Germany to invest billions to bring semiconductor production back to Europe

euractiv.com

By Oliver Noyan | EURACTIV.de | translated by Daniel Eck

 3 Sept 2021 (updated:  0:16)

Europe is not just trailing behind in terms of numbers, but also with respect to quality. Most advanced microchips, which are used in smartphones, computers and other high-tech devices, are currently produced almost exclusively in Asia. [SCHUTTERSTOCK/genkur]

Languages: Deutsch

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As part of a major European project, Germany wants to invest several billion euros into bringing semiconductor production back to Europe, with the aim of strengthening German and European technological sovereignty. EURACTIV Germany reports.

To promote the expansion of microelectronics in Germany, Economy Minister Peter Altmaier held talks with 50 representatives of the European and international semiconductor industry on Wednesday (1 September) to encourage them to invest in Germany by presenting them with a support package.

“Access to sufficient microchips will become a competitive element for any successful global economy in the coming years,” Altmaier stressed at a press conference on Wednesday.

“This means we must act if we want to preserve our technological sovereignty,” Altmaier added.

Within the framework of the European Initiative ‘Important Projects of Common European Interest’ (IPCEI) – one of the EU’s key subsidy tools to stimulate investment and reduce dependence on imports – the German government intends to invest around €3 billion to reclaim production sites along the entire value chain of semiconductor production.

This initiative is primarily motivated by the worldwide semiconductor supply shortage resulting in production losses across the industry. The demand for semiconductors has grown exponentially in recent years, which is partly due to the increased demand caused by Industry 4.0 and the Internet of Things.

According to Altmaier, Germany wants to prepare itself in particular for the digital and environmental challenges of the future. Both e-mobility and Industry 4.0 require much more powerful semiconductors than are currently produced in Germany and Europe.

German carmakers partially shut down amid semiconductor shortage

The German automotive industry is continuing to struggle with a severe supply shortage in semiconductors, while national and European authorities are trying to boost local production capacities.

Europe lagging behind

For years, the manufacturing of semiconductors in Europe has been on the decline compared to production in the rest of the world. Europe’s share dropped from 35% in 1990 to a current meagre 9%.

The European Commission now wants to reverse this trend. According to its Digital Compass, the aim is to have the EU cover 20% of international production by 2030. But with the market growing at an exponential pace, production capacities would have to be tripled or even quadrupled to reach the 2030 target set by the Commission.

Europe is not just trailing behind in terms of numbers, but also with respect to quality. Most advanced microchips, which are used in smartphones, computers and other high-tech devices, are currently produced almost exclusively in Asia.

European producers, like NXP or Infineon, focus mainly on producing semiconductors for the industry, which are technologically less refined than the semiconductors developed by their Asian competitors.

Asian companies like TSMC or Samsung are already specialising in the production of 3-nanometre process of semiconductor production – a new, improved generation of silicon semiconductor chips in terms of increased transistor density, increased speed and reduced power consumption.

Europe is lagging behind as most of its production facilities – except for the Intel factory in Ireland – focus on 20-nanometre production.

But the EU is eager to address this gap.

In December last year, Internal Market Commissioner Thierry Breton said the bloc wants to focus on the high-tech sector in semiconductor production and has set its sights on developing 2-nanometre production on European soil.

Europe’s first digitalised chip plant opens in Dresden

German engineering and technology company Bosch opened a new semiconductor factory, fully networked with 5G mobile technology, in Dresden on Monday (7 June). The production facility was funded with €140 million as part of a joint European project.

The right path to digital sovereignty?

Altmaier is confident the 20% target can be reached by 2030 and the technological backlog in production can be reduced through IPCEI funding, which in turn should encourage more semiconductor manufacturers to invest in Germany and Europe.

The minister referred to a success story from 2018, when a €1 billion in public funding through an IPCEI had triggered three times the amount of private investment, noting that the instrument is thus “the right instrument to preserve Europe’s sovereignty,” the minister continued.

The German and European ambitions were also welcomed by the industry.

“The announcements at the European level and by the German government are right and important for our industry,” Frank Bösenberg, head of the office of Silicon Saxony, one of Germany’s leading microelectronics industry associations, told EURACTIV.

The “world is not waiting for Europe,” he added.

But others have doubts about the viability and feasibility of the investment offensive.

Reaching the 20% target is “completely unrealistic”, said Niclas Poitiers of the think-tank Bruegel. Europe is still lagging behind other countries like the US or Japan, particularly in terms of the size of investments.

Increasing the number of production sites alone does not automatically lead to less dependency and greater digital sovereignty, “because in the global world economy, supply chains are so tightly interlinked across so many borders that dependencies remain even if sub-sectors of the semiconductor industry are massively expanded locally,” Poitiers explained.

The EU would therefore be better advised to invest in existing strengths instead of fighting an uphill battle, he added.

Leading chip-maker answers EU call to scale up European capacity

Intel, the world’s largest manufacturer of semiconductor chips, will open a foundry plant for cutting-edge semiconductors in Europe in a bid to diversify its global supply chain.

[Edited by Zoran Radosavljevic]

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