2024: A Microchips Odyssey
EU Tech Revolution and the Race for Digital Sovereignty
The race is on: EU envisions the Chips Act to be a strategic move to focus on research, innovation, and workforce development laying the foundation for a self-reliant semiconductor ecosystem.
In the midst of global fascination with the Space Race and the buzz about reaching the moon in the 1950s and 1960s, there was a game-changer brewing quietly on the sidelines – a microchip. A tiny semiconductor that would change the world – and barely anyone noticed. These unassuming chips, smaller than a fingernail, ended up being the heroes that powered the tech revolution. They made computers, smartphones, and pretty much everything tech possible. Fast forward to today, and both the U.S. and the European Union are putting serious weight behind their Chips Acts, recognizing the critical role microchips play in their economic game plans. So, while we were dreaming about the moon, a tiny invention was silently reshaping our world.
Catch Me If You Can
The EU Chips Act came into force on 21 September 2023 in response to a worldwide shortage of semiconductors, which started in 2020 and affected almost 170 industries. EU was not the first in line. Major economies such as the United States, Japan, Taiwan, China, and South Korea have either established or are currently developing their own initiatives to encourage greater domestic chip production, often incorporating subsidy programmes. European Union envisioned the Chips Act to be a strategic move to fortify Europe's position in the digital and green transition.
In Europe's attempt to close the gap in the microchips race, the EU's share of the global microchips market stands at 10%, trailing behind. On the other hand Taiwan produces over 60% of the world’s semiconductors and over 90% of the most advanced ones – the success is predominantly owned to Taiwan Semiconductor Manufacturing Corporation (TSMC), whereas United States has already allocated $52 billion to boost its semiconductor supply chain (CHIPS Act, see more here). China and South Korea are also important players in that market and the strong reliance on one region is a risk in the eyes of EU and US. Is it the next chapter in the global subsidy war after the TCTF (you can read more about the Inflation Reduction Act and the TCTF here)?
What is EU’s Strategy for Microchips?
The EU Chips Act aims to address the disruptions in supply chains and build a robust semiconductor ecosystem. At its core, it strives to achieve technological sovereignty by focusing on five strategic objectives:
Research and Technological Leadership: Strengthening Europe's position in semiconductor research and development.
Innovation in Design and Manufacturing: Building and reinforcing capacity for cutting-edge chip design, manufacturing, and packaging.
Production Framework: Establishing a conducive framework to increase chip production by 2030.
Skills Development: Addressing the skills shortage by attracting and nurturing talent in the semiconductor field.
Global Supply Chain Understanding: Developing a comprehensive understanding of global semiconductor supply chains.
The Race is On
The Chips Act introduces the "Chips Fund" under the Chips for Europe Initiative, funnelling significant funding into semiconductor projects. The EU has earmarked over €4 billion from the Horizon Europe and Digital Europe Programmes, with the expectation that Member States will match this contribution. The goal is to mobilise an additional €43 billion in private investments. Notable beneficiaries include Intel: their €33 billion investment in Magdeburg, Germany and an investment of over €4.6 billion in Poland (Wroclaw), both creating thousands of jobs and contributing to the EU's semiconductor strategy.
State aid for microchips in Europe should also correlate with the European market’s demand for advanced integrated circuits (e.g., required size or degree of integration).
However, akin to the TCTF and support for net-zero transition projects, the responsibility for implementation of incentives and securing funding rests predominantly with each member state. This underscores the importance of engaging in discussions with authorities to actively shape opportunities and tackle challenges – a commitment mirroring our approach at Hickey for our Clients.
Skills Development and Other Challenges
Securing major investments may pose a challenge for some European countries. Both the European Chips Act and key industry players prioritise locations that not only have access to skilled professionals but also meet additional criteria, such as cost-effective and environmentally friendly energy. For comparison, in 2022, the CO2 emission per kWh of energy is approximately 80 g in France, almost 400 g in Germany, and over 600 g in Poland. This underscores the need to focus on delivering energy in an economically and environmentally sustainable manner to meet the requirements of modern industry and attract investments from key players like Intel.
Addressing the shortage of skilled professionals is a critical aspect of the Chips Act. The EU is investing in educational programmes and "competence centres" to develop a workforce capable of meeting the demands of the semiconductor industry. The recently inaugurated program in advanced semiconductor technologies in Magdeburg, Germany, serves as an example. The United States and TSMC learned this the hard way, as the Taiwanese company recently announced a delay in the opening of their Arizona plant due to a lack of skilled workforce.
Conclusion: A Collaborative Digital Future
As Europe strides into a future dominated by digital innovation, the Chips Act is a necessary step in the commitment to technological advancement. The focus on research, innovation, and workforce development lays the foundation for a self-reliant semiconductor ecosystem. However, continuous collaboration, transparency, and addressing the intricacies of the semiconductor industry will be crucial for the EU to maintain its competitive edge in the global technological race. The journey has begun, but the road ahead demands unwavering commitment and strategic vision. Let us at Hickey be your guide.
Contact Hickey to Learn More
Ready to ride the innovation wave? Contact Hickey and Associates for more information on the EU Chips Act and how your business can benefit. Don't miss out on new opportunities!