EU's €320B Decision to Compete with US for Chip Dominance

• 2024-09-02
• News

The European Parliament has made a significant investment of €43 billion to reshape Europe's position in the semiconductor industry. With an investment equivalent to 320 billion yuan, can the EU achieve autonomy in the chip industry chain? Is the EU's move in response to the US "Chips and Technology Act," or does it plan to compete with the US in the chip field?

The EU has allocated 320 billion yuan to subsidize European semiconductors.

According to reports, on April 18, the EU officially reached a consensus on the subsidy amount for the "European Chips Act."

The European Council and the European Parliament decided to provide a subsidy of €43 billion to the European semiconductor industry, which is equivalent to 320 billion yuan!

This time, the EU is sparing no expense to ensure Europe's security in the chip industry.

According to the content published in the "European Chips Act," the EU plans to enhance the resilience and strength of the European semiconductor ecosystem, ensure Europe's chip production capabilities, and reduce dependence on external sources.

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To this end, the European Commission has established three main action guidelines. First, it is to set up the "European Chips Initiative," using large-scale subsidies to support the construction of technical capabilities of European semiconductor companies.

The EU plans to use a €43 billion subsidy to strengthen Europe's capabilities in new product design, manufacturing, and packaging.Secondly, Europe intends to use this massive subsidy to increase the production capacity of European semiconductor companies, aiming to account for 20% of the global semiconductor production capacity by 2030. To achieve this goal, Europe's chip output must triple its current production. However, the key enterprises and markets that currently dominate the world's semiconductor manufacturing and exports are concentrated in Asia. In order to gain a technological advantage in the semiconductor field, countries such as China, the United States, Japan, and South Korea have invested tens of billions of dollars in developing their own semiconductor production and manufacturing capabilities. Europe does not want to be left behind in this competition.

Although Europe has semiconductor giants such as STMicroelectronics and NXP, similar to China's focus on chip packaging and testing processes, European semiconductor companies place more emphasis on the design and manufacturing of equipment in the upstream of the chip industry. Therefore, to promote the integration of the European semiconductor market, the European Union plans to establish a coordination framework that can not only monitor the supply of Europe's semiconductor supply chain but also hopes to establish a coordination mechanism with the United States, Japan, South Korea, and even the Taiwan region to ensure the security of Europe's supply chain.

In the future, the dependence on chips in the new energy industry and high-tech enterprises will become more severe. To ensure that its new product supply chain will not be suddenly "choked," the European Union will inevitably significantly increase subsidies and investment in the European semiconductor industry. It will also inevitably compete with the United States, which is actively seeking "chip dollars."Aiming to Compete with the United States?

Is Europe's current large-scale subsidy for European semiconductor companies intended to compete with the United States?

In fact, in the short term, the European semiconductor industry is not yet capable of truly competing with the United States.

However, in the long run, with the European Union's massive subsidies and support for European local semiconductor companies, it is inevitable that competition will form between Europe and the United States in the semiconductor field.

This is because semiconductor companies are different from traditional companies.

Usually, companies that master advanced technology will form a technological advantage over the entire industry, leading to a "winner-takes-all" situation, earning most of the profits in the industry.

The "winners" in the industry will then reinvest most of the profits earned into the development of the next generation of technology, creating a technological gap.

This causes the gap between companies in the industry to widen.

In the semiconductor field, European semiconductor companies hold an advantageous position in the upstream of the chip industry. The three major semiconductor companies, Infineon, NXP, and STMicroelectronics, are the three giants in the upstream of the European chip industry chain. Germany's Zeiss, the Netherlands' ASML, and Belgium's PFAS (perfluoro and polyfluoroalkyl substances) production bases, among others, firmly place Europe in the upstream of the chip industry.

However, this also makes Europe lag behind Asian countries and the United States in manufacturing, packaging, and other technologies.At the beginning of the 21st century, Europe held a 20% share in the global semiconductor market, but in recent years it has plummeted to 8%.

