Europe should ask, what do we want from the semiconductor market?

As the world moves into the digital era, everyone wants a piece of the semiconductor market pie. Today, Europe lags behind the big players in the semiconductor market – the US, China, Taiwan, South Korea and Japan. However, the European Union (EU) does not sleep. A bit late, of course, but her hand was already reaching towards the chip market. What are the real chances of the EU joining the semiconductor market and what strategy should it apply? We talk to Dr. Dr. Tom Hashimoto.

– Today we have such a number – the EU semiconductor market makes up 10 percent. all world markets. A year ago, the EU adopted the so-called Chip Act, which aims to to double this percentage. How do you see the EU and its new strategy looking globally?

– I think that the main question raised by the EU should be why we want to get involved in the semiconductor market. There is currently talk that a Taiwanese company could manufacture chips in Germany. But would it really be a European product?

In the act you mentioned, the EU distinguished three main emphases. One of them is the effort to reduce dependence on external partners due to possible disruptions in the supply chain. So if the Taiwanese are making chips in Europe for domestic markets, that’s actually a valid tool. But on the other hand, if we say we want to make European chips because they are European and the market becomes more resilient, then setting up a Taiwanese company in Germany makes no sense. We must want the chips to be manufactured by big German or Lithuanian companies.

So Brussels has initiatives, good initiatives, but they don’t always follow through.

– On the other hand, it is impossible for one country or one continent to provide all the necessary resources and ensure the supply of microchips.

– Exactly. Ultimately, it’s a matter of division, right?

– A year has passed since this decision was made. What are your most important accomplishments? Is Germany the only highlight we can name as an achievement?

– I would say yes, partly because Brussels’ attention and resources were taken away by the war in Ukraine, Gaza, and everyone is also worried about the possible re-election of Donald Trump. We also have to remember that the EU budget is extremely limited, so they cannot do everything. So they have initiatives, good initiatives, but they don’t always follow through. So I think that the security of the microchips or semiconductor market is not necessarily a priority for the EU at the moment.

– And should it be?

– Yes, it should be.

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– We hear talk that, let’s say, the EU should create a separate defense policy. So the priorities would be distributed differently. Hence the fact that semiconductors may receive less attention.

– I think that when it comes to security, it has more to do with research and development. You mentioned defense. This is already a very problematic area. Because, for example, we have airplanes, air defense, and who makes those systems?

The European company Airbus is French-owned, but the Czech National Aircraft Factory, for example, is actually owned by (US-owned company – IQ Past.) Boeing. So when it comes to the defense industry at the European level, we are not sure if Europe speaks the same language. What to say that we are talking about creating common things. I mean the European Eurofighter fighters, which took a very long time to develop. Therefore, European microchips are everyone’s dream. In terms of the strategy, its implementation, it is possible that there will be more opinions among the members, because the opinions of the member states are starting to diverge.

So yes, the EU wants to do it. However, the confederal arrangement of the EU, where the member states can also influence, say, the operation of the strategy, affects what actually happens in the market.

– So, as you said, this should be a priority for the EU. But we can already see that even the Green Deal is stalling. It’s getting harder to get everyone together and make a single decision.

– It goes back to the old saying that if Germany and France agree, the EU wins.

– Yes. Let’s consider. Currently, the US and Taiwan are inseparable when it comes to semiconductors, with one developing technology and chip designs while the other manufacturing them. Is it possible for EU countries to have all this internally?

– No, I don’t think it’s possible. I think it’s too complicated. Partly because making power and analog semiconductors doesn’t require a lot of brains—it requires manpower. And the cheaper it is, the better. Yes, we could give this function to the country where the production cost is lower, such as Romania, Bulgaria, etc. Technically we could, but then do we want to simultaneously invest in huge installations all over the EU that would emit a lot of heat, even though it would be completely incompatible with the EU’s ecological policy.

The EU’s strategic thinking should be focused on research and development, next-generation microchips.

I think the EU will be interested in semiconductors that can address these three issues. First, create a crisis-proof supply chain. Second, align the semiconductor industry with security and defense needs, and third, meet ecological challenges. In that case, Europe could tackle problems like, say, making a high-quality chip that has more computing power while using less electricity. Then it will be something that would interest the EU.

The EU’s strategic thinking should be focused on research and development, next-generation microchips. European universities and research institutes will be the most important for this. This will be relevant for countries such as Germany, France, the Netherlands, etc. math and engineering in graduate schools, this may be the fastest solution.

– I really liked your phrase about the youngest member states of the EU, which, in contrast to rich countries such as Germany, do not have the financial resources to suddenly start a whole industry. You said that such countries will never be like China, but can be like Taiwan. What exactly is behind this thought? And what means should be used to achieve this?

– What I mean is not price competition, which is determined by the market, not strategic thinking based on price competition, but quality competition. You compete on quality, ideas, market creation. This is the survival factor of Europe.

Therefore, countries like Lithuania have to deal with niche matters. And it’s all about marketing. For example, furniture. There is a lot of IKEA-style, factory-made, cheaper furniture, right? It’s fun, but we still have handmade furniture, and we spend twice as much. Why? After all, they are imperfect, but they are authentic.