Advanced Semiconductor Ecosystem Imperative For Europe

Today’s chip shortage has put a spotlight on the degree to which the European economy depends on semiconductors. With limited local production capability and capacity, Europe risks its technological sovereignty and needs to correct course to maintain long-term competitiveness.

FREMONT, CA: As digitalization alters several elements of our lives, demand for cutting-edge semiconductors will nearly quadruple the EU's overall demand by 2030, growing at a CAGR of 15 per cent, while demand for older semiconductor technologies will grow at a CAGR of three per cent. In the year 2000, Europe was the world's biggest semiconductor producer, with about 25 per cent of global manufacturing capacity. Today, the output is at an all-time low of eight per cent. Leading-edge semiconductor technology has seen an even more dramatic decrease, with market share dropping from 19 per cent in 2000 to nil today. The European Union has established a strategic goal of more than doubling its semiconductor manufacturing share to 20 per cent by 2030. Although there is broad agreement on the need to boost the EU's position in the semiconductor industry, European political and corporate leaders disagree on the best strategy for achieving this aim.

A mix of advanced engineering (research and design) and manufacturing (equipment and fabrication) capabilities are required to stay at the forefront of semiconductor technology. Integrating various domains has long been a European strength, as evidenced by the car sector. In the semiconductor value chain, Europe has strategic assets. Europe has everything it takes to reestablish the region's competitiveness in leading-edge semiconductor technology, backed by leaders in fab equipment, top R&D capabilities and technical expertise, a stable political environment, good infrastructure, and the required financial strength.

Investing in cutting-edge semiconductor technology can provide enormous economic benefits to Europe. In terms of economic impact, a cutting-edge semiconductor production fab generates more than twice the initial investment. It would also open up new business prospects and serve as a launching pad for local start-ups. Chip production in Europe would also help to strengthen the region's technical sovereignty and supply chain resilience. In comparison to other regions, European fab operations currently have a higher total cost of ownership. Operating a new cutting-edge fab in Europe is 30 per cent more expensive over ten years than in South Korea, and more than 40 per cent more expensive than in Taiwan. Regional incentives, co-investments, and subsidies are the most significant distinctions. In the global arena, Europe is likely to lose even more ground unless it changes the status quo.

For leading-edge technology in engineering and production, investments in semiconductor technology are quite high and growing. To achieve the EU's strategic aim in the next ten years, we believe two simultaneous activities are required. To begin, resurrect the local semiconductor ecosystem. This can be accomplished through promoting cutting-edge chip design, production capability, such as fabs and ATP sites, and basic research. These initiatives would encourage more mature technology development and scale into the ecosystem's remaining sections. Second, form alliances with cutting-edge semiconductor technology firms. As Intel, Samsung, and TSMC have vowed to invest more than EUR 300 billion by 2030, a window of opportunity has opened, allowing the EU to combine its strengths with the knowledge of its partners to de-risk the accomplishment of its goals.

As 2030 approaches, Europe must decide how it will proceed with semiconductors.