Can Europe win the chip war?

Europe has been in a state of panic since Washington began offering billions of dollars in incentives for high-tech companies to relocate to the United States. But do they need it?

But virtually every week there are reports of plans for a new semiconductor factory in the United States or Europe. In Germany, Infineon hopes to build a plant in Dresden, while U.S. chipmaker Intel wants to build a plant in Magdeburg. There have been rumors that Taiwan's TSMC is also considering building a factory in the country.

Joe Biden has successfully lured TSMC and Samsung to the United States, where they are building multibillion-dollar chip factories.

Subsidies are key. The Biden administration has $370 billion (€352 billion) at its disposal for an inflation-reduction bill. In addition, the "Chip and Science Act" with a total allocation of US$280 billion aims to strengthen the United States' strength in the semiconductor field, promote research and development, and create a regional high-tech center.

Can EU technology companies resist the temptation of US subsidies in the long term? The EU Chips Act is supposed to achieve the same purpose and costs about 43 billion euros. Is it enough? With these billions of dollars, Europe's share of global chip production should double to 20% by 2030.

"Europe is the world champion in announcements, but not very good at execution," Andreas Gerstenmayer, head of Austrian technology group AT&S, complained to Handelsblatt in late November. "The sum is too small to have an impact on a global scale."

Europe is already worried that important companies will move to the United States and skip Europe.

Marcus Gloger, an industry expert at Strategy&, the strategy arm of consultancy PwC, has no such fears. He believes that repeated criticism that Europe accounts for only about 10% of global chip production does not take into account that the continent also has "significant knowledge and a well-trained workforce."

"It's completely underestimated. You can open a factory anywhere. But they need people who are trained to do these jobs," Gloeger said. "Because of the long history of semiconductors in Europe, you can turn to several centers that are trained in this field," he said.

One of these places is the Inter-University Center for Microelectronics in Leuven, Belgium, where even rivals from big tech companies conduct research together. There are other European semiconductor clusters, for example, near Munich, the so-called Silicon Saxony near Dresden and the French university town of Grenoble.

Europe not only has the EU Chips Act, but also the European Recovery Fund, which has the same goals as the Inflation Reduction Act in the United States. By 2030, the total EU funding scope is approximately €1.9 trillion.

It is the European Commission's senior officials and experts who are fighting for greater European participation in high-end chips and supercomputing. Groeger said that for them, ensuring digital sovereignty is more important than securing supply chains. Because the more digitalization progresses through the Internet of Things (IoT) or the digitization of countries and societies through artificial intelligence (AI), technological sovereignty must be safeguarded.

Two of the world's four most powerful supercomputers are already in Europe - in Bologna, Italy, and Finland. By 2024, the first German exascale supercomputer should be up and running in Jülich. With more than 1,000 petaflops, the supercomputer JUPITER will have the computing power of more than 5 million modern laptops. Other exascale supercomputers will follow in Munich and Stuttgart.

According to Gloger, the assumption that companies are located where they receive the most subsidies is incorrect. "This requires a complete ecosystem. Just building a chip factory is not enough. Materials and research are required, as well as a complete network of companies."

At big tech companies, salaries for highly skilled professionals are roughly the same as in Europe, China and the United States, which is why "the right framework conditions are key to being able to retain these people," Gloger said, adding that this would be helpful for them in Europe. Other options.

"When high-level people move to another country or continent with their families, it's important that they know that there are other companies in the area to move to besides the one they started with," Gloger said, a common refrain. aspect "has not received enough attention."

According to Gloger, related research is also important and this is an area in which Europe is still leading. In Germany, for example, researchers at the Fraunhofer Institute and the Max Planck Institute are leading the development of Industry 4.0, while the Leibniz Institute and the Ferdinand Braun Institute are also places of scientific excellence.

Germany also shines in the semiconductor cluster. At the microchip cluster Silicon Saxony near Dresden, around 200 companies are involved in the semiconductor business. For vendors, this infrastructure means they can receive support in minutes instead of days. This help is essential because delays at semiconductor plants can cost companies tens of millions of euros.

Europe has semiconductor industry talent, cutting-edge research and leading international clusters. Unique suppliers such as the Netherlands' ASML, industrial optics group Zeiss or industrial laser specialist TRUMPF, as well as manufacturers of industrial gases and clean room technology, are also in Europe.

"What is missing is the speed of implementation. We Europeans have to be braver and more determined in our decisions. I think the German government and industry can definitely do this," Gloeg concluded.