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Semiconductors

EU aims to be independent chip power with 20% global share

Plan seeks to buffer bloc from US-China tensions that disrupt supply chains

A technician adjusts a laser at Trumpf, a German company that supplies CO2 laser technology to Dutch ASML, a leader in semiconductor lithography machines.   © Reuters

BRUSSELS -- The European Union put forward a plan Tuesday that called for the bloc to produce a fifth of advanced semiconductors worldwide in a vision that echoes the U.S. pursuit of a tech supply chain that is independent of China.

A cornerstone of the Digital Compass plan is the investment of about 140 billion euros ($166 billion) into the digital sector over the next two to three years. The financial resources will come from a coronavirus recovery fund, equivalent to roughly 20% of the package.

The EU will build the digital supply chain inside the 27-member bloc. From there, foundries will aim to manufacture 2 nanometer semiconductors. The EU aims to grab at least 20% of the share by value of semiconductors below 5nm in size by the year 2030.

Last year, Taiwanese and South Korean companies collectively controlled more than 40% of the global semiconductor production capacity, according to data from Boston Consulting Group. Meanwhile, the U.S. and Europe hold shares of roughly 10% apiece. Europe once held a 24% share in 2000, but has quickly lost ground in the arena.

The EU will realize its production goals by luring big-name chipmakers into building plants within the common market. The EU reached out to both Taiwan Semiconductor Manufacturing Co. and South Korea's Samsung Electronics, Bloomberg News reported last month. The companies have virtually monopolized contract manufacturing of advanced semiconductors sized 7 nm and below.

This follows U.S. President Joe Biden's executive order last month to conduct a review on the risks to the domestic supply chain to be completed within 100 days.

"We shouldn't have to rely on a foreign country -- especially one that doesn't share our interests or our values -- in order to protect and provide our people during a national emergency," Biden said during the signing of the executive order, in a thinly veiled reference to China.

The frictions between the U.S. and China have not changed since Biden took office. China has responded to U.S. sanctions by pivoting toward establishing a tech infrastructure capable of self-sufficiency.

That has signaled a potential rivalry that will involve the entire industry.

"In the coming years, we will see a certain number of tensions ... in the field of semiconductors, that can have implications, including geopolitical ones," Thierry Breton, EU commissioner on internal markets, told reporters last month.

While the U.S. and EU pursue chip independence, Japan is lagging behind. Japan, which held a nearly 20% share in semiconductor production in 2010, is on track to sink to 13% by the end of the decade.

There are only a few Japanese chipmakers capable of competing globally. As things stand, the situation risks casting a shadow over Japan's auto industry and other key sectors.

The Japanese government's plan to support the semiconductor industry rests on the 200 billion-yen ($1.8 billion) fund set up by the Ministry of Economy, Trade and Industry (METI). But the U.S. and the EU are spending at least 10 times the amount in terms of subsidies. Japan's Green Growth Strategy also outlines goals for the semiconductor industry, but the scheme is scarce on details.

Japan's Kioxia Holdings, formerly Toshiba Memory, is strong in memory chips. But Renesas Electronics decided to stop manufacturing advanced semiconductors as the result of a business restructure.

METI will draw international groups to Japan to do research and development on packaging and testing semiconductors. Last month, TSMC announced it will open such an R&D center in Ibaraki Prefecture. METI sought to have TSMC build a wafer fabrication facility in Japan, but the company chose the U.S. state of Arizona instead.

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