Europe has the potential to increase its competitive position in the global semiconductor market thanks to the increased importance of logic circuits in chip production, which is well positioned, and the relative decline in memory and processor sales, controlled by Asia and the US, due to the collapse of the smartphone and PC market. The construction of a new Infineon semiconductor plant in Germany and the possibility for TSMC to manufacture chips also in Germany together with a consortium of European manufacturers may improve the EU’s position in the strategic global semiconductor market.
The global semiconductor market has suffered dramatically in the last six months, with global dollar sales expected to fall by 11% this year, according to the Gartner consultancy. The slowing economy and rising global interest rates also make it less profitable and attractive for chip manufacturing plants located outside Taiwan, South Korea or China, such as the United States, where the vast majority of the world’s semiconductor manufacturing complexes are now located.
The projected reduction in global semiconductor turnover in 2023 is a direct result of the sharp drop in sales of personal computers, smartphones and tablets that has occurred over the last year and a half worldwide. This has led to inventory excess and cancellations of orders for the most chip-intensive products with very high prices and profit margins for manufacturers.
The world market for integrated circuits, which accounts for about 85% of the total semiconductor market, is divided into four major parts, which in order of importance are logic circuits, semiconductor memories, analogue circuits and processors. The decline in sales of smartphones and computers has meant that the weight of memory and processors in the global semiconductor business, controlled almost entirely by Taiwanese, Korean and US chipmakers (TSMC, Samsung, Intel and SK Hynix), is less important than logic and analogue circuits, where European and Chinese manufacturers have greater control, and will increase with the rise of the electrical car market.
Many chips for industrial control, telecommunications and automotive applications are manufactured in Europe by companies such as Infineon, NXP, ST Microelectronics and Bosch, which are little known to the general public because their products are not sold individually but embedded in electronic equipment. Europe also has the world’s largest chip manufacturing equipment manufacturer, the Dutch ASML, which supplies its most innovative products, extreme ultraviolet lithography, almost exclusively to TSMC, Samsung and Intel, because it has been banned from selling this equipment to China.
On 3 May, the foundation stone was laid for a new semiconductor production plant to be built by Infineon in Germany, near Dresden, with an estimated investment of $5 billion and relatively modest subsidies of 20%. The first step during construction works was presented by the German Chancellor Olaf Scholz and European Commission President Ursula von der Leyen to raise the profile of the event, emulating what US President Joe Biden did at the groundbreaking ceremonies for Intel and TSMC chip factories in Ohio late last year. Infineon plans aim to complete the complex by 2026.
More ambitious, however, seem to be the plans for TSMC to finally land in Europe, including Germany. This would be a joint chip plant between Europe’s NXP Semiconductor, Robert Bosch and again Infineon, all of which specialise in making chips for automotive and industrial equipment, and Taiwan’s TSMC. The joint investment is estimated at 10 billion euros, with subsidies of up to 7 billion euros. The decision could be announced as early as August, according to Bloomberg.
TSMC is the world’s largest contract chipmaker, supplying the most sophisticated processors to US companies such as Apple, Qualcomm, NVidia, AMD, Broadcom and Taiwan’s MediaTek, which, like Qualcomm, specialises in smartphone processors. Intel was scheduled to build a huge processor production complex in Germany, and in fact work has already begun, as announced with great force at the end of last year.
However, it seems that the negotiations have run halted, because Intel is demanding higher subsidies from Germany and the European Union, which were already very high but were never officially communicated. Germany is reportedly willing to subsidise the complex further if Intel commits to a much higher level of investment.
If this deal with TSMC and others under negotiation happen, the EU could become more self-sufficient in semiconductor manufacturing in the second half of this decade, provided that the US-China technology relationship does not worsen further or, at the very least, that the EU clarifies its position and reaches a mutually beneficial trade compromise with China.
Continue reading here – Six-month turnaround of the chip market
Albert Cuesta, specialized journalist