Every year, the European Union consumes hundreds of millions of chips, yet only a small percentage of them are manufactured within the EU. Although nations such as Germany are pushing chipmakers to locate fabs there, it is doubtful that the EU will ever be self-sufficient in terms of semiconductor supply. Margrethe Vestager, the EU’s Commissioner for Competition, believes so.
Leading semiconductor contract manufacturers, such as Intel, Samsung Foundry, and Taiwan Semiconductor Manufacturing Co., spend around $30 billion each year on capital expenditures and billions on researching new process technologies. Analysts predict that a nation, or group of countries, that wishes to establish a competitive semiconductor sector locally would need to invest more than $150 billion on direct assistance, tax cuts, and incentives over five years. However, the likelihood of success is quite low.
According to the EU source, such expenditures are impossible to undertake, hence the bloc will continue to rely on local and foreign chip supply.
“The numbers I hear of, sort of, the upfront investments to be fully self-sufficient, that makes it not doable,” said Vestager in an interview with CNBC. “What is important is that there is a different level of production capacity in Europe.”
It is worth noting that Europe does not manufacture cellphones or PCs, two types of applications that require chips manufactured utilizing cutting-edge manufacturing technology. Meanwhile, the EU manufactures automobiles, consumer electronics, and other items that do not require chips manufactured on the most recent nodes. As a result, the bloc wishes to increase chip manufacturing for these items to defend its economy. It also does not want China to disrupt supply lines or cause problems with the United States and Germany.
“You would need a lot of chips that come from legacy technology, a lot of the chips that go into a sort of internet of things, your fridge, your coffeemaker, that’s a legacy technology, and it will take quite some time because that sort of migrates into leading-edge,” said Vestager.
At the moment, Europe produces around 10% of the world’s chip supply, down from 40% in 1990. The block’s present objective is to increase its worldwide chip production market share to 20% by 2030, which is already an extremely ambitious target given the growth of chip fabrication. Vestager concedes that to achieve this aim, the EU must encourage domestic semiconductor manufacturers. Unfortunately, Margrethe Vestager has not made any specific intentions public at this time.