The revival of European semiconductors has a long way to go

Europe is an important pole of the world economy, with its GDP accounting for 24.6% of the world’s GDP in 2020, but the market share of European semiconductors in 2020 is only about 10%, mainly relying on imports from the United States and Asia.
Europe once played an important role in the world’s semiconductors. Infineon, NXP and ST Italy and France semiconductors from Europe are world-renowned semiconductor manufacturers. However, with the decline of the entire European electronic industry, the voice of Europe in the semiconductor field has been greatly reduced; What is more serious is that the shortcomings of latecomer companies are in sharp contrast with the trend of introducing new semiconductors from the old.
In fact, Europe had a sense of crisis about the decline of the status of semiconductors for a long time. The European Union had led Europe to many meetings and formulated many joint plans, but it did not catch up as expected.
No matter how many bills, we can’t escape from wishful thinking
This month, a draft EU policy document showed that the European Commission might agree to a new subsidy policy that would allow EU governments to subsidize cutting-edge chip factories in Europe. The international community took note of the news, and some comments revealed that the draft was actually promoted by France and Germany. Bloomberg even directly called the bill a victory for France. As the major economic and semiconductor countries in Europe, France and Germany have a strong voice in the EU. However, the rest of the countries may not meet the wishes of the two countries.
There are 27 member countries in the EU (excluding the Brexit UK), but there are not many well-known companies in the semiconductor industry chain, and the scope of industrial drive is more limited to France, Germany, Switzerland, the Netherlands, Italy, etc. The reality is that a large number of European countries and France and Germany do not have the same interests. A large number of small countries focus on their real economic situation and have their own considerations for many collective actions.
In September this year, European Commission President von der Leyen recalled the European Chip Act and said that he would propose a new text for signature. This time, the bill calls on Europe to focus on semiconductors and make Europe become the world leader in this field, accounting for 20% of the world’s semiconductor sources in the next decade, and also to sprint for 2nm. Von der Leyen also said that the EU needs to coordinate at the European level to create a European level chip ecosystem, including production. He used the example of the European Union’s successful development of the Galileo satellite system as an analogy and believed that European countries should have the same ambition as at that time.
Should European semiconductor die?
Europe’s share of the world’s semiconductors is insufficient. Source: Jinshi data
Vondelaide’s ideal is more like a stone thrown into the lake, with great action, but only a circle of waves respond to him.
However, such a situation is completely expected.
Last year, the European Union began to sign plans to develop semiconductors. On December 26, 2020, a message was published on the EU website, which sounded the call for collective efforts to achieve “chip independence”. 17 countries in the EU signed the Joint Statement of European Processor and Semiconductor Technology Plan online, announcing that 145 billion euros (about 1152.7645 billion yuan) will be invested in the research of semiconductor technology in the next two or three years.
Should European semiconductor die?
Should European semiconductor die?
Joint Statement of European Processor and Semiconductor Technology Plan Source: EU official website
At that time, 17 countries signed the declaration, while 10 countries did not sign it. The signatories of the statement are Germany, France, the Netherlands and Italy, which can also represent 80% of European semiconductors.
According to the EU, the main budget of this plan comes from the “Recovery and Resilience Fund”, and the upper limit allocated to each member country is 6.8% of national income. Some of them are free loans, but this is the part, and countries have quite different opinions on their distribution. The first two years will be measured by the average unemployment rate and other indicators from 2015 to 2019, and 2023 will be measured by the economic decline after the epidemic as the benchmark, which will virtually benefit the big countries.
The countries that did not sign the agreement protested against it. They said that “excessive and non-targeted use of strategic funds for key industries will lead to subsidy competition and unfairness within the EU.” Due to the small national base, the market is not large enough, and the cost of people and property invested in semiconductors is high.
For some countries or enterprises, manufacturing is better than purchasing. ASML is a typical example of this. ASML has a wide range of lithographic components. Of the 30000 parts of the 7nm EUV, 90% of the equipment comes from other countries, including precision equipment from Germany and the United States. At the same time, companies that purchase ASML lithography machines need to purchase shares of ASML. Samsung and TSMC are customers of ASML. The largest shareholder of ASML is from the United States. This business model helps ASML resist external risks and ensure the supply chain. It also implies that ASML cannot completely escape from non-European countries and help realize the goal of semiconductor in Europe.
Ireland is because semiconductors have brought huge profits to the country. Intel has four factories outside the United States, of which the factory in Leixlip, Ireland, is the largest production base outside the United States, and Intel is still investing in this factory. Because there is not enough market and personnel in Ireland to develop the domestic semiconductor industry, Therefore, relying on foreign capital has become a necessary way for this country. Irish Prime Minister Michel á l Martin welcomed Intel’s continued investment in Ireland and said that Intel had made great contributions to Ireland. He said, “Intel’s journey in Ireland is extraordinary. The next stage of development plan will improve Intel’s reputation as a global leader in semiconductor innovation and manufacturing.”
Should European semiconductor die?
Intel’s factories and test bases worldwide Source: Intel
The interests of European countries are different. The legislation led by Germany and France cannot satisfy all or even the vast majority of countries. The semiconductor union is very likely to become a short order with thunder and rain.
Do enterprises attract or rely on to build factories in Europe
The European Union is persuading semiconductor companies to set up factories in Europe, but few companies are interested in this policy, and there are also different comments on foreign factories in Europe.
