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It may yet be, but two things stand as caveats around this plan.

Firstly, Europe has dithered on the topic of microelectronics and should have executed much earlier and either mobilized far greater sums of money or none at all. Secondly, moving tax-payers’ funds around is never enough (see Europe approves state-aid for electronics worth €1.75 billion).

What is required is a change of economic climate that will drive entrepreneurism, drive those sitting on capital to put that money to work and drive speed of execution. I am sorry to say that IPCEI demonstrates the continuing problem in European wealth creation rather more than it represents a solution.

It is often said that all regions support their champion companies but that somehow Europe fails to do this and our declining market share in various parts of the electronics supply chain is a result. China is set to account for about 20 percent of the world’s semiconductor fab capacity by the end of 2020, according to trade organization SEMI.

The National IC Fund being used to drive China’s rise in semiconductors and reduce its semiconductor trade deficit has accumulated more than 140 billion yuan (US$21.5 billion) and spurred rapid gains throughout the region’s IC supply chain. A second phase is aiming to raise another 150 to 200 billion yuan ($23 to $30 billion), according to SEMI.

That is just in the semiconductor sector alone and it makes the European Union’s allowance of up $2 billion state support for microelectronics seem rather small in comparison. We have already seen how the $10 billion budget set by the Abu Dhabi sovereign wealth fund Mubadala was not quite enough to get Globalfoundries to the top table in semiconductor manufacturing (see GloFo rethinks its future, drops 7nm FinFET).

Next: Europe for sale


We are also seeing a number of European microelectronics companies being acquired by entities outside the continent, often in China so we are losing control of the world-class electronics infrastructure we do have.

The first thing to say is that Europe in too many cases – and with some notable exceptions – lacks fast-moving entrepreneurial drive. And in like manner IPCEI has been too slow to arrive.

The idea has been floating around Europe for years and effectively dates back to 2013 and before. IPCEI started to surface at a meeting of leaders in November 2016 that sought to adjust the failed 10/100/20 chip project (see Europe to rethink 10/100/20 chip project). The 10/100/20 project’s remit was to raise European chip making to 20 percent of the global total by 2020 by spending €10 billion of tax payers’ money and unlocking commercial spending of about €100 billion. It was simple, unrealistic and an exercise in making hand-waving arguments (see European Commission repeats call for “Airbus of chips”).

Back then Europe’s market share of global chip manufacturing was somewhere around 7 to 10 percent and so it would have required the building of multiple leading-edge wafer fabs to move the needle on chip manufacturing. And in any case it was something for which the leading European chip companies – the only actors the European Union could realistically turn to – had no business plan and no appetite. As almost no chip manufacturing capacity has been added in Europe since then we can estimate that Europe’s market share will have dropped to around 5 percent of the global total.

While the European Commission. and therefore the European Union, saw chip manufacturing as strategic, the main semiconductor actors in Europe were going fab-lite. So with IPCEI the carousel has come round again; this time with the emphasis on R&D and innovation, which can include some spending on manufacturing infrastructure. That’s a five year dither accompanied by a drop in the financial sums involved.

Next: Shame


One of the companies inside the IPCEI is European chip company STMicroelectronics NV. Jean-Marc Chery, the recently appointed CEO of ST, has said he feels ashamed of how poorly Europe has performed in electronics (see ST’s CEO speaks of shame at European failure). Chery was speaking to an audience of MEMS and sensor engineers and executives and he also told them he wants Europe, and presumably ST, to start having greater ambition.

At least Chery has called Europe out on its under performance, which must be a first step towards improvement. That said it doesn’t take too much ambition to take Italian and French state funds. The test will be how much investors’ money Chery is prepared spend and how effectively he does it.

Talk of unlocking €6 billion (about $7 billion) sounds positive but will it really happen? And even if it does what the European Commission is saying is that countries would not be in breach of WTO rules to funnel some money towards a microelectronics infrastructure that is reluctant to spend its own money on its own behalf. On top of that, the money, which might be significant if spent on a single enterprise is being distributed over many years and as many as 40 sub-projects thus spreading the largesse thin. It effectively becomes a minor tax break for those companies that are prepared to do the not inconsiderable bureaucratic paper work.

Next: Standards


Rather than moving monies around to try and plug the cracks opening up in Europe’s ability to generate wealth, the European Union would be better advised to use its legal and standards-setting powers to generate a climate that is favourable to European wealth creation.

For example, Nokia and Ericsson rose to global significance on the standardization of GSM for telecommunications in Europe and Nokia at least was laid low again in part by the globalization of subsequent telecommunications standards. A fictitious example is that if a law had been passed that all European lighting should transition to LED and all those LED die had to be diffused in Europe, then there is no doubt that a clutch of LED wafer fabs would have been built in Europe and a focus on LED technology created here.

There are now numerous sectors such as industry 4.0, smart cities, autonomous driving, IoT and machine learning that would be suitable for such standards-setting today. Appropriate standards would not only support European endeavors in these areas but help create world-class expertise and startups that could go out and thrive elsewhere in the world subsequently.

It would be protectionism of a sort but it is at least it would be protectionism at the cost of a pen to sign the legal documents, rather than at the cost of billions of euros, when such spending is too often of little long-term effect.

Related links and articles:

Europe approves state-aid for electronics worth €1.75 billion

European Commission repeats call for “Airbus of chips”

Europe to rethink 10/100/20 chip project

GloFo rethinks its future, drops 7nm FinFET

ST’s CEO speaks of shame at European failure

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