Semiconductors, Europe launches a mega plan. But for now, leadership is wishful thinking
The European Union has launched its challenge to achieve strategic autonomy. Pending that (chimerical) policy, at least from the point of view of microchip. The famous semiconductors fundamental to producing almost anything that makes the world of the third millennium work. Ursula von der Leyen’s commission has launched a mega plan worth over 43 billion eurosa sort of European Chips Act between public and private, European and national investments, to double the EU global market share in chip production by 2030.
Finally relevant numbers, with Europe that has woken up from a great sleep that has made it completely dependent on Asia. And now, while the geopolitical tensions become embittered, the Old Continent realizes that it cannot deliver itself helpless to external actors. It is no coincidence that this happens as the United States seeks technological decoupling with the People’s Republic of China. It is no coincidence that the move concerns precisely semiconductors, truly considered the fundamental component of the new dispute not only in technology and trade but also in geopolitics and diplomacy.
Just think of the fact that in recent months the United States announced a maxi investment plan in the technology sector approved by the Senate. Of the 250 billion total, 52 are dedicated exclusively to the development of the American semiconductor industry. Not only. All of the recent moves by the Biden administration (and Trump’s before him) are aimed at creating a supply chain that effectively excludes China. During his trip to Europe, Biden will also address the topic of the technology alliance on semiconductors with partners from the Old Continent.
Why Asia dominates the world on semiconductors
Fundamental chapter of the technological cold war between the United States and Chinaand the object of everyone’s desire, semiconductors are also taking away sleep from Europe, given the great dependence for their manufacture and assembly on Taiwan, at the forefront of Beijing’s aims, which considers it a piece of its own territory to be restored. Taiwanese manufacturers were inundated with orders and there was a rush to get the chips before the rest. And at the same time they are trying to diversify supply chains not to depend too much on Taipei.
The European Union has a digital development plan that plans to significantly increase investments in semiconductors e get to produce 20% in-house (from the current 10%) of total world production, as well as lowering the size of semiconductors produced to 2 nanometers. Here too, the goal is to try to become at least in part self-sufficient and shelter from the geopolitical storms caused by the ongoing challenge of semiconductors and nanometers.
There are also those who have moved in advance. In particular Germany. First with a negotiation with the Taiwan Semicondutor Manufacturing Company, the famous TSMC, world super leader with over 50% of the global semiconductor production share. Negotiation that should lead to the construction of a TSMC plant in Dresden. It would be his first in Europe. Even if the subsequent Siltronic case risks calling into question.
An offer from 3.5 billion euros from Taiwanese Global Wafers for the German company Siltronic it has in fact fallen on deaf ears due to a legal quibble. Or perhaps for something more, with a Beijing “interest”. A big problem for Europe, which has to chase after the Asian giants on semiconductors. The government asked the Taiwanese company to formulate one second offer but in response the company said it would focus on new projects in the US.
But beware of the EU’s bombastic announcements. The domination of Asia still seems difficult, indeed very difficult, to scratch. TO today Taiwan has 65.8% of the global manufacturing and assembly share, with Tsmc alone weighing 55.3%. The domain is even more extensive from a qualitative point of view. In an industry where “smaller is better”, Taiwanese manufacturers hold the 92% of the chip manufacturing with less than ten nanometers, with the remaining 8% in the hands of South Korea.
The first 11 ODM manufacturers (Original Design Manufacturers) in the world are all Taiwanese, as are seven of the top ten contract manufacturers. In Taipei it is convenient to maintain this diplomatic lever towards Beijing. Not surprisingly, given the possible partial jamming of that diplomatic lever, Taipei asks Washington for a less ambiguous strategic ambiguity.
And pay attention to the imperious step of Beijing. Coinciding with the announcement of the US plan, the Chinese media Caixin released data on Beijing’s investments in the semiconductor sector, which in 2020 reached the figure of 35.2 billion dollars. A monstrous increase of + 407% compared to the amount spent in 2019. If we move to 2021, in the first five months of the year in China 15,000 and 700 new companies operating in the semiconductor industry were registered, from design to chip manufacturing.
According to internal sector reports, the chip manufacturing plants in China (between those already operational and those under construction) are now 91: a year ago it was 66. They had already doubled between 2017 and 2019. Achieving production at the highest standards of quality could be 5 or 6 years away. But state subsidies are steadily increasing and the ongoing digital giants rectification campaign is redirecting big names like Alibaba or Tencent on the industry. Operators fear that in ten years, thanks to government subsidies, Chinese companies could upset the world market by producing below cost and upsetting demand.
And the other East Asian countries are also on the move. Especially South Korea, which it intends to put on the plate 450 billion. More than Japan, which has seen its market share plummet from 50 to 10% since 1990. Tokyo has set up a task force on the subject, with the direct involvement of none other than the former prime minister Shinzo Abe.
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