Behind shiny new semiconductor investments, the EU Chips Act needs more work

By Théo Bourgery-Gonse, Reporter, Economics for EUROACTIV – While Single Market EU Commissioner Thierry Breton hailed chip manufacturers’ recent investment pledges in Europe as a ‘culmination’ of the EU’s industrial strategy and its newly-adopted Chips Act, a lot more work is needed before Europe can claim victory in securing strong semiconductor supply chains.

On Tuesday (8 August), Taiwanese semiconductor giant TSMC, alongside Bosch, Infineon and NXP, announced it will invest over €10 billion in Germany, to both build and operate a microchips plant.

In June, US Intel also unveiled a €30 billion investment plan in Germany in an effort to “create a first-of-its-kind, leading-edge end-to-end semiconductor manufacturing value chain”, according to the press release.

France also saw the very fresh start in June of a production plant for ‘wafers’ – a silicon slice designed to create electronic integrated circuits, used mostly in photovoltaics – run by STMicroelectronics and Globalfoundries, first announced in July 2022 and worth €7.5 billion.

The list of announcements marks the “culmination” of a sound EU semiconductor strategy, Breton told French broadcaster RTL on Thursday (10 August), after years of deindustrialisation.

“Europe is taking its destiny back into its own hands,” with a pledged total of 68 EU projects worth about €100 billion, Breton added, praising the recent adoption of the EU Chips Act, which aims to bridge the gap between research and development (R&D) and production and support the creation of ‘first-of-a-kind’ foundries that help secure European supplies.

The legislation was first introduced in February 2022 during a global semiconductor shortage that nearly completely halted the production process of many products with electronic components, from PlayStations to cars.

The EU had found itself exposed to a ‘strategic dependency’ over chips, which are mostly designed in the United States and produced in East Asia.

The recent investment announcements make the Chips Act objectives “concrete”, just weeks after the legislation was approved in late July, director of the semiconductor division at consultancy Yole Group Emilie Jolivet told EURACTIV.

The EU is looking to “reacquire production capacities to start playing in ‘the big league’ again”, she added. While announcements still need to translate into real production increases – TSMC’s investment comes with a €5 billion German subsidy, that the European Commission has yet to approve – she agrees with Breton that positive signs abound.

Mathieu Duchâtel, Head of International Studies and a China expert at French think-tank the Institut Montaigne, agreed announcements go in the right direction. However, he warned that the Act’s aim to double the current EU semiconductor global market share to 20% by 2030 “would require hundreds of billions of euros”, a far cry from the €43 billion the regulation intends on ‘mobilising’ through both EU public and private money – not counting state aid.

Duchâtel’s view was largely shared by Zach Meyers, a research fellow at the Centre for European Reform (CER). The doubling of current EU production to 20% relies on the “unrealistic assumption that global production everywhere else stood still […]. Announced chip-making investments in Europe do not come close to delivering these ambitions,” he told EURACTIV.

Full article

Source: www.euroactive.com