The EU must play a long game for semiconductor success 

The writer is chief executive of Intel

Technology has never been more important for humanity than it is now. Every communication, every retail experience, every hospital visit and every factory floor runs on semiconductors — the tiny chips that have become essential to maintaining our digital lives and enabling our modern economies. And now these chips are scarce. 

Last year, Covid-19 accelerated demand for semiconductors, disrupting global supply chains, shuttering manufacturing lines in key industries and slowing delivery of essential products. The central problem? A lack of the sufficient capacity that is needed as a foundation for a resilient worldwide supply chain for chips. 

The abrupt chip shortage has hamstrung industries from automobiles to appliance makers and prompted a scramble to find quick solutions. Companies like ours are working to address the immediate problem, but the hard truth is that the semiconductor industry is a long-term game. Real solutions will take time and strategic thinking to implement.

The EU needs to work to win back technological market share. Over the past 20 years, the region has dramatically cut back on chip manufacturing. Europe’s current share of the global semiconductor market sits at around 10 per cent, down from a heady 44 per cent in 1990.

Today, according to the Semiconductor Industry Association, it is mainland China that makes nearly a quarter of all semiconductors, Taiwan makes 21 per cent, South Korea makes 19 per cent and Japan makes 13 per cent. All in, a staggering 80 per cent of semiconductors are now made in Asia.

Research and development and knowhow inevitably follow the industry. Once gone, they are difficult to recover. It is therefore imperative that the EU builds more chips on local soil to help prevent future supply issues. It is good news that the EU has committed to doubling its manufacturing capacity to 20 per cent of global production by 2030. This would bring economic and strategic benefits, helping to retain and foster semiconductor design and engineering skills locally.

But in order to take control of its own destiny in this critical area, the EU is going to have to compete hard and to collaborate. An alliance that brings together industry and governments is the best way to achieve this ambitious plan, and guarantee long-term success. It will require both decisive action on the part of individual member states, and constructive collaboration with major semiconductor manufacturers. It won’t be easy but it’s the only way the EU will win.

The EU has some semiconductor industry champions, but it faces fierce competition from other countries that view chip production as a national priority. Many governments provide generous incentives to attract and develop semiconductor manufacturing and to incentivise R&D. Europe must match this to stand a chance of competing.

Since 1989, Intel has invested $15bn in R&D and manufacturing capacity in Europe, and we are investing an additional $7bn in an expansion designed to bring our most advanced technology to the region. We are spending $20bn on two new US plants and are one of the few companies with the expertise needed to make EU ambitions a reality. While we’re already investing in European capacity and knowhow, this is just a start. A modern semiconductor wafer fabrication facility (or “fab”) costs billions and takes years to build. We must go faster, and we can’t do it alone.

The EU has earmarked 20 per cent of the €672.5bn coronavirus response fund for investment in technology and we believe balancing the global supply chain of silicon should be a key priority. This week I will meet politicians and business leaders to discuss how the EU can achieve its semiconductor market objectives. Europe’s strategy needs to build resilient supply and expand innovation for the long term.

Every aspect of our lives is becoming increasingly digital, and everything digital runs on semiconductors. They are foundational to nearly all modern products, from cars and kitchen appliances, to telecommunications networks and schools and healthcare equipment. Advancing semiconductor development in Europe would be a win for many sectors in many EU countries.

As the global economy gears up for the biggest recovery in more than 70 years, EU leaders must make the necessary investments to ensure a vibrant semiconductor industry. We look forward to building upon and renewing the tremendous heritage of EU and US partnership, and we stand ready to play our part.