Opinion: Strategy, tactics of European chipmaking are being confused

February 04, 2021 // By Peter Clarke
Opinion: Strategy, tactics of European chipmaking are being confused
There are two elements to the musings of German economy minister Peter Altmaier about the need for a boost for chip manufacturing in Europe; the short-term tactical and the long-term strategic. They are being confused and need to be separated.

Altmaier has been reported saying Germany is ready to contribute to an Important Project of Common European Interest (IPCEI) that could have a budget of €50 billion (see Germany ready to help Europe invest 'billions' in chip manufacturing).

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 chipmakers that are at least on par with those in Asia and the US. The unnamed board member added that European companies 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 (see Germany asks TSMC to prioritize automotive chips). It would seem that lobbying by Volkswagen, Daimler, BMW and others had motivated him.

But we have to remember that because of the amount of time it takes to install chipmaking equipment and ramp up production, 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 chipmakers 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: The strategic kind

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