Monday, January 17th, 2022

independent semiconductor production isn’t doable


Becoming completely independent on semiconductor production is just “not doable” because of the high levels of investment needed, the EU’s competition chief admitted Monday.

Carmakers and other businesses in the bloc have struggled in the wake of the coronavirus pandemic, as supply chains were impacted and limited access to the much-needed technology. As a result, European policymakers have been looking at ways to boost production of computer chips.

For some officials, the EU needs to become a global powerhouse in this space — but Margrethe Vestager, the EU’s competition chief, has cautioned against any unrealistic expectations.

“The numbers I hear of, sort of, the upfront investments to be fully self-sufficient, that makes it not doable,” Vestager, executive vice president of the European Commission, told CNBC in an exclusive interview in London.

“What is important is that there is a different level of production capacity in Europe,” she said.

The European Commission, the EU’s executive arm, has said that it wants to double the market share of semiconductors in Europe by 2030. At the moment, “on a good day,” Europe’s market share is at 10% — it used to be 40% in the 1990s, according to data from the commission.

“At the same time, you’d need a lot of chips that come from legacy technology, a lot of the chips that goes into sort of internet of things, your fridge, your coffeemaker … that’s legacy technology, and it will take quite some time because that sort of migrates into leading edge,” Vestager said, noting that it is important “to see yourself in a global perspective, and to see with whom we would want to have real interdependencies and also politically to commit to help each other on a rainy day.”

Geopolitics

One of the reasons behind the push for self-sufficiency is to be free from geopolitics. There are concerns that frictions between the U.S. and China, or Germany and China, could disrupt supply chains even further.

Vestager said the EU is working with the United States to identify what is causing shortages in the production of semiconductors.

“We need to continue international cooperation,” she said, “because even if our strategic goal is to have 20% of [the] value of leading edge to be produced in Europe by 2030, in most advanced products, you’d find numerous chips of different sorts. So it’s also really important internationally to get the supply chains working well.”

Vestager also said that governments need to be able to provide support to this sector, but this can only be done in a “proportionate” way.

“We can establish directly on the treaty, subsidies for specific kinds of production capacity to be enabled in Europe. Of course, it has to be proportionate, the aid given, only what is necessary, and there needs to be a European perspective,” she said.

“But of course, if it’s first of a kind in Europe, then the risk of competition distortion is much, much less than if you had, you know, one business given productive subsidies compared to another business not having it,” she added.

Foreign subsidies

The European Union has been concerned about foreign investment in European companies for some time, but the pandemic has exacerbated the issue as firms struggle for cash. The bloc insists it is not opposed to foreign investment in the region, but wants to be able to check deals to ensure they are not distorting competition in the market.

News emerged earlier this month that a Chinese state-controlled company bought an Italian manufacturer of military drones, Alpi Aviation. But the deal was not scrutinized by European authorities.

Vestager has asked European institutions to reinforce the competition tools so her team can scrutinize deals more efficiently. This piece of legislation has not yet been approved, however.

“We need to use the tools more. We need more activity, we need more scrutiny,” Vestager said.

“We need to be much more out there. Even with new regulation coming in, the digital services act and digital markets act, you know, the enforcement need[s] to stay vigilant,” she said.