ST and GlobalFoundries invest 4 billion euros to build a wafer fab in France

GlobalFoundries Inc and STMicroelectronics will announce plans on Monday to build a semiconductor factory in France, investing nearly 4 billion euros as part of Europe's efforts to increase its independence in the microchip sector, Le Figaro reported. This will help support the European Commission's push to produce 20% of the world's microchips in Europe by 2030.

The investment is expected to be announced during President Emmanuel Macron’s fifth “Choose France” summit in Versailles on Monday.

STMicroelectronics declined to comment.

It is not clear how large the project is, but the French factory will likely focus on producing high-performance chips using advanced technology. In April this year, GlobalFoundries, STMicroelectronics, French semiconductor material supplier Soitec, and CEA Research Center jointly announced that they would begin to work together to develop the next generation of FD-SOI technology.

STMicroelectronics currently has a factory in France, but GlobalFoundries does not yet have a presence in France.

Demand for everything from smartphones to cars has rebounded sharply after a downturn caused by the coronavirus pandemic, disrupting chip supply chains, especially in the auto industry.

According to Xinhua News Agency, the European Commission announced the highly anticipated "Chip Act" in February this year, which aims to ensure the EU's competitive advantage in semiconductor technology and applications and chip supply security, and thus become a leading force in this field. However, there are still many questions as to whether the EU can achieve its strategic ambitions.

According to the "Chip Act" published by the European Commission on February 88, by 2030, the EU plans to use more than 43 billion euros of public and private funds to support chip production, pilot projects and start-ups, and vigorously build large-scale chip manufacturing plants. According to the bill, by 2030, the EU plans to increase its share of global chip production from the current 10% to 20% to meet its own and world market needs.

European Commission President Ursula von der Leyen said the bill will enhance the EU's global competitiveness. In the short term, this move will help predict and avoid disruptions in the chip supply chain and enhance resilience to future crises; in the long term, the Chip Act should enable knowledge transfer "from lab to fab" and position the EU as a "technological leader in the downstream innovative market."

Next, the European Commission will carry out coordination work to understand the status quo of the entire EU semiconductor value chain, predict potential disruptions, and take measures to overcome the current chip shortage. EU member states and the European Parliament will discuss the Chip Act, which, once passed, will apply to the entire EU.

As industry transforms toward digitalization, the EU has realized the importance of chips and its heavy reliance on third-party suppliers in recent years, hoping to improve its strategic autonomy through the Chip Act. In particular, the outbreak of the COVID-19 pandemic has made the EU further aware that if the global supply chain is severely disrupted, some European industrial sectors will soon face chip shortages, and many industries will stagnate as a result.

In July 2021, the European Commission launched the Processor and Semiconductor Industry Alliance to clarify the EU's current gap in microchip production. In September of the same year, von der Leyen mentioned the European chip strategy vision in her "State of the Union Address" and stated that she would build a European chip ecosystem.

Margrethe Vestager, the European Commission's executive vice president in charge of digital policy and competition, said: "Our security of supply should not depend on one country or one company. We must work together in research, innovation, design and production facilities to ensure Europe's key role in global value chains."

Thierry Breton, European Commissioner for internal market, said the EU's goal is to produce the most complex and energy-efficient semiconductors in Europe, enabling European industry to remain competitive, create high-quality jobs and meet growing global demand.

Although the Chip Act is ambitious, there are doubts about whether it can be fully implemented. Previously, the European Commission proposed a similar microchip plan, which failed to achieve its goals.

The current fiscal environment in the EU will hinder the implementation of the bill. The bill requires contributions from member states, but as inflation in the eurozone continues to rise, member states including Germany are losing interest in large-scale public investment. German Finance Minister Lindner has repeatedly warned of inflation risks and recently called for a "real debate" on EU fiscal rules to begin this summer. This is a sign that large-scale public investment may face greater political resistance.

It remains to be seen whether the bill can leverage more private investment. For more than a year, the EU has been pushing TSMC, Samsung and Intel, the three largest manufacturers, to build factories in Europe to produce the latest generation of chips, with only Intel being more active.

In addition, analysts pointed out that the bill will have limited help in the "chip shortage" situation in the European automotive industry. Severely impacted by chip shortages and supply chain bottlenecks, Europe faces the risk of discontinuing production of millions of cars. Automotive industry executives have repeatedly lobbied the EU to take measures as soon as possible to ease supply pressure. The strategic goals of the EU's "Chip Act" are obviously not fully matched with the expectations of the automotive industry. At the EU level, the focus is on cutting-edge chips below 5 nanometers, and the chips currently widely used in automobile production are mainly 14 to 28 nanometers.

Vestager also poured cold water on the calls from the automotive industry: "The Chip Act is not intended to solve the current chip shortage, but to anticipate the impending crisis."

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