Even with massive subsidies, Europe's semiconductor industry cannot compete with the United States in the short term.

However, what about the long term? Since Europe is seeking autonomy in the chip supply chain, how can it avoid competition with the United States?

Although Europe and the United States each have their strengths in different areas within the semiconductor industry, under the unspoken rule of "winner takes all" in the chip industry, the two will inevitably move towards confrontation.

The main advantages of American chip companies are concentrated in the fields of communication, mapping, and computer equipment, while European semiconductors are concentrated in the automotive and industrial chip sectors.

NXP, a European company, is a representative of traditional automotive semiconductor suppliers; Infineon is a giant in the supply of integrated European semiconductor chips.

When formulating the next generation of "chip development plans," both the United States and Europe have unanimously focused on the production capacity of chips below 5nm.

As indicated in the "European Chips Act," the EU also plans to strengthen Europe's capabilities in the manufacturing and testing of new-generation automotive smart chips and industrial chips to ensure that the European chip supply chain has sufficient chip production and supply capabilities.

However, the EU's ambitions do not stop there.

In the main development direction of Europe's semiconductor industry in the future, the EU is not satisfied with the traditional advantages of European chip design, such as establishing processor structures based on RISC-V (open-source reduced instruction set computer architecture).The European Union also plans to integrate the entire semiconductor industry chain. For instance, the bill intends to plan a large-scale chip design platform that can be used by all European semiconductor companies. Within this platform, the innovative design capabilities of European semiconductor companies will be integrated to achieve the integration of European EDA (Electronic Design Automation) software. Through this integrated platform, preparations will be made for future European chip design, production, and R&D. This includes FD-SOI processes ranging from 10nm to 7nm, and even cutting-edge node processes below 2nm.

Furthermore, the EU also intends to enhance Europe's design capabilities in quantum chips by establishing a complete industrial base that includes design libraries, pilot lines for integrated quantum circuits, and packaging and testing production.

In terms of RISC-V and FD-SOI, it's not just Europe that is pursuing these technologies; China is also racing in this arena.

The "Chip Battlefield" of Three Competitors

In the race to integrate the chip supply chain, there are currently enough powerful entities to integrate the entire industry chain, in addition to Europe and the United States, there is also China.

The United States, leveraging its strong technological advantages and economic strength, can integrate advantageous industries on a global scale, forcibly relocate TSMC, and collaborate with South Korea and Japan to ensure that the United States can lead the entire chip industry chain, thereby ensuring a limited supply of American chip shortages.

Europe, on the other hand, can rely on its own foundational advantages in the semiconductor industry to integrate chip manufacturing suppliers within the EU. Additionally, it can build collaborative frameworks between Europe and America, as well as between Europe and Asia. Although its strength is lower than that of the United States, the external interference and resistance during industry integration are far less than internal challenges.Among the three, China faces the greatest difficulty in integrating the chip supply chain and is also the weaker of the three parties. However, China has the most momentum and potential in the pursuit.

China is not only chasing in the 14nm to 7nm race through SMIC, but also "betting" on multiple tracks such as FD-SOI at the same time.

In terms of chip design architecture, like the EU, China is also seeking breakthroughs in RISC-V.

This provides aBecause the United States, with its advanced and mature technological advantages, does not pay as much attention to other tracks as China and Europe do. Both Europe and China have a strong driving force to integrate and perfect their own advanced chip industry systems. According to NXP Semiconductors CEO Kurt Sievers, the EU's investment this time is far from enough to achieve the goals set by the European Chips Act. If Europe wants to restore its chip production to 20% of the global share, it will need to increase the funds to at least 600 billion euros. However, the EU is far from as wealthy as China and the United States. The EU cannot afford so much money. If Europe wants to restore a complete semiconductor supply chain and attract investment, cooperation is a necessary means. And if a large amount of American funds are introduced, it will pose a huge challenge to Europe's chip industry chain autonomy. In fact, if China and Europe cooperate in the chip field, it will be of great benefit to both sides. However, in the current sensitive chip field, will Europe do so?