Two bets on the European semiconductor future

Yole Group, including Yole Intelligence, Yole SystemPlus and PISÉO is rooted in the European semiconductor ecosystem. It is not every day we have to comment on a multi-billion euros industrial investment around here; actually, it never happens… except in the last six months… twice. Today’s snapshot is a combination of Yole Group’s technology & market analyses including Imaging for Automotive,

Earlier this year, in March, the first announcement was the creation of an INTEL mega factory in Magdeburg, Germany, for $17B, with a $7B subsidy from the EU. Six months later, STMicroelectronics and GlobalFoundries announced a $5.7B new fab in Crolles, France, to expand SOI-based production. The two investments are very different in nature, though they are two big bets on the future of the European semiconductor industry. They participate in the same strategy of maintaining, if not expanding, Europe’s 10% share of the semiconductor industry by 2030 at times when massive investments are taking place all around the world and especially in Taiwan, Korea, and Mainland China. Let us quickly analyze the reasoning behind each of these announcements.

The first announcement, Intel Magdeburg, is directed at the production of advanced nodes in the range of 7nm to 3nm. This will guarantee that, within ten years, Europe will have some control over the production of these chips that notably power Autonomous Vehicles (AV) and internet servers. The limit of this vision is that today no company in Europe needs such chips, so this is only a bet on hypothetical future needs. Today, the only companies using these chips are the internet giants and robotic AV players Waymo (Google), Cruise (GM), Zoox (Amazon), and Apollo (Baidu), which are indeed the same companies. In the face of the inability of Europe to give birth to any internet-era giant (GAFAM NATU BATX), this $7B subsidy bets that some existing or upcoming European company will be able to compete in that arena, or maybe it is just the price to pay to ensure foreign technology keeps serving the local downstream needs.

The second announcement, which occurred this week by STM/GF in Crolles, is directed at the production of intermediate nodes in the range of 22nm to 18nm. This will guarantee the continuous development of the current production capacity of a key technology, Silicon on Insulator (SOI), which notably powers the Advanced Driver Assistance System (ADAS) of today’s cars. With this new investment, ST’s early success in producing the INTEL-MOBILEYE chips and also many Internet of Things (IoT) products is being confirmed. This move opens a way forward for a new generation of products with the same desired features – low power consumption, high signal integrity, and low cost. The limit of this vision is that INTEL bought MOBILEYE five years ago and quickly moved the MOBILEYE product line toward advanced nodes which the Magdeburg factory could serve. This is where the two bets are competing. One side is actually producing chips every day for the ADAS systems of the Fords, Volkswagens, and Hyundais of this world, while the other is expected to take some share within five years from the current pilot production at TSMC. As we sometimes say, “the future is uncertain”.

The two upcoming fab investments cannot be reduced to the future of Autonomous Vehicle technology only. They will also include internet infrastructure and IoT, which are part of AV technology anyway. A safer bet is always to cover both types of approaches, the entire stack. Indeed, these two investments are very complementary in nature, with the second more aimed at promoting the existing ecosystem while enriching the collaboration of its players. The Grenoble semiconductor cluster, which encompasses the CEA Leti and SOITEC, and also many other FD-SOI related players such as design house DOLPHIN INTEGRATION, will benefit highly. Here at Yole, we cannot but applaud more of this kind of action, the endeavors of our daily work.

Pierre Cambou MSc, MBA, is Principal analyst in the Photonics and Sensing Division at Yole Intelligence, part of Yole Group. Pierre’s mission is dedicated to imaging related activities by providing market & technology analyses along with strategy consulting services to semiconductor companies in that field.  At Yole, Pierre is responsible for the CIS Quarterly Market Monitor while he has authored more than 20 Yole Market & Technology reports. Known as an expert in the imaging industry, he is regularly interviewed and quoted by leading international media.
Previously, Pierre held several positions at Thomson TCS, which became Atmel Grenoble (France) in 2001 and e2v Semiconductors (France) in 2006. In 2012, he founded Vence Innovation, later renamed Irlynx (France), to bring to market an infrared sensor technology for smart environments. Pierre holds an Engineering degree from Université de Technologie de Compiègne (France) and a Master of Science from Virginia Tech. (VA, USA). Pierre also graduated with an MBA from Grenoble Ecole de Management (France).