Geopolitical chips and new EU agenda for semiconductor sovereignty – EURACTIV.com

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Technology is becoming alarmingly too geopolitical, especially in the case of the current global shortage of semiconductors, writes Raluca Csernatoni.

Raluca Csernatoni is a European security and defense expert specializing in emerging and disruptive security and defense technologies at Carnegie Europe in Brussels.

Also known as microchips, semiconductors are the backbone of today’s interconnected world. From the old low-end chips used by the automotive industry to the high-end chips needed for cutting-edge products like PCs and smartphones, semiconductors are the “brains” of all electronic devices.

The current global shortage is a cause for great concern. Why did it happen?

The crisis is linked to a combination of different events and factors. The main culprit was the snowball effect of the COVID-19 pandemic, which shut down chip manufacturing plants but also triggered a strong demand for personal electronic devices from millions of people working from home.

Another factor was the technology trade war between the US and China, with Washington imposing trade restrictions on China’s largest chip maker (Semiconductor Manufacturing International Corporation – SMIC).

This geopolitical struggle has put pressure on non-Chinese producers, who are already operating at full capacity.

Finally, Taiwan, the largest player in the semiconductor manufacturing industry, has gone through its most severe drought in more than a century – a large amount of ultrapure water is required in the chip manufacturing process. Therefore, bottlenecks have been added to the already dire situation.

Today, the United States (Intel) competes in many parts of advanced manufacturing processes, such as chip design and manufacturing. But the highest concentration of cutting-edge chip manufacturing and assembly is found in Asia, primarily Taiwan (Taiwan Semiconductor Manufacturing Co – TSMC), then South Korea (Samsung Electronics), with Europe only a minor player.

Due to production delays, intensified in the last two years by the pandemic, the shortage of chips has prompted states to pursue their autonomy in this strategic sector and to support production.

The current global shortage of chips has therefore exposed the geopolitical risks of technology addictions and of concentrating chip manufacturing in only a handful of countries.

Access to high-end microchips is not only essential for industry, but also for national and international security.

The United States discussed massive investments and incentives under the bipartisan American Chips Act to support internally grown manufacturing, research and development, and supply chain security.

Maintaining a lead in semiconductor innovation and supporting supply chain resilience have become key strategic priorities for Washington.

This highlights the fact that semiconductors, as “core technologies”, are seen as critical to both economic performance in the digital age and military might.

Likewise, the EU aims to strengthen the resilience of supply chains and raise the European stake to reach the top level of chip makers, with the aim of acquiring 20% ​​of the global market by 2030.

In her latest annual State of the Union address, European Commission President Ursula von der Leyen launched another initiative to strengthen the EU’s technological sovereignty, the European Chips Act.

It aims to send the political signal that the EU wants to enter the global chip race and expand research and manufacturing capacity at home.

To this end, the European Commission has also recently launched the European Alliance for Processors and Semiconductors, which brings together EU Member States, businesses, research and technology organizations.

According to the European Commissioner for the Internal Market Thierry Breton, with the “European Chips Act, our technological sovereignty is at hand”.

Or is it? The EU’s ambitions for chip sovereignty may indeed be misplaced, particularly when it comes to manufacturing cutting-edge chips that take a lot of time and money to develop.

Political rhetoric abounds around this goal.

Gaining control over production and an upward foothold in supply chains is very difficult. The EU arrives late for the party.

The semiconductor industry is highly concentrated, specialized, innovation-oriented, capital-intensive, and most importantly, controlled by established players in Asia and the United States.

Other major obstacles for the EU are its own single market rules on competition and a history of keeping public subsidies to a minimum.

However, the European technological sovereignty framework could be useful in convincing Member States of the merits of “more EU” in coordinating technological innovation and industrial efforts.

Furthermore, going alone in search of strategic autonomy is not always the most feasible approach. Partnerships with trusted states and commercial actors are just as important, if not more so.

This explains Commissioner Breton’s recent visits to the United States, Japan and South Korea in an effort to increase onshore production and attract high-end manufacturing to Europe.

To attract the interest of chip makers, the bloc can leverage its sizable research ecosystem, scientific and industrial capabilities in key technology sectors, and a skilled workforce.

Two successful cases based in Europe are worth reporting. The Inter-University Center for Microelectronics of Belgium – IMED, an international research and development organization, is a leader in semiconductor research.

And the Dutch multinational ASML is a leader in innovation in the semiconductor industry, producing complex machines essential for the production of microchips.

Equally important are strategic technology alliances. Semiconductors and a commitment to rebalancing global supply chains were also on the agenda of the Pittsburgh EU-US Trade and Technology Council in September 2021.

The Council seems to be the best place to discuss common strategies and find common ground to strengthen the respective security of supply. Beyond the commitments, it remains to be seen how it will work in practice, such as in an attempt to avoid a global semiconductor “subsidy race” with the US and other players like South Korea and China.

As EU plans for chip sovereignty are taking shape, the bloc should focus efforts on fostering an innovation-friendly ecosystem in Europe, accompanied by substantial European funding to support local technology initiatives when it comes to design and manufacturing. of chips.

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