Can Europe be a real player in advanced computer chips?
Disruptions caused by natural disasters, accidents, infrastructure failures, cyberattacks and geopolitical tensions expose the fragility of a chip supply chain that puts every sector of the EU economy at risk of disruption
By Jon Van Housen and Mariella Radaelli
Published: Wed 21 Dec 2022, 7:24 PM
In the mid-19th century, Europe was the cutting edge for a new technology that would transform civilization – steam power. Use of steam locomotives and industrial engines would bring the world closer, open up new continents and possibilities, and enable people to discover, inhabit and harness lands across the four corners of the Earth.
Similar to the steam engine, the computer chip of today, as the semiconductor is generally known, is among general purpose technologies that have revolutionized progress and economic growth. Like steam power of old, computer chips have an astounding range of uses. They are so ubiquitous in our modern world they are in almost everything that performs a function.
And the tiny chip is impressive on many levels. Semiconductor technology is so profound it stretches from the atomic-scale world to global geopolitical challenges, a reach made particularly obvious by the Covid-19 pandemic that exposed how long the chip supply chain is. An unprecedented shortage of computer chips since late 2020 has created a bottleneck that damaged industries and caused prices on many items to soar.
In 2021, the semiconductor industry surpassed the trillion chip mark for the first time as output reached 1.1 trillion chips, or about 140 for every person on Earth. The global chip market was then worth $614 billion, up 25 per cent over the previous year. A smartphone incorporates around 160 different chips, while hybrid electric cars employ up to 3,500. Analysts estimate that the market could reach a value of $1 trillion in 2030.
The extreme complexity of the global supply chain exposes it to a wide range of potential disruptions. It is a fragile arrangement with a high level of geographic concentration and specialization, an interdependence between suppliers and is staggeringly capital-intensive – a fabrication facility for advanced logic and memory chips costs around $20 billion.
A large semiconductor firm may rely on as many as 16,000 suppliers worldwide through a global supply chain that has more than 50 potential chokepoints where one region holds more than 65 per cent of the global market share.
Disruptions caused by natural disasters, accidents, infrastructure failures, cyberattacks and geopolitical tensions expose the fragility of a chip supply chain that puts every sector of the EU economy at risk of disruption.
And unlike innovations of yore, Europe badly lags in production of the crucial core component. In an attempt to catch up, the European Commission, the EU’s executive and administrative body, has announced plans to invest 43 billion euros in an effort to lure computer chipmakers to set up factories, joining the global race for production and control of the crucial technology.
And the bloc has some surprising advantages, including the Dutch firm ASML, which has the worldwide monopoly on extreme ultraviolet lithography machines required to make advanced chips.
Another global giant in the field is Carl Zeiss in Germany, the only manufacturer of the mirrors and lenses used in the world’s most advanced chipmaking equipment. Its ultra-precise mirrors and lenses are so accurate that they are 200 times more precise than telescopes used in outer space.
Europe also has one of the world’s top research hubs at IMEC, a nanotechnology research center outside Brussels that is used by the most advanced chipmakers to build prototypes.
Responding to the European Commission’s outreach, US chip giant Intel has pledged an initial investment of 33 billion euros in the bloc including 17 billion for a sprawling facility in Germany. European chipmakers STMicroelectronics and Infineon are also expanding their facilities, while the bloc’s effort is also trying to attract a facility by Taiwan Semiconductor Manufacturing Co, the world’s largest contract chipmaker with more than 50 per cent of the global market.
Brussels hopes to double the EU’s share of the global semiconductor market from less than 10 per cent today to 20 per cent by 2030.
But in the race to develop more powerful chips that pack more into tiny spaces, the decline of Europe’s mobile phone industry had left the continent without obvious customers for such advanced chips.
There are no chip designers in Europe who work in 7 nanometer and below levels while the current global leaders are exploring possibilities in the 3 nanometer range. None of the world’s top 10 chip designers are based in Europe.
Of the 80 or so new chip facilities to be built between 2021 and 2025, 10 will be built in Europe compared with 14 in the US and 21 in Taiwan, according to industry groups.
When Ursula von der Leyen became president of the European Commission in 2019, one of her signature programs was entitled “A Europe Fit for the Digital Age”. With most global Internet companies based in the US and hardware production centered in Asia, it was clear Europe was then simply a consumer of digital products from other regions, leaving it vulnerable to the vagaries of foreign laws and international relations.
Whether it can become a truly global player remains to be seen, but Europe certainly has the intellectual and financial firepower needed. What remains to be shown is its stubborn determination in action over the long haul.
- Jon Van Housen and Mariella Radaelli are international veteran journalists based in Italy