The global semiconductor industry has become a battleground for nations seeking technological dominance. In this fierce competition, Taiwan Semiconductor Manufacturing Company (TSMC), a leading chipmaker, recently made a groundbreaking announcement. TSMC agreed to build a multibillion-dollar plant in Germany, signaling Europe’s aspirations to become a central player in the semiconductor industry. This move comes at a time when the United States and China are locked in a heated rivalry to control chip manufacturing. In response, Europe is investing billions of dollars to stay competitive and reduce its reliance on foreign chip supplies.
Semiconductors, the fundamental components of electronic devices, play an indispensable role in powering modern technology. From smartphones and electric cars to children’s toys and advanced weaponry, chips are ubiquitous. The COVID-19 pandemic and subsequent border closures caused a significant shortage of chips, disrupting various sectors of the tech industry. Governments worldwide were compelled to take action promptly. The United States and China, in particular, implemented stringent measures to secure their chip supply chains, realizing that access to semiconductors has become a matter of national security.
Europe’s Strategic Plan
To strengthen its position in the semiconductor industry, Europe is formulating a comprehensive strategy. The proposed Chips Act, currently making its way through the European Union’s legislative processes, aims to attract a staggering 43 billion euros ($49 billion) in investments from public and private entities. The ambitious goal is to capture 20 percent of the global chip market by 2030, quadrupling Europe’s current production capacity. As part of this strategy, individual European countries are also forging their own agreements and partnerships with chip manufacturers.
Germany Leading the Way
Among European nations, Germany has emerged as a frontrunner in attracting chip investments. TSMC’s decision to build a plant in Germany followed closely on the heels of a deal brokered with Intel to construct a massive 32-billion-euro facility. Germany has also secured substantial agreements with Wolfspeed, a US company, and Infineon, a prominent German chipmaker. While these investments demonstrate Germany’s determination to establish itself as a chip manufacturing hub, the deal with Intel did raise some concerns. The estimated costs for the Intel plant nearly doubled, and sources revealed that the government had promised 9.9 billion euros in subsidies. France has also unveiled plans to invest 2.9 billion euros in a joint plant run by STMicroelectronics and US-based GlobalFoundries.
Unlike the United States and China, the European Union has yet to formulate a unified response to the challenges posed by the chip industry rivalry. While urging both sides to ease restrictions that harm European companies, the EU has not developed a comprehensive plan. Instead, individual countries have taken matters into their own hands. The Netherlands, a key player in semiconductors through equipment maker ASML, announced its intention to impose export controls in an attempt to block China. The pressure from the United States influenced this decision. Furthermore, Germany blocked the sale of two chip companies to China in 2020, citing concerns over national security.
The semiconductor industry is truly globalized, encompassing various stages from design to manufacturing. China dominates the production of essential raw materials like silicon, germanium, and gallium. Meanwhile, Taiwan stands as the epicenter of chip manufacturing, accounting for over half of global chip output. Notably, major chip designers such as NVIDIA and equipment manufacturers like Apple are based in the United States. According to the Semiconductor Industry Association, US firms accounted for 48 percent of the global chip market in the previous year. South Korea, spearheaded by Samsung, held a strong second position with a 14 percent market share, followed by Europe with nine percent.
Europe’s bid for global dominance in the semiconductor industry is gaining momentum. With a focus on attracting investments, implementing legislative measures, and fostering strategic partnerships, Europe aims to reduce dependence on foreign chip supplies and solidify its position in the market. Through Germany’s strong leadership and collaboration with companies like TSMC, Intel, and STMicroelectronics, Europe is transforming its semiconductor landscape. While the United States and China engage in a fierce battle for technological supremacy, Europe is carving out its own path toward becoming a key player in the global chip industry.
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