On November 26, Reuters reported that TSMC might build factories in Eastern Europe, rather than Germany, which had been hotly discussed before. Although Western Europe has developed economies and standardized industries, Eastern Europe seems to be more sincere. Eastern Europe itself has a lower labor force, and it will have greater preferential support for enterprises such as TSMC, including water and electricity management administrative expenses and taxes.
This summer, Europe began to approach relevant enterprises and lobby them to set up factories in Europe. TSMC was one of the lobbying objects. Taiwan, China’s response is that TSMC is not interested in building factories in the EU. TSMC also poured cold water on Europe, saying that TSMC’s European customers accounted for only about 6%, which could not produce scale effect from the perspective of market or cost. Previously, the news had always said that TSMC would choose Germany to build the plant, but TSMC continued to deny this. Wei Zhejia, president of TSMC, was asked several times about setting up a factory in Germany, and repeatedly responded that it was only for the purpose of serving customers, not excluding setting up factories outside Japan. As for the overseas plant model, TSMC said that it would not make a joint venture with the local government, and would also consider whether to accept local funds as shares.
As one of the few actions that came to the table after the release of the Joint Statement of the European Processor and Semiconductor Technology Plan last year, if TSMC did not go to Europe for the time being to build a factory, the possibility of the success of the European semiconductor rise plan would be greatly reduced. After all, the wafer factory needs huge funds and resources.
Intel is different from TSMC. At the beginning of this year, when Intel CEO Kissinger released IDM2.0, he said that he would build a new wafer factory in Europe. In September, Kissinger made a business trip in Europe and announced the plan of the European semiconductor wafer factory during his visit to Germany. On November 29, Breton, who is responsible for trade in the European Union, said in an interview that they might announce the news of Intel’s establishment in Europe in the next few days. However, according to the previous information, the condition for Intel to build factories in Europe is a subsidy of 8 billion euros.
Should European semiconductor die?
Thierry Breton, the EU internal market specialist who strongly supports the semiconductor plan
One side is full of enthusiasm, while the other side is constantly worried. Since the EU attracted the establishment of factories in April this year, its internal disputes have also been frequent. According to Reuters, French officials said that this was not necessarily right, and long-term industrial policy might be sacrificed for short-term achievements. Three officials of the European Commission said that they were not satisfied with the strategy of relying on non-EU companies to build factories, and that the partnership between EU companies and foreign counterparts might be better. In addition, issues such as the capacity of the European market and the free market have been put on the table. Representatives of ASML, NXP, Infineon, ST Italian and French Semiconductors also discussed in the EU. But until today, there is no conclusive news.
Lack of interest ties, and large European factories are not active
As the witness of the brilliant era of European semiconductors, European semiconductors are mostly in a corner, and large manufacturers are generally not willing to jointly develop semiconductors.
On March 12 this year, Infineon made a high-profile “dismantling” of the EU semiconductor plan. Reinhard Ploss, president, expressed doubts about the statement of the EU “strengthening the development of chip capabilities and aiming at 2nm technology”, and believed that the new wafer factory invested by the EU alone could not solve the chip supply problem in Europe. He said that the main customers of European wafer factories were not in Europe, and it would not help to keep the chip manufacturing capacity in the EU. “At present, the scale of the European technology industry is not large enough to make the localized production of chips valuable.”
On May 6, ST Italy and France Semiconductor, one of the three largest semiconductor companies in Europe, made it clear that it would not join the semiconductor alliance that the European Commission was preparing to establish. Its CEO Jean-Marc Chery said that the plan is a positive development, but it has nothing to do with Infineon, because “if it is about mature technology, we have no reason to participate”.
The senior executives of ASML also pointed out that it is meaningless to build a wafer factory in Europe with huge subsidies to produce advanced chips. “This investment is too high for the EU, and there are too many gaps in the upstream and downstream industrial chain. The entire supply chain required for the success of the wafer foundry is missing in Europe.”
On April 5, the European Commission announced the establishment of the processor and semiconductor technology alliance, but the alliance was basically not supported, and Intel was the only external company that expressed its support.
Should European semiconductor die?
Intel CEO Kissinger mentioned supporting the European semiconductor plan in the IDM2.0 strategy
In addition, there is also competition among big European factories. Europe is an important position in automobile production. According to the 2020 Auto Semiconductor Manufacturers Market Share Report released by Strategy Analytics, the top 5 auto semiconductor suppliers in the world are Infineon, NXP, Reisa, Texas Instruments and Italian French Semiconductor. In 2020, these five suppliers accounted for nearly 49% of the global auto semiconductor market, with three from Europe. Although the three products are different, they are also competing in the automotive field. Prior to that, NXP and Infineon continued to compete in the automobile market through acquisitions and other actions. In 2020, Infineon replaced NXP as the largest supplier of automotive semiconductors.
The national characteristics of Europe may be an important factor affecting its semiconductor strategy. Without common interests, there can be no real cooperation. As a community, the EU also has weaknesses in its policy drive. However, the most important factor is the market factor. The semiconductor market in Europe is not large enough, and there is no strong market demand support to achieve independent “continent”.
When the European Union announced its semiconductor plan, the United States also planned to invest $50 billion to subsidize the manufacturing of the chip industry and the design of cutting-edge chips to protect its position.
There is still a gap between the weather, the people and the location. The revival of European semiconductors has a long way to go.