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Semiconductors: the very big EU budget to detach from Asia

Brussels no longer wants to depend on asian countries in the semiconductor market. This very strategic sector of industry has been suffering severe shortages for several months, and the European Union therefore intends to emancipate itself from Asia so as not to have to suffer from it any longer. Also, the European Commission proposed, Tuesday, February 8, to release an envelope of 43 billion euros in favor of this semiconductor industry. Ursula von der Leyen, the president of the European executive, thus explained that the Europeans have “set the objective of having 20% ​​of the world market in 2030”, twice as much as today.

In a market which should itself double by 2030, this means a fourfold increase in the production of semiconductors in Europe. The European Union, at the forefront of chip research, has seen its market share drop in recent decades, to just 9% of global production, she pointed out.

The reasons for this desire for independence

But the shortage of semiconductors, which has held back the automotive industry for three years with the forced shutdown of many factories, has caused an electric shock. Geopolitical tensions around China, as well as the pandemic, have raised awareness of the need to produce in Europe these essential components mainly imported from Taiwan and Korea.

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To the point of convincing the Commission to relax its strict state aid framework and to adopt an interventionist industrial policy in a continent traditionally very open to global competition. “For the first time, Europe is changing the rules on competition policy, including state aid,” explained Thierry Breton, who is leading the EU initiative.

These components are essential in many everyday objects, such as mobile phones, but also in data storage centers, at the heart of the booming digital economy. Last year, semiconductors represented a global market of nearly 600 billion euros, according to the consulting firm Yole Développement.

A budget for research and for setting up factories

The draft regulation, which still needs to be adopted by member countries and the European Parliament, provides €11 billion in grants, around half from the EU budget and the other half from member states, to finance research into the most innovative technologies and pilot lines to prepare for their industrialization.

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To allow the establishment of very large factories, Brussels will also authorize 30 billion euros in public aid from the Member States to industrialists in the sector, including foreign groups, such as the American Intel, which plans to invest in Europe. A fund of more than 2 billion euros will support start-ups in the sector. This essentially public financing should lead to an even greater amount of private investment, the Commission hopes.

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The European plan rivals that of the United States, which has also initiated the repatriation of production activities to their territory. On Friday, the House of Representatives passed a bill that provides 52 billion dollars (45 billion euros) to relocate the manufacture of electronic chips.

A problematic double dependence

“Europe is currently very behind in terms of means of production,” emphasizes Émilie Jolivet, Semiconductor Director for Yole Développement. The project announced on Tuesday is “a step forward, but it must be put into perspective in relation to what is being done elsewhere in the world, especially in Asia”, she explained to Agence France-Presse, stressing that the Taiwanese group TSMC alone was going to invest 36 billion euros for the year 2022 alone.

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Europe is now experiencing “a double dependence” in terms of semiconductors, explained this expert. On the one hand, a dependency on the United States, which designs chips, with players such as Intel, Micron, Nvydia and AMD. On the other hand, a dependence on Asia where most of the manufacturing takes place, in Taiwan with TSMC, but also in Korea, with leaders like Samsung and SK Hynix, and, increasingly, in China .

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The European Union depends on Taiwan for more than half of its needs, underlined Thierry Breton. Hence a major economic risk, for example if a military conflict arises with China. “If Taiwan was no longer able to export, almost all the factories in the world would stop in three weeks,” he warned.

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