How the EU Intends to Fix the Chip Shortage

The Ford plants in Cologne and Saarlouis have to throttle their production due to a lack of microchips – similar steps had already been taken by Daimler, Audi and other car manufacturers. In contrast, the chip manufacturers’ plants are running at full speed. Business is going so well that the Infineon Group has further raised its forecast for the current year and is now expecting sales of eleven billion euros. Investments are also to be expanded. The opening of a new plant in Villach, Austria, was brought forward by three months to September, but that will not change the acute semiconductor shortage, explains Infineon boss Reinhard Ploss. “In most fields of application, the demand clearly exceeds the supply,” says the manager. Infineon sees bottlenecks primarily in those segments that are served by contract manufacturers. And they are mainly based in Asia.

Great dependency on manufacturers from Taiwan: Taiwan alone has two-thirds of global capacities for contract manufacturing of chips and processors. The reason for this is the outstanding position of TSMC (Taiwan Semiconductor Manufacturing Company), a globally dominant group that manufactures three quarters of its semiconductors on behalf of external customers. TSMC is also the world’s largest producer of the component that the automotive industry is particularly lacking: the Microcontrollers. The market research company IHS Markit found that 70 percent of the demand for these chips comes from the factories of TSMC. EU wants to significantly expand Europe’s semiconductor production This dependence on Asia is a thorn in the side of the Europeans. Inspired by the model of the European battery alliance, in which numerous companies are working to build up a European car battery production with state aid, a Europe-wide semiconductor alliance is now also to emerge. The driving force behind the project is EU Internal Market Commissioner Thierry Breton. He has set himself the goal of doubling the share of Europeans in semiconductor production from ten to 20 percent by 2030. He is particularly interested in the extra-thin nanometer chips, which are currently only manufactured by Asians and Americans.

Semiconductors are everywhere “In an interview with the” FAZ “last week, Breton said that building chip factories in Europe is not only important in view of the current bottlenecks, but also because semiconductors are needed everywhere nowadays.” They are the key technology for 5G and 6G, autonomous driving, Industry 4.0, the Green Deal. “Today everyone was talking about the storage of data in the cloud. In the future, the importance of decentralized data processing, the” edge computing “, will play an even greater role.” We need semiconductors for this too “, so Breton. Now it is a matter of bringing the industry and the states together within the framework of the European semiconductor alliance in order to initiate the necessary investments. In plain language this means that the Europeans need the support of the manufacturers from Asia and the USA. Corporations like TSMC, Intel or Samsung, if they are ready to set up new plants in the EU, billions of euros can be won, because European manufacturers are off Can’t seem to be able to manufacture the latest microprocessors without the help of Asian or American chip companies.

Breton therefore met with Intel boss Pat Gelsinger last week to find out under what conditions Intel can get involved in the EU and participate in the European semiconductor alliance. It was mainly about money. French newspapers report that Intel is demanding aid of eight billion euros to build a chip factory that will cost at least 20 billion euros. Intel is based on the customs in Asia, where subsidies of 40 percent are common. Neither the industrial commissioner nor his environment wanted to comment on the sums. Much greater is the problem that the Asian manufacturers, above all TSMC and Samsung, apparently do not want to participate in a European semiconductor alliance, as reported from Brussels. Catching up the deficit in two years In the coming week, Breton will meet with the bosses of the Dutch Semiconductor manufacturers NXP and ASML. But even if industry plays along and tax money flows in, it will be years before Europeans improve their position on the world market. Breton is more optimistic. He believes that the gap can be made up in two years, which is not too late. “We have everything we need to catch up,” said the Frenchman. In addition, the latest announcements by corporations such as Bosch and the US giant Globalfoundries show that Europe, especially Germany, is a sought-after location – if the public sector gives them generous support.