“EU chips investment drop in bucket in grand scheme”
Spurred by the pandemic and its resulting supply-chain issues, and punctuated by the invasion of Ukraine, a new chip-war between the West and East has seen a revaluation of the role micros and semiconductors play in countries’ economies and a concerted effort to shore up supplies.
“With chips being used in everything from consumer devices to military to industrial industry, it's clearly something that a spotlight has been put on. So each region has their own their own proposal,” Wayne Rickard, Terecircuits Corporation CEO tells Electronic Specifier.
The US last year announced the CHIPs for America Act, introducing roughly $280bn in funding for domestic production; Japan has plans for a state-backed semiconductor venture; Rapidus to partner with IBM to develop high-tech chips, and the EU have mobilised €43 billion to boost R&D for semiconductors, with a goal of producing 20% of the world's semiconductors by 2030.
With all these large numbers flying around, one might think that the chip sector will be due for a golden age – in terms of production and technological advancements. Yet, examining the EU’s aim of reaching 20% of global supply, when considering its current market share is less than 10%, appears like a lofty goal.
European Chips Act examined
The provisional agreement was proposed by EU lawmakers in 2022 when a semiconductor shortage nearly completely halted the production process of many products with electronic components. April 2023’s agreement is the culmination of a year’s worth of scrutinising the proposals for a new Chips Act.
Currently, many of the chips produced in the EU are used in the automotive sector, with smaller use in the aerospace and defence, industry, healthcare, and other sectors. Yet, as global consumer electronics increase, the trend of greater connectivity of everyday items and infrastructure – as anticipated by the EU’s 5G plans – mean more chips are needed. The EU’s own estimate demand for semiconductors is due to double by 2030 and become a $1 trillion industry.
A main element of the European Chips Act proposal is large-scale technological capacity building. This includes channelling funds towards new semiconductor manufacturing facilities and the creation of semiconductor hubs across the EU, as well as the piloting of new semiconductor technologies, improvements to design and engineering capabilities, and enhancing access to debt financing and equity for companies in the semiconductor value chain.
“This is aimed to ensure, an uninterrupted supply chain, but also ensuring that the other sectors of the economy that depend on chips are given that opportunity to grow and flourish,” Rickard says.
With supply chains being the concern, it may appear that these spendings are to ensure the trading bloc is self-sufficient in the production of semiconductors and chips, but that’s not the case Rickard explains.
“When you look at a semiconductor, it could have as many as 200 different border crossings and process steps to complete the design and the fabrication. So, what the European Chips Act does is recognises the need for an ecosystem of suppliers and partners.”
With assembly in Southeast Asia, design in the US, and then manufacturing in either South Korea or the Netherlands, the chip industry is an international industry. Therefore, de-tangling it is not likely the near-term goal.
“The final thing that the investment does is it increases the R&D in areas that have been under invested,” Rickard says.
Yet by building up development capacity, it is aiming to ensure if shocks happen, they are minimised by a supply chain that now has greater investment in it, with more plants processing the various production elements of the chips.
Effect on the chips sector
“Although these are big numbers, they're really a drop in the bucket compared to the type of investment the individual companies will be making,” Rickard explains.
Despite the global governmental investment into the industry, the amount of money needed to advance the chip industry is more than even the big numbers provided. But what it does is create an ecosphere of investment for companies wanting to expand their own chip-making capacities. Since talks of the Chips Act begun, companies like Intel, STMicroelectronics and GlobalFoundries have committed to building multi-billion Euro facilities in Germany and France and will seek EU approval for national subsidies to build first-of-a-kind in Europe operations. TSMC, the world’s biggest chip manufacturer, is also reportedly considering its options in Europe.
This growing investment, and as a consequence increased R&D, going into the sector creates a higher propensity to yield greater technological advancements into chip technology.
“I think what really comes out of this is not to shift production necessarily, but to drive the innovation cycle and create a workforce development and an incentive for international cooperation,” Rickard says.
This innovation may prove crucial in the manufacturing of new, more fragile chips. As currently, a number of chips are suffering from issues related to current inadequacies of tools and pick and place as a mechanical process used to make them.
Miniaturisation, for instance, is reaching the point of micro and nano scale electronic components. A micro LED, can be on a scale of five to 10 microns, and they can't be handled by the clinical assembly tools the industry has been using for the last 30-40 years.
Also, the new field of power electronics. A field today pegged to grow to €6 billion in five years. Yet these are based on materials like silicon carbide or gallium nitride, materials that are three to five times more brittle than silicon. So mechanical tools that are used and packaging and assembly and handling can damage the silicon carbide and destroy an entire wafer.
Yet, new assembly processes do exist. Ones that use chemical reactions to create expanding gasses to selectively release components can circumvent some of these issues.
Therefore, these funds being allocated by government and expanded upon by private enterprises, can lead to a wider spread adoption of new such manufacturing processes that lead to a blossoming of new chips production, or an optimisation of ones already being made.
“I think besides addressing the skill shortage and developing this type of deep understanding of global supply chains, we come out of this era of these various government initiatives with a more a global appreciation of how important semiconductors are to the to the not just the world economy but to the ability of individual regions to grow their own economies and that alignment of public and private policy,” Rickard concludes.