The global semiconductor industry plays a critical role in the functionality of numerous electronic devices, ranging from smartphones and toys to electric vehicles and advanced weaponry. However, the COVID-19 pandemic and subsequent border closures have created a shortage of chips, causing significant disruptions in the tech industry throughout 2020 and 2021. This crisis has prompted governments worldwide to take action, with the United States and China going to great lengths to secure their chip supply chains. But what is Europe doing to address this issue?
Europe has put forward a proposal to strengthen investments in the semiconductor industry through the introduction of the Chips Act. Currently navigating its way through the EU’s legislative processes, this act aims to unlock a staggering 43 billion euros ($49 billion) in investment from both public and private entities. The ultimate objective is for the European Union to capture 20 percent of the global chipmaking market by 2030, which would require a quadrupling of its current chip output.
Germany Takes the Lead
Among European countries, Germany has emerged as the frontrunner in chip manufacturing investments. Merely two months prior to this announcement, Berlin brokered a deal with Intel involving the construction of a 32-billion-euro plant. Germany has also secured substantial agreements with the US firm Wolfspeed and the domestic company Infineon earlier this year. However, the Intel deal faced some controversy due to the significant increase in estimated costs, and sources suggest that the government pledged 9.9 billion euros in subsidies. Similarly, France has made its mark in this race by committing to a 2.9 billion euro investment in a plant operated by European multinational STMicroelectronics and American company GlobalFoundries.
While the United States and China have resorted to restrictive measures to isolate their respective chip industries, the European Union has yet to formulate a unified response. The EU has called on both sides to ease their measures, as they pose obstacles for European companies. However, individual countries within Europe have taken independent initiatives to safeguard their interests. The Netherlands, a key player in the sector due to equipment manufacturer ASML, announced plans to implement export controls in September. This move is widely perceived as an attempt to impede China, influenced by pressure from the United States. Furthermore, Germany blocked the sale of two chip companies to China in 2020, citing national security concerns.
The landscape of the semiconductor industry spans multiple continents, with global interdependencies at every stage, from design and manufacturing to end-use. China stands as a major producer of the raw materials required for chip production, including silicon, germanium, and gallium. Taiwan, the home of leading chip manufacturers, accounts for over half of the global chip output. Conversely, prominent chip designers such as NVIDIA and equipment makers like Apple primarily operate out of the United States. According to the Semiconductor Industry Association, American firms held a 48 percent share of the global industry in the previous year. South Korea, propelled by companies like Samsung, secured the second-largest slice with a 14 percent market share, while Europe followed closely behind with a nine percent share.
In a rapidly digitizing world, the race for dominance in the global chip industry has intensified. Europe’s ambitious plans, exemplified by the proposed Chips Act and strategic investments from Germany and France, demonstrate the continent’s determination to catch up with the United States and China. However, the lack of a coordinated response by the European Union raises questions about the ability to effectively compete on a global scale. As the industry transcends borders, collaboration and a united approach are key to securing Europe’s position as a formidable force in chip manufacturing. The stakes are high, and time will reveal whether Europe’s efforts will propel it to the forefront of the semiconductor industry.
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