Europe's semiconductor industry, which has declined over the years, is now experiencing a potential turnaround, marking a significant development in the escalating tech war between the US and its allies and China. Despite Europe's advanced technology and substantial economy, its chip industry accounts for only a fraction of Japan's and less than half of the US's silicon wafer processing capacity. The private sector and the EU bureaucracy are working to reverse this decline, but some politicians' hyperbolic statements are clouding the reality of the situation.
EU Commissioner for Internal Market Thierry Breton's recent remarks at the IMEC Technology Forum emphasized Europe's determination to lead in semiconductors and not be left behind in any "underground technological battle" between blocks. However, there is no secret battle, but rather a widely known and highly politicized conflict between the US and its allies and China. The challenge faced by Europe is similar to that of the US, with limited production capacity and a high dependence on Taiwan, particularly TSMC.
Europe's global integrated circuit wafer capacity share is only 5%, significantly lower than the Americas, Japan, China, Taiwan, and South Korea. To address this, the European Chips Act was enacted to increase Europe's share of the global semiconductor market to 20% by 2030, with a 43 billion euro ($46.4 billion) package of public and private investments. The Act also aims to diversify the industry and develop expertise in emerging areas like artificial intelligence, 6G mobile telecom, the Internet of Things, and quantum computing.
Europe's strategy involves partnerships, investments, joint ventures with foreign companies, and direct investment in production facilities. The goal is to rebalance and secure supply chains, reducing dependence on Asia. However, regaining 20% of the global semiconductor market may be challenging, as other players like the US, Japan, and China are also making substantial investments in their semiconductor industries.
China's approach focuses on mature process nodes rather than accelerated miniaturization, aiming to develop comprehensive expertise step-by-step. China already has significant semiconductor production capacity but needs to invest heavily to overcome US sanctions. Europe's semiconductor makers, particularly those in the automotive industry, have significant business interests in China and could play a crucial role.
While Europe sees China as both a market opportunity and a strategic risk, punitive actions from politicians could have adverse consequences for European companies and automakers. As long as harsh rhetoric prevails over sanctions, European automotive IC makers should continue to thrive in China.
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