Europe’s race to catch up in semiconductors is just beginning

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The voices are therefore getting louder to support works for more mature chip technologies in the next step. Semiconductor manufacturers such as Infineon need these in particular for their customers in the automotive industry. The assembly lines there have been standing still for almost two years because the components from the leading contract manufacturers in the Far East are missing. They produce for the large European chip companies Infineon, NXP or STMicroelectronics.

The state governments of Bavaria and Baden-Württemberg are pushing for the so-called “Chips Act” of the EU to be as broad as possible. With the law, the Commission wants to clear the way to support the chip industry with public funds of 43 billion euros.

Not just building high-performance chips

According to the current draft, “innovative systems” are deemed to be eligible for funding. A formulation that should be interpreted as comprehensively as possible in the interests of European industry, according to Baden-Württemberg’s Economics Minister Nicole Hoffmeister-Kraut and her Bavarian colleague Hubert Aiwanger in a joint statement.

“We mustn’t just focus on high-performance chips with the smallest structure sizes,” the politicians are demanding. Mature technologies are of great importance for German and European user industries in the automotive sector, mechanical engineering, medical technology and renewable energies in the medium and long term.

“It only makes sense to build a semiconductor industry in close coordination with the market to meet demand,” emphasizes Lola Attenberger. The researcher at the European School of Management and Technology in Berlin accuses the EU of merely reacting far too often instead of looking ahead. Attenberger: “People thought the market would regulate itself. But it’s clear that you’ve become de-industrial.”

Asian countries have been promoting the chip industry for decades. The EU now wants to follow suit with the “Chips Act”.

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The aim is to increase Europe’s share of global chip production from less than 10 to 20 percent by the end of the decade. Because the semiconductor market will have doubled by then, in 2030 the EU will need four times as much production capacity as it does today if it wants to achieve the targets it has set itself. The world’s largest contract manufacturer TSMC from Taiwan has so far played a key role as a supplier, as have Samsung from South Korea, UMC from Taiwan and SMIC from China.

Industry doesn’t just want to build chip factories

Industry representatives also warn against only promoting the chip factories themselves. “It is now important to set further impulses: The Chips Act must not be limited to silicon factories,” said Gerhard Reischl, head of the chip supplier AT&S, the Handelsblatt. “It is also important to promote technological development. In addition, the chip packaging should be brought to Europe.” So far, the semiconductors have mostly been processed in China, Indonesia and Malaysia.

Another important issue is still open: the financing of the catch-up in chips. Intel boss Pat Gelsinger stressed that he was still negotiating with the authorities about how high the subsidies would be for Magdeburg. According to earlier information, he is demanding between 30 and 40 percent of the investment sum, i.e. around five to seven billion euros.

The economics ministers from Baden-Württemberg and Bavaria criticize the fact that according to the current plans, only relatively little of the EU’s own funds are to flow into the chips. Both ministers are therefore calling for “a more substantial financial contribution from the EU”.

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