Munich Far from catching up: Europe threatens to fall further behind in chip production. This is shown by the latest figures that the supply chain specialist Everstream has determined for the Handelsblatt. Accordingly, manufacturers in North America are investing five times as much in new capacity as in Europe. In the East Asian chip nations of Japan, South Korea and Taiwan, about four times as much money flows into modern factories.
“As of now, Europe can at best maintain its market share,” warns Everstream expert Mirko Woitzik. The EU has set the goal of doubling the share of global chip production to 20 percent by the end of the decade. However, the investments announced and made in Europe to date are far from sufficient for this. “It’s relatively unrealistic to achieve that by 2030,” says Woitzik.
Apparently even the federal government sees it that way. “The goal of doubling the European share of world production is ambitious,” says the Federal Ministry of Economics in response to a small query from the Die Linke parliamentary group, which is available to the Handelsblatt. In it, the ministry also warns of supply bottlenecks for the chips: “Overall, an undersupply is expected within the next decade.”
Delivery bottlenecks will persist in the long term
This is bad news for European customers in the chip industry. Because the companies will probably remain permanently dependent on suppliers from overseas. And it’s still stuck there, even though the pandemic is long over. “The delivery bottlenecks across the board are over. However, individual chips are still scarce – and that will remain so in the long term,” says Jan-Hinnerk Mohr from the consulting firm BCG.
It is extremely important for customers in this country to be reliably supplied with chips. “90 percent of industrial companies depend on semiconductors, for 80 percent they are even indispensable,” says Achim Berg, President of the digital association Bitkom. New factories in Europe are all the more important “because the demand for semiconductors will also increase in key areas such as autonomous driving, renewable energies or artificial intelligence”.
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Gunther Kegel, head of the sensor manufacturer Pepperl+Fuchs and president of the ZVEI industry association, warned in an interview with the Handelsblatt that “one-sided dependencies” should be reduced.
New US factories are of little help to Europe
According to Everstream expert Woitzik, the European industry is primarily concerned about supplies from two countries: “Many chip buyers have identified China and Taiwan as their main risk.” Buyers fear that tensions between the People’s Republic and what they see as a breakaway province will escalate and from one day to the next there are no deliveries.
European chip companies such as Infineon or NXP purchase many state-of-the-art semiconductors from contract manufacturers in Taiwan. TSMC in particular has mastered very complex technologies. Important components for European industry, which are manufactured using rather older production processes, come from China.
The Dax group is building another plant in Dresden and spending five billion euros on it.
(Photo: dpa)
The large plants that are currently being built in America will do little to help chip customers in Europe to reduce their dependence on China and Taiwan. “In America, the funds have so far flowed primarily into factories for chips with the smallest structure sizes,” states Ondrej Burkacky, semiconductor expert at the consulting firm McKinsey. These are semiconductors that are primarily used in smartphones and computers. However, these devices are hardly produced in Europe.
Europe, on the other hand, could use additional factories for chips of mature technology generations. But these are rarely newly built worldwide. The reason: It doesn’t really pay off. “The hurdles are high because you have to compete against manufacturers whose equipment has long since been written off,” explains BCG consultant Mohr.
TSMC hesitates with commitment for Dresden
TSMC shows how difficult it is to attract foreign investors. The world’s largest contract manufacturer has been negotiating a billion-euro investment in Dresden for more than a year. The Taiwanese are considering building a factory for chips with structure sizes between 16 and 28 nanometers. For comparison: TSMC is a technological leader with its three-nanometer process. However, these are exactly the structural sizes that car manufacturers in Europe will need in the future.
On the one hand, the Asians are demanding state subsidies for the plant in Saxony, and on the other hand they are forming alliances with partners, thereby securing orders and capacity utilization at the same time. According to Handelsblatt information, Infineon, NXP and the automotive supplier Bosch should be on board. In August, the management of TSMC wants to make a decision.
European Commission President Ursula von der Leyen also knows that Europe is far from reaching the 20 percent target it has set itself. In order to meet the target, Europe would have to “quadruple the current capacity,” said the politicians recently at the groundbreaking ceremony for a new Infineon factory in Dresden.
In addition, experts criticize the fact that Europe has so far mainly promoted the core of chip production, the so-called front end. According to semiconductor analyst Alan Priestley from market researcher Gartner, the components will continue to be sent to Asia for the personnel-intensive testing and packaging, the backend.
At least a start has been made. For example, Infineon is investing five billion euros in a plant in Saxony. The US group Wolfspeed is building for almost three billion euros in Saarland. ST Microelectronics spends several billion at existing sites in France and Italy. Intel wants to invest 17 billion in Magdeburg.
According to Everstream, almost 32 billion dollars will flow into factories in Europe that will start operating between 2021 and 2026. The projects in America meanwhile amount to around 160 billion dollars.
Americans discover their homeland
The fact that Europe is lagging behind when it comes to new chip factories is also due to the dominance of the Americans in the business. According to Gartner, seven of the ten largest semiconductor companies in the world come from the USA. For years they have invested their money in favorable locations in Asia. That is changing with the lavish grants from the Biden government, and your own country is attractive again.
But that’s not all, according to Wolfgang Büchele, head of the system manufacturer Exyte: “US chip manufacturers have the additional advantage on their home market that they can build on existing infrastructure at existing locations, while new projects such as in Magdeburg require a campus must be built from scratch.”
Wolfspeed encourages Europe
After all, Europe is not completely without a chance, as the settlement of Wolfspeed shows. State aid is “similar” in America and the EU, said Wolfspeed boss Gregg Lowe recently in Munich. The advantage for Wolfspeed in Germany is the readily available workforce. The company can fall back on staff from the automotive supplier ZF, which has a stake in the plant in Saarland and is also setting up two chip research centers together with Wolfspeed.
It is also important for Wolfspeed not only to produce in the American homeland in the future. “Our German automotive customers are happy to have a semiconductor factory around the corner,” emphasized Lowe.
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