Semiconductor Value Chain

CEO's Report Outlines How to Double European Chip Manufacturing Share

18 February 2014

The Electronics Leaders Group – comprised of CEOs from Europe's leading semiconductor-oriented companies – has produced a long-awaited strategic plan for the resurrection of the European electronics industry.

And the plan has stuck to the primary goal laid down by the European Commission, that European chip manufacturing should be increased to 20 percent of the world market. The original call from Neelie Kroes, the European Commission vice president, was that this should be achieved by 2020 but the ELG have indicated that six years is too short a time and relaxed the goal to some time between 2020 and 2025.

Part of the plan is to drive component demand in Europe by taking a leading position in upcoming high growth markets such as the Internet of Things (IoT) and the development of 'Smart-X' markets such as smart homes, smart grids and cars that communicate with each other and the transport infrastructure.

However, that Kroes has got the CEOs of such companies as Infineon Technologies, NXP Semiconductors and STMicroelectronics to flesh out and sign off on such a plan is significant. The behavior of these companies over the previous decade – which has seen European chip manufacturing decline to about 9 percent of a $300 billion world market – does not match the intention laid out in the plan.

Nonethless, the European semiconductor ecosystem still employs approximately 250,000 people directly; with 2.5 million employed in the full value chain, according to the European Commission, and micro- and nano-electronic components and systems are responsible for at least 10 percent of Europe's GDP.

The 11 senior executives that make up the ELG, mainly CEOs but including Mike Muller CTO of ARM, have now, by way of their report, told Kroes that Europe can capture up to 60 percent of emerging markets, and double the economic value of semiconductor component production in Europe within the next 10 years.

This suggests that behavior within Europe will have to change as chip companies have been driving capital expenditure down while the cost of engagement in chip manufacturing at the leading edge has been going up. The three top chip companies of European origin are all operating fab-lite strategies and when they do manufacture chips, much of that is done in fabs located outside Europe.

To increase European chip manufacturing several wafer fabs will have to be built and even international giants present in Europe – Intel and Globalfoundries – have significant wafer fab plans in other places such as the United States.

The ELG estimates that the needed additional manufacturing capacity to double Europe's share is 250,000 wafers/month (300mm equivalent) – requiring tens of billions of dollars of investment. To get there the ELG proposes that Europe increases manufacturing capacity by 70,000 new wafers per month each two years from 2016/17 onwards - an average of 10 percent increased capacity per year.

Without indicating which companies might respond to incentives, the report made the point that forms of public funding would have to be found to support not just R&D and pilot lines but also to support the creation of production facilities in Europe. "Total public investment in such a package will need to exceed one billion euro to be competitive with other regions worldwide," the report said.

It is notable that the Indian government has just pledged a 25 percent capital expenditure subsidy for a two-fab plan with a budget of $10 billion. The report also offers up the hope that innovative cooperative ownership models could be deployed to get world-class fabs built in Europe.

The report also focuses on the need for the chip production to be demand driven and spends some time indicating that Europe needs to pioneer and take a commanding position in new markets and applications for semiconductor components.

It specifically references e-health, smart homes, smart cities, CO2 reduction, energy reduction and intelligent transport systems where Europe could get 60 percent market share. In automotive, energy and industrial automation, where Europe already has a strong position, the aim is to double production of the relevant chips by 2020 to 2025. And despite the notable failure of the ST-Ericsson joint venture the ELG report maintains that Europe must try to win a 20 percent of the growth in the mobile digital market through a mix of leading-edge and More-than-Moore production.

Among the generic technologies expected to have an impact across these applications and on which Europe should focus the report lists: low-power digital technology based on silicon-on-insulator production, photonics, integration 3D/multilayer silicon, programming languages and compilers, debug for highly parallel systems, design reuse and non-volatile memory.

In a statement accompanying the publishing of the report Kroes said: "I want us in the driver’s seat. The sector wants to be back in the driver's seat. So my message is this: we are going to make Europe the place to make and buy innovative micro and nano-electronics."

The ELG will continue to work on the detail of actions to be taken under plan until June 2014.

Related links and articles:

A European Industrial Strategic Roadmap for Micro- and Nano-Electronic Components and Systems

European Commission

News articles:

India Details Wafer Fab Subsidies

Can the 'Airbus of Chips' Plan Fly?

Europe Nurtures Plan to Bring Back Chip Manufacturing

EU To Bolster Investment in Nanotech

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