Europe Is Trying to Reclaim Its Lost Chipmaking Glory


April 27, 2021

Hey everyone, it’s Natalia. Europe wants to reclaim its former glory as a chip-manufacturing powerhouse.

As soon as next week, the European Union is set to release some details on its new semiconductor plans. The ambition will feature as part of a larger update to the bloc’s industrial strategy, highlighting areas where it’s dangerously dependent on non-EU companies for key imports.

But weaning Europe off chipmaking technology from the U.S. and Asia promises to be extremely difficult—particularly because it may need help from those same foreign entities to boost its own production.

The world is currently in the throes of a chip shortage, which has slammed the auto industry and other sectors. The squeeze has underscored Europe’s dependency on suppliers in Asia for its semiconductors. Now, like the U.S., China and Japan, Europe wants to reinvest in domestic chip production to regain self-sufficiency. The bloc has already vowed to increase production to at least 20% of the world’s chips by 2030.

One key goal for European officials is to produce advanced semiconductors that are more efficient than the chips currently made by industry leaders like Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. But questions remain about whether the EU has the financial firepower, or the political will, to get there.

It’s a very different scene than a couple of decades ago, when Europe led the world in manufacturing semiconductors, thanks in large part to a strong consumer electronics industry with first-generation cellphones from Nokia, Ericsson and Siemens. But as those devices fell out of favor, the chip production industry also shifted abroad.

In 1990, Europe accounted for about 44% of global semiconductor manufacturing. Now, it’s closer to 10% and Taiwan, South Korea and Japan account for about 60% of production, according to a joint report by the Boston Consulting Group and the Semiconductor Industry Association. European chip designers including NXP Semiconductors NV and Infineon Technologies AG now outsource most production to giants like TSMC, and other foundries.

European officials looking to return to the bloc’s heyday of manufacturing microelectronics are considering trying to spur the construction of an advanced semiconductor factory in Europe. But they will likely need to rely on manufacturing expertise from abroad to do so.

For example, in the U.S., TSMC is already planning to build a $12 billion chip plant in Arizona, relatively close to some of its most important clients, including Apple Inc., Qualcomm Inc. and Nvidia Corp. But Europe doesn’t have major consumer electronics companies, and while its auto sector is still strong, most cars generally don’t need super-advanced chips.

EU industry chief Thierry Breton will meet with senior executives from TSMC and Intel Corp. later this week, and the topic of a potential European manufacturing facility is bound to come up. He may try to convince them to build in the EU to rekindle its chipmaking prowess—or at least bring more manufacturing within the bloc’s borders. What about the fact that those companies aren’t European? Well, you can’t have everything. Natalia Drozdiak