What is the Current State of Chip Manufacturing in Europe?

The chip shortage has had a crippling effect on the global electronics industry for the past few years, with the problem predating the coronavirus pandemic. While many people are familiar with the causes of the semiconductor shortage, it is just as important to look at what is being done to combat it.

For years, the global semiconductor market has been dependent on Asia, with almost two-thirds of chips manufactured there, particularly in Taiwan, China and South Korea. The disruption of recent years has made European manufacturers realise that more autonomy is necessary to combat the shortage. With that in mind, here are some of the major factors shaping the current state of chip manufacturing in Europe. 

European investment by Intel

US tech giant Intel is looking to expand into Europe, looking at creating factories to reduce the dependence on Asian manufacturers for chip production. Intel has announced plans to invest around €30 billion in making the continent a leader in chip manufacturing.

A new manufacturing plant in Magdeburg, Germany is due to start operating in 2027. This plant is at the centre of Intel’s decade-long plan, which could eventually cost €80 billion, involving manufacturing and research efforts in a number of other European countries, such as France, Italy and Ireland. Intel is also investing €12 billion into an existing facility in Ireland.

However, Intel’s investment hasn’t been met with an entirely positive response. Some European executives believe that the type of advanced manufacturing techniques Intel will be investing in are better suited for smartphones and servers, rather than serving the needs of the European industry. The belief is that the investment should instead be focused on improving energy efficiency and other aspects required by carmakers and similar manufacturers.

The potential sale of Newport Wafer Fab

The UK’s current largest manufacturer of semiconductors is potentially being sold to a Chinese-owned firm. The company attempting to make the purchase is the Netherlands-based Nexperia, which is owned by Wingtech in China. Newport Wafer Fab is currently responsible for manufacturing 32,000 wafers a month. 

However, the sale of the UK company is currently being held up by the UK government, as they want more time to scrutinise the sale before it is officially sold to overseas ownership.

This comes after the UK also blocked the sale of a British chip design software company to a Chinese company, citing reasons of national security. If the sale of Newport Wafer Fab does go ahead, it is sure to have ramifications for the state of European chip manufacturing.

The European Chips Act

In early 2022, the European Commission put forward the European Chips Act with the aim of addressing the semiconductor supply shortage and boosting Europe’s position in the chip production market. This act is set to mobilise €43 billion in ‘policy-driven investment’ to the EU semiconductor market by 2030, with the expectation that long-term private investment will exceed this.

This investment should allow EU manufacturers to strengthen and scale up production throughout the EU semiconductor sector, while also making them better equipped to navigate supply disruptions and reducing dependence on Asian manufacturers.

Europe’s chip manufacturing sector has been under stress for some time and has lacked serious investment due in part to the global reliance on Asian manufacturers. However, we are seeing the promise of significant investment in building a more productive and robust chip manufacturing industry in Europe.