Chips with everything: Europe’s bid to build a different kind of silicon valley 

The EU Chips Act hopes to more than double Europe's chip production, but will this belated move be enough to undo decades of slump, asks Jason Walsh

28 July 2023

Doubtlessly it was a veritable beanfeast in boardrooms across Europe this week. At least in those of the continent’s forlorn semiconductor manufacturing sector.

Finally approved this week by the Council of the European Union, the EU Chips Act, amounts to a €43 billion subsidy to chipmakers to aid the building of new fabs in Europe, aiming to increase market share of chips produced in Europe from a paltry 10% today to 20% by 2030.

Having withered on the vine, European companies are now being asked to get silicon flowing. If nothing else, the cash will likely be a boon for the industrial spine of Europe that runs from the Benelux countries down the Franco-German border and into northern Italy. Central and eastern Europe can also expect to benefit, as can Ireland.




It’s worth considering the scale of demand for silicon: global production of microchips reached 1.1 trillion units in 2021. And then there’s the labour shortage. A study published jointly this week by the Semiconductor Industry Association (SIA) and Oxford Economics estimated that, in the US alone, the industry would be short 67,000 workers by 2030.

Despite a glut of supply, chipmakers see gold in the AI boom and are now telegraphing that the current downturn in production is very much temporary.

Put bluntly, the new EU Act aims to ensure that when production does ramp up not all of it occurs in Taiwan and Korea.

Manufacturing is back

Similar plans are underway in the US. Shares in the beleaguered Intel rallied overnight on news that the company beat analyst earnings predictions. In the middle of a major transition, Intel hopes to not only boost its own manufacturing capacity, but also become the manufacturer of choice for the many fabless chip designers now worried about supply chain bottlenecks.

Indeed, the US government’s own 2022 Chips and Science Act is intended to undo the work of decades of off-shoring semiconductor production to the Far East. One result of this push for supply guarantees in the face of increasing geo-political instability is the somewhat ironic arrival on US shores of the Taiwan Semiconductor Manufacturing Company (TSMC), which had been the single greatest beneficiary of US chip companies hiving off production.

Whether or not the EU’s bung to foundries will work remains to be seen. Certainly, doubling chip production in the bloc in just six and a half years is an ambitious goal. And, in fact, as chip production increases globally, going from 10% to 20% would require more than doubling, but we’ll leave that for the moment.

If the fact that ASML, once an unloved subsidiary of Philips, is Europe’s most valuable tech company does not spark a realisation on the importance of chip manufacturing then it is hard to know what would. 

ASML, which manufactures the photolithography machines used to create patterns on silicon wafers, which are then used to manufacture integrated circuits, was virtually unknown to those outside the industry just a few years ago with ‘tech’ investors and talking heads seemingly more interested in discovering the latest food delivery or automated dog-washing app. 

Making stuff? That’s boring!

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