The EU Invests in the Semiconductor Industry

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A Shortage of Semiconductors

In 2021 and 2022 the world has experienced a shortage of semiconductors that forced companies to scramble for solutions. Many have been forced to temporarily close down production several times because of the shortage and the number of vehicles produced has dropped.

The shortage has led many national governments, as well as the EU, to take measures to support the development in the semiconductor industry in their respective countries. The US and India are among the countries that have launched multi-billion dollar programmes to support semiconductor development in their countries.

Asian countries, especially Taiwan and China, but also Japan are the leaders in the global semiconductor industry with a market share of 75 percent. The share of European countries has since the 1980’s shrunk to 9 percent.

Covid -19 has showed the world how vulnerable it has become to trade disturbances, that has resulted in global shortages of semiconductors and created the insight among politicians that the supply of semiconductors is a strategic issue with a strong impact on economic development. Governments have decided to invest in the development to increase the share of chips that are made in their countries and in the EU.

Use of Semiconductors

Chips are used in all advanced products, such as computers and smartphones, and they are critical to their functionality. In a car, there are 1,500 chips with a total value of 500 dollars and by 2030 these figures are expected to increase to 3,000 chips with a value of 1200 dollars, according to the EU document “A Chips Act for Europe.”

Semiconductors are also used in other types of equipment that are also critical for the functioning of society. They are used in industrial machinery, medical equipment, and in various types of military equipment.

Semiconductor Production

Chip production is the most advanced production process on the planet. Designs are made on the nanoscale, which means that production is done on the atomic and molecular levels. 100,000 transistors fit on an area the diameter of a human hair, and several layers of transistors are stacked on top of each other.

There are more than one hundred steps in a typical production process and production takes six months from start to finish.

A Chips Act for Europe

The EU has set aside financing of 43 billion euros for the development of the semiconductor industry. The Chips Act consists of three “pillars:”

Pillar 1: The Chips for Europe Initiative – an investment programme for the development of key European resources for semiconductor development, which will receive an estimated 11 billion euros.

Pillar 2: A Framework to Ensure Security of Supply – a framework to speed up investment and make sure that investments are directed towards key strategic areas of the market.

Pillar 3: Monitoring and Crisis Response – the implementation of mechanisms for the monitoring of semiconductor markets to facilitate rapid response and action when crises appear in the future.

Pillar 1 includes investment in a pan-European virtual design platform, investment in competence centres and skills development, investment in new pilot lines that address the most advanced technologies, investment in advanced technology and engineering capacities for quantum chips, and management of the intellectual property.

Pillar 2 includes investment in new production capacity in the EU, for example the establishment of first-of-a-kind facilities.

Pillar 3 includes measures to make it possible for the EU to monitor the supply chain for semiconductors to be able to predict shortages and act before problems strike.

Effects of the Act

Due to long lead times for investments in the semiconductor industry, it will take time for the chips act to take effect. Professionals who work with chip design are engineers with advanced degrees. Many are PhD’s. If the number of students that are trained in various semiconductor-related disciplines, it will still take years until the number of trained professionals increases out there.

In “A Chips Act for Europe” the authors describe the lead times of technology development and use in the following way:

“Today’s efforts will shape the type and scale of production capacity available in the EU in 2030. A semiconductor fabrication plant typically requires two years to build and another one to two years to optimise production processes. Investments now will allow increased production capacity in the EU as of 2025-26 in more mature nodes. And investments now in leading-edge nodes, starting with advanced pilot lines, are needed to develop knowledge and skills and be able to translate such investments in new production capabilities at 2 nm or below around 2028-2030 in Europe.”

There is no stated goal for the growth in market share for European companies through the Chips Act. This will clearly depend on other factors as well, including how much is invested in other regions and countries across the world. Shortages have been a recurring phenomenon over the decades since the start of the development of computers, but no previous shortage has been as severe as the present.

Clearly, the increasing focus on semiconductors in Europe opens up substantial business opportunities for investors and companies that are already active in the industry. The investments are also likely to increase the demand for employees with training in the various disciplines related to the industry, from chip design to production-related jobs.

My latest book on innovation and the transformation to sustainability is “The Blind Guardians of Ignorance – Covid -19, Sustainability, and Our Vulnerable Future” and the first one of these was “The Transparent Market,” written together with David Lundberg. In “The Transparent Market” we discussed the future of electronic business. The book was published in 1998, when most experts still did not see that most companies soon would do business on the Internet. My first book about the transformation to e-mobility was “Global Energy Transformation” in 2009.

Mats Larsson Mats is a business and sustainability consultant with 30+ years' experience. In the past 15 years he has written extensively about the large-scale transformations to electromobility and a circular economy that are in their early phases, but also worked with business development in many other high-tech and sustainability areas. He is an experienced project and change manager, has developed strategies for companies in a wide range of industries, and likes to tackle subjects of importance for the development of society. He was one of the first to write a book about e-business strategy, "The Transparent Market," written with David Lundberg and published in 1998.

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