EU Chips Act needs to create a competitive microelectronics ecosystem based on market demand

The current semiconductor supply shortages are affecting numerous European companies across all industries.  A new semiconductor strategy paper by ZVEI  and a member of DIGITALEUROPE - shows that policy action must now focus on securing supply for all different sizes of microchips to support key sectors of the economy like manufacturing, consumer electronics and healthcare. Besides public funding, Europe also needs a favourable business environment to build a thriving microelectronics ecosystem.

Building upon the ZVEI study, DIGITALEUROPE has laid out several recommendations:

• The EU should expand production capacity after careful analysis driven by market demand, not just political imperatives. 

• Industry needs both chips of larger structure sizes  as well smaller ones. This will also be the case decades from now. “Leading edge innovation  ” or “beyond state-of-the-art innovation” is not only about structure-size. It can also refer to new production processes, materials, equipment, or other innovations along the whole value chain .   

• The EU is way behind on public funding, but this is just one aspect. The announced EU Chips Act must also include creating a more favourable environment for investments, like tax incentives, construction permits and boosting skills.

• The new European Semiconductor Alliance is the most promising group to work on this. It must bring together designers, producers and users of chips, together with industry stakeholders and EU Member states, to align on clear KPIs and a clear timeline.

• The semiconductor market is by nature global and will remain so. We must use fora like the EU-US Trade and Technology Council to improve global supply chains.

Cecilia Bonefeld-Dahl, Director-General of DIGITALEUROPE, said:
“A huge range of products from games consoles to medical devices and cars rely on a stable supply of semiconductors. The current shortage is a huge issue, and businesses and consumers are starting to feel the pinch.  The proposed EU Chips Act must listen to industry to see what the needs are, and not just be driven by politics. We of course need more funding, but the right way to make Europe a global semiconductor hub is to create a supportive business environment through incentives and skills.”

Wolfgang Weber, CEO of ZVEI, the Electro and Digital Industry Association, said:
“Semiconductors are the backbone of Europe’s digital and green twin transition and of high relevance for every industrial sector in Europe, from automotive to machinery, from start-ups to global enterprises.  We need to expand production capacity for chips of all structure sizes, in line with market dynamics. In the coming decades, Europe's downstream industries will need both high-performance processors in smaller structure sizes and power electronics, sensors, or microelectromechanical systems (MEMS) in more mature structure sizes. The demand for power semiconductors alone will triple by 2030.”

Background

• The European Commission recently announced an European Chips Act and Commissioner Thierry Breton declared the EU’s ambition in increasing capacity of semiconductors in the range of 5 nanometers (nm) and below. 

• This strategy is aimed at tackling a decline in Europe’s share of global semiconductor production from 22 % in 1998 to 8 % today, while other regions in the world have gradually introduced a more favourable business climate. 

• The sum of EU governments’ semiconductor incentives foreseen from 2020 to 2030 is just a tiny fraction of what respectively China and the US have promised over the same time.