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For two years we’ve been hearing about how the EU is going to be a major player in the semiconductor industry again, only to find out that the financial backing of the plans falls woefully short.
“The objective to more than double Europe’s share in microchip production is very ambitious – some might even say unrealistic – but our view is this: without healthy ambition, there can be no progress,” writes ASML in a position paper that underlies the recently presented European Chips Act proposal. How realistic is the EU’s ambition, exactly?
It should be noted that the EU targets more than manufacturing dies. Much more. The European Commission wants a full-fledged ecosystem that spans the entire semiconductor supply chain and technology spectrum. It wants to build this from the ground up, boosting R&D, establishing large-scale design capabilities and deploying pilot lines for manufacturing, packaging, testing and system integration of next-gen chips. These efforts will extend beyond standard CMOS to include emerging technologies such as disruptive sub-2nm process technology (eg graphene-based transistors), quantum and neuromorphic computing and integrated photonics.
Obviously, the Commission can’t afford to wait until these activities come to fruition. If the EU is to become “a leader in the semiconductor markets of the future” with a 20 percent global market share in manufacturing by 2030, quadrupling current production is required since the market is expected to double within that timeframe. This can only be achieved by luring the world’s top chip manufacturers to Europe with billions in cash incentives. Since this has traditionally been illegal under state-aid rules, the Commission proposes to relax them – but only for the express purpose of improving the EU’s semiconductor clout.
Working both bottom-up and top-down simultaneously to catch up with Asia and the US in multiple technologies is going to be expensive. The EC’s figure is 45 billion euros: roughly 11 billion for developing ‘European’ chip technology, 5 billion for a chip investment fund and the remaining 30 billion or so for fab funding. Brussels’ own contribution is very limited: about half of the R&D component, that’s it. The burden of saving the European semiconductor industry, therefore, falls mostly to member states and companies. Their contributions are included in the 45 billion figure, but their commitment isn’t.
Compared to public semiconductor investments in other countries, 45 billion euros is low. The US, too, has set aside 45 billion euros (52 billion dollars), but that’s all government money. On top of that, a number of US states are known to offer incentive packages to chipmakers. China is estimated to spend 150 billion dollars in the 2015-2025 period. Through tax breaks, lower interest rates and other measures, the South Korean government has incentivized its semiconductor sector to invest an eye-watering 450 billion dollars.
Even set against the capital expenditure of a single company, 45 billion euros isn’t a lot. TSMC has announced a capital expenditure of 35-38 billion euros for 2022, and that kind of money will keep coming year after year. In fact, the budgets will get bigger every year. The EU’s 45-billion budget, by contrast, stretches over multiple years.
To gain market share, you have to either outspend or outsmart the competition. The former clearly isn’t going to happen, the latter is a long game. The EU’s target of 20 percent market share by 2030 is therefore completely unattainable. It’s disappointing to see that kind of lofty ambitions getting thrown around for two years, only to see them backed up by such a flimsy budget. ASML may believe any progress is useful, but this is simply not enough.
Main picture credit: EC – Audiovisual service
