Semiconductor Self-Sufficiency in Europe

With growing global demand for computer chips amid a post-corona supply shortage, Germany and Europe are building up their domestic capacity. International electronics companies are positioning themselves to take advantage of the developments.

December 2021

In June, German Chancellor Angela Merkel attended the opening of a billion-euro new Bosch production facility for computer chips in Dresden to highlight Germany’s response to an economic challenge. “In the past, oil was considered the lifeblood of an economy; today, we depend on semiconductors more urgently than ever,” she said. “We will not only make Germany and Europe as a whole more crisis-resistant but also create new opportunities for growth and prosperity, for sustainable jobs and for social security.”

Bosch built its semiconductor plant – the largest investment in the company’s history – with the help of EUR 200 million in IPCEI (Important Project of Common European Interest) funding for microelectronics. That move has already triggered billions of euros of investment in Dresden and the surrounding region.

With its many renowned R&D institutes, the eastern German regional state of Saxony has become the center of chip production in Europe and the fifth largest producer in the world. Other major international electronics companies – including TSMC, Samsung and Intel – are in discussions regarding potential locations in Germany. EU Commissioner Thierry Breton hopes Europe’s share of global semiconductor production will grow to 20 percent by 2030.

Germany tackles a post-corona shortage

In the first half of 2021, as many economies were starting to rebound, industries were hit by a global shortage of microchips. The bottleneck disrupted supply chains, delaying production in the auto industry, portable electronics and other manufacturing sectors. Germany recognized the need to support chip production at home. At the start of 2021, the German government pledged an extra EUR 400 million to its existing EUR 1.75 billion in funding for microelectronics.

“The months of chip shortages ahead are threatening profits and the livelihoods of a lot of people,” says Max Milbredt, a manufacturing industry expert with GTAI. “But Europe is very strong in applied research, and we have a world-class talent pool of engineers and apprentices.”

Europe’s Chip Sector is Growing

German electronics industry group ZVEI predicts that by 2025 Europe’s share of worldwide semiconductor production will increase to about 9 percent.

$34billion

2015

$38billion

2020

$52billion

2025

Source: ZVEI, https://www.zvei.org/presse-medien/pressebereich/weltmarkt-fuer-mikroelektronikwaechst-im-pandemiejahr

Apple commits to Bavaria

Greater self-sufficiency means greater innovation. Also in June, Apple announced it would build a new billion-euro Silicon Design Center in Munich. The Bavarian capital is home to Apple’s largest engineering hub in Europe employing 1,500 engineers. Apple wants to produce more of the tech that runs its devices in-house, and over the past five years has worked with more than 700 German companies, including chip manufacturer Infineon.

In May, France’s SiPearl opened its first international subsidiary in Duisburg in the Ruhr region, focusing on hardware development. The R&D location is also a regional hub providing support for connected mobility and high-performance computing applications. “Proximity to customers” and the “excellent university landscape” influenced the choice of location, says SiPearl’s country lead, Frank Gorris.

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