Europe's semiconductor challenge

February 05, 2021 // By Peter Clarke
Opinion: Strategy, tactics of European chipmaking are being confused
There are two confused elements to the musings of German economy minister Peter Altmaier to boost semiconductor manufacturing in Europe.

Peter Altmaier has been reported saying that Germany is ready to contribute to an Important Project of Common European Interest (IPCEI) for leading edge semiconductor manufacutring that could have a budget of €50bn.

That sounds highly significant, strategic even. At the same time the same reports say European chipmakers have until early March, or March 1, to submit their plans and bids for subsidy. That's so urgent a deadline it is not even tactical. It is ludicrous.

A Volkswagen board member has been quoted by Reuters saying Volkswagen would like to deal with strong European semiconductor companies that are at least on par with Asia and the US. He added that Europe should be leaders in software and chips and also offered up the idea that an IPCEI could be a vehicle for subsidy.

Altmaier appears to have had his mind focused by the approach he had to make to his opposite number in Taiwan recently, asking for help getting foundries to make more automotive chips. It would seem that lobbying by Volkswagen, Daimler, BMW and others had motivated him.

The amount of time it takes to install chipmaking equipment and ramp up production means neither short-term nor long-term subsidies will make any difference to the problems that will be faced by Volkswagen and other car makers in the 1H21.

There are two types of subsidy that must be thought about here.

One is the tactical which provides money to European semiconductor companies to increase their manufacturing capacity of the power, RF and mixed-signal chips that they already make. It should be no surprise that the likes of Infineon, Globalfoundries and STMicroelectronics will be eager to be given cash to do what they were going to do anyway -- and would otherwise have had to get shareholders to fund.

This money can be mobilized and spent quickly and could make a difference in 2022 and 2023. But it won't necessarily help Volkswagen obtain an advanced engine control unit or autonomous driving processor capable of machine learning. These are the advanced digital logic chips that are made by the likes of TSMC for the likes of NXP, Mobileye, Infineon and others.

Next: Strategic semiconductor support

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