EU Recession Due To Microchips
Microchips are becoming increasingly difficult to find. Cars, washing machines, dishwashers, but also robots, computers, smartphones, traffic lights, satellites, planes and even smart bulbs. The whole world that revolves around us can no longer do without a wafer of a few millimeters. Today there are many causes, remote and more recent, but the fact is that if a quick solution is not found, the world risks stopping. EU tries to survive.
Brussels, 19 July 2022
As Fortune wrote, “Computer chips are the new oil. A country needs enough of them to meet its needs, must worry about securing supply, and produce as much of it as possible to benefit from high global demand. And, like oil, a small number of actors in a complex security environment control production. Microchips define geopolitics and remake world alliances”.
Microchips must be designed, then produced and finally assembled. When the world chose to be global, the tasks were divided: there are those who design them, those who produce them and those who assemble them. This division of labour has broken down borders and any country has been able to develop and sell products that make use of those microchips.
The run-up to ever lower production costs has meant that geographic areas with lower manpower have become real hubs for microchips. This is the case in Asia. Taiwan became the world’s leading manufacturer and China became Europe’s leading supplier of microchipped products.
But the pandemic, then the US sanctions on China and finally the war in Ukraine led to more shortage of microchips. The european weakness started before: digital skills, innovations, infrastructures, the digital transition of public administrations are all weaknesses of Europe and the shortage of microchips are a symptom.
For those reasons, EU is thinking a global strategy, involving competences, new infrastructures and more ambitious targets for the digitalisation.
The future of microchips in Europe: dream or reality?
Europe produces only 9.6% of microchips worldwide. The EU target is 20% by 2030
Europe has 450 thousands ITC specialist and want to reach 20 million by 2030
Europe wants to invests on advanced chips and wants to turn them into commercial products
Europe wants to develop an in-depth understanding of global semiconductor supply chains.
In February 2022, the Commission presented a proposal for an EU Chips Act aimed at reinforcing the whole EU chips value chain. The chips act is based on a three-pillar structure:
- pillar 1 aims to bolster large-scale technological capacity building and innovation in the EU chips ecosystem, improving the transition ‘from lab to fab’;
- pillar 2 focuses on improving the EU’s security of supply, by attracting investment and enhancing production capacities in the EU;
- pillar 3 aims to set up a monitoring and crisis response mechanism.
The proposed actions are:
- to finance EUR 1.65 billion from Horizon Europe and Digital Europe Programme
- to design capacities for integrated semiconductor technologies
- to pilot lines for preparing innovative production, and testing and experimentation facilities
- to support advanced technology and engineering capacities for quantum chips
- setting up a network of competence centres and skills development
- to launch ‘Chips Fund’ activities for access to debt financing and equity to start-ups, scale-ups, SMEs and other companies in the semiconductor value chain
Controversies and delays
Nothing happens without controversy. For example, the discussion on the financing that the EU is ready to give to companies, especially foreign ones, that move production and assembly to Europe is very heated. European semiconductor companies naturally protest, because they see their market threatened by competition that would become unfair with public money. And the EU countries also have their hands tied for the same reason. In short, everyone needs microchips, which are more difficult to find, but it is difficult to find a solution quickly.
Many wonder if the US embargo on China is really a good solution, given that Europe will remain dependent on imports from Asia for a long time, but they are decreasing every day.