According to the “European Chip Act”, the European share of semiconductor production should increase to 20% by 2030. To achieve this ambitious target, there are some critical issues to consider. “Without an overall strategy that includes a holistic production in our region, the target remains partial – explains Tobias Wölk, Product Manager Automation Technology & Active Components at reichelt elektronik –. We are convinced that Europe can achieve true sovereignty in semiconductor manufacturing only through a fully Europeanised value chain, from front-end to back-end production. Not only do we need more production factories, but also a regionalisation of the processing industries. Otherwise, we will continue to be vulnerