A smartphone contains 160 microchips, a modern car about 3,500, and supercomputers or autonomous weapons powered by artificial intelligence (AI) probably much more. No need to go further to recall how crucial the semiconductor market, the basis of these circuits, has become nowadays. The United States, at the forefront in the field, is currently making life difficult in Beijing. The Chinese regime is eyeing the most sophisticated semiconductor etching systems, measured in nanometers (nm). The objective: to meet increasingly important civilian and military needs, which the United States perceives as threats to its leadership.
But Europe, in all this? The European Parliament voted on Wednesday in plenary session, by an overwhelming majority, the outline of its Chips Act, announced with great fanfare just a year ago. This decade-long plan contains three components to upgrade from Asia and the United States: to promote research and innovation in this field, to attract foreign capital to produce more semiconductor devices on its soil (20% of the total world against less than 10% today), and develop a crisis mechanism in the event of a shortage; the Covid-19 with its supply difficulties (especially from China) has shown the urgency.
There is now a consensus on these objectives. The text, moreover, had been modified in November with the promise of expanded subsidies for the production of a wider range of chips and not just the most advanced ones, claimed Reuters. A significant turnaround. The commissioner in charge of industrial policy Thierry Breton had initially focused on engraving in “two nanometers”. “A cathedral in the desert, quips Jean-Christophe Eloy, head of Yole Group, a company specializing in the study of the semiconductor sector. Because Europe simply does not have the market for this very advanced and expensive.
The new balance of the European strategy makes much more sense today. “Let’s not put all the eggs in one basket: let’s support the production of what we do now, like cars or medical equipment, using standard engraving technologies, and have, without making it a priority, a way to the 2nm.” In stages, most likely with 10nm and 5nm lenses initially. An opinion shared by historian and expert on the subject Chris Miller, author of the remarkable essay Chip War. “It seems to me that it would make more sense for Europe to focus its efforts on other parts of the supply chain where it is already well established rather than on the most expensive and complex edge chips. ” This call for air thus benefits, for the time being, Germany, which is multiplying mega-factory projects with the Americans Wolfspeed and Intel. The Taiwanese juggernaut TSMC is also considering settling there. In France, an ecosystem is taking shape in the Grenoble region around STMicroelectronics and GlobalFoundries.
Grant Race
With this reindustrialisation, Europe and the major companies in the sector want to reduce their dependence on China. The Old Continent is even forced to go a notch further. After intense lobbying, Washington recently obtained from the Dutch company ASML, a leader in the manufacture of semiconductor equipment, a limitation of its exports to China. This limits a little more the capacity of this country to produce its own chips and not only the most advanced ones (the details of the agreement nevertheless remain secret). “Europe is following American leadership on the issue of semiconductors. But Chinese ambitions, which are blurring the lines between civilian and military, are also generating an awareness of Europe which is becoming more defensive”, analyzes Mathieu Duchâtel, director of the Asia program at the Institut Montaigne. Beijing is trying, somehow, to retaliate. The ASML company revealed on Wednesday a case of industrial espionage on the occasion of its annual report, evoking a “misappropriation of data relating to proprietary technology by a (now) former employee in China”.
European ambitions now risk coming up against the question of funding. Some 43 billion euros have been allocated to the Chips Act. The EU’s effort in favor of chips is therefore lower than that of the United States (52 billion dollars, via the Chips and Science Act, over five years), which has the same objectives. Above all, it is much less substantial than that of China (nearly 147 billion dollars over ten years), which aligns the zeros to compensate for American sanctions and catch up. In Brussels, the envelope should therefore move, we let L’Express know. Trilogues – negotiations between the Parliament, the Council, and the Commission – will take place soon. Time for the first arbitrages… on the rise? Difficult to say, in full European questioning on a response to the American Inflation Reduction Act (IRA). Endowed with 400 billion dollars, this plan promises significant subsidies for the installation of “clean” technologies in the United States. The electric automobile, on which Europe is also betting a lot, chargers and batteries should benefit from it.
The Parliament thus calls for European ambitions in semiconductors to be maintained at all costs. “The rest of the world is not standing still: Europe’s partners and competitors are investing heavily in their semiconductor facilities, skills and innovation. We may not have the enormous financial firepower of the United States, and these are economically difficult times, but the budget offered by the Commission and the Council must reflect the seriousness of the global challenge we face”, underlines MEP Eva Maydell, one of the rapporteurs of the Chips Act. The clock is turning. Intel recently asked for an extension of public subsidies to Germany – up to 10 billion euros, against 6.8 currently – in order to confirm one of its factory projects. The race for subsidies launched by Washington undoubtedly contributes to this negotiation. The ball is now in Europe’s court.