Delays Hinder Europe's Chip Strategy

­The COVID-19 pandemic showed us that our supply chains were not as robust as we thought they were. Shutdowns across the globe stopped OEMs getting the components they needed to finish their products, adversely affecting the economies of nations all around the world. After the pandemic was over, the leaders of both countries and trade organizations decided to take action to prevent such a shortage happening again in the future. That meant creating new supply chains, much closer to home. The US, South Korea, Japan and the EU all put up huge sums of money to encourage semiconductor manufacturers to locate to their own specific areas and things looked to be going well. However, recently, there have been signs of progress slowing down, in Europe at least. While large fabs are being constructed around the world at record rates, some of the biggest companies that have pledged to manufacture in Europe look to be having some second thoughts.

Last September, Intel, who had made agreements to build several new facilities on the continent, pushed back plans to build a huge semiconductor plant Magdeburg, Germany along with a second facility investment in Poland. The €30 billion Magdeburg investment and the €5 billion Polish plant have been delayed by at least two years due to Intel’s financial struggles. The company had earlier backed off its investment in new plants in both France and Italy. The replacement of the Intel CEO who championed the fab investments as part of a strategy that would have seen Intel emerge as a contract manufacturer that could compete with TSMC, along with constant talks of a takeover of the company, must place further doubt on whether the huge investments in Europe will ever come to fruition. The news has been a big disappointment for the EU’s stated intention to claim 20% of the global chip market by 2030.

That blow may now been followed by another. A recent article in Digitimes claims that STMicroelectronics and GlobalFoundaries (GF) are shelving their €5.7 billion joint investment in a 12” wafer fab in Crolles, France. Although unconfirmed at this point, the article says that neither ST or GF reported any progress in the project during recent earnings calls.

However, it is not all bad news, Infineon, Bosch and TSMC are just some of the companies who are keeping their commitments to invest in semiconductor manufacturing on the continent. However, if Europe is not to fall further behind its international rivals in chip production, the EU will have its work cut out persuading manufacturers to locate here.