the EU semiconductor industry to meet our own needs, as well as exports,” Mr. Breton said on RTL radio.

Mr. Breton reiterated that Europe currently produces only 9% of all semiconductors globally and to be self-sufficient and meet the bloc's needs, the EU must increase its production share to 20% by 2030.

"New dawn" for the European chip industry?

Will the EU Chip Act achieve its goals? In November 2022, global management consultancy Deloitte published an independent report highlighting a number of key issues that the EU must urgently address.

The report notes that Europe is one of many countries investing in the goal of semiconductor self-sufficiency. To do that, important technological decisions must be made, from the smallest issue of which wafer size - 200 mm or 300 mm - to focus investment. Meanwhile, the complex nature of semiconductor manufacturing also depends on a complex ecosystem, including partners and experts in the industry.

The Deloitte report calls the target set by the European Chip Act “bold.” With the global semiconductor industry forecast to double by 2030, the EU would need to quadruple its output to reach 20% of global output from the current 10%.

Of course, there are many paths to success, but each has significant trade-offs… Which semiconductor technologies should Europe focus on? Which part of the value chain makes the most sense for Europe’s development? If factories are built, where will the demand and the human and financial resources come from?...

One of Europe’s big questions now is which generation of semiconductor technology to focus on. Deloitte believes that advanced semiconductors will be important in the future, but chips made using older processes are still important for many core industries, including transportation, car manufacturing, healthcare and factories in general.

The second big problem is determining which parts to prioritize, as no single country or region can be completely self-sufficient in all types of semiconductors and supply chain components by 2030.

Ultimately, Europe will need to find a balance between localizing its supply chains and diversifying them. Not everything has to be European, other places like Japan, Singapore or the US are all credible alternatives that still help diversify external supply sources, rather than the current over-concentration in China, South Korea and Taiwan (China).

Titled “A New Dawn for the European Chip Industry,” Deloitte outlined four possible scenarios for the European tech sector over the next decade. Scenarios range from long-term and optimistic but possible, such as pure European tech companies achieving trillion-dollar valuations, to the unlikely scenario of This area becomes a technology desert.

“Who Wants to Be a Trillionaire” is the best-case scenario, in which a European-headquartered company is valued at a trillion dollars. In fact, as of Q3 2022, no pure-play semiconductor company globally has reached a trillion-dollar valuation, but several companies have emerged with market capitalizations of several hundred billion dollars.

The second scenario, “Divide Greatness,” is less brilliant, in which Europe will be left with a handful of world-class companies, specialized in specific sectors. This scenario is expected to happen in Europe by the end of the decade.

In the 'Cowardly Cow Scenario', European companies remain buyers and users of technology created outside the region. Europe would then be a net importer of semi-finished products by 2023, despite the efforts of the European Chip Act. As it is now, Europe is a net importer of semiconductor chips, consuming around 20% of global chip supply but producing only around 9%.

Finally, the 'Technology Desert' scenario is the least likely given the strategic importance of semiconductors, but not impossible. With regulations that are too restrictive for competitors, Europe could become a place where technology supplies are difficult to access and applications are limited.

In fact, Germany is becoming a hot spot for semiconductor manufacturing in Europe. Infineon, one of the region’s largest chipmakers and suppliers, is pouring billions into a new site in Dresden.

Taiwanese chipmaker TSMC also agreed on August 8 to a multi-billion dollar deal to build a factory in Germany, in an effort to make Europe the center of the global semiconductor industry.

Intel is also investing billions of dollars in the European semiconductor ecosystem over the next decade, with the expectation of covering the entire value chain, including research and development, manufacturing and packaging technology. Last month, the company announced an investment of more than 30 billion euros in Germany to expand its European manufacturing capacity. Intel said the project would help the EU advance its goal of building a more resilient semiconductor supply chain.

The company also plans to build a flagship wafer fabrication site in Magdeburg, Germany, a move Chancellor Olaf Scholz called “good news for Germany and for all of Europe.”

Additionally, the US company is spending about 4.3 billion euros on a site near Wrocław, Poland, to create a semiconductor assembly and testing facility.

These are all promising steps, but these chip manufacturing facilities are unlikely to be ready for delivery before the second half of the decade, so Europe has no choice but to continue to persevere with its long-term plans. The goal of self-sufficiency and reducing dependence on other countries will take time and the future is difficult to foresee.

Source: https://baoquocte.vn/chau-au-rao-riet-mo-chien-dich-chip-duoi-theo-my-va-trung-quoc-tim-binh-minh-moi-cho-tuong-lai-238042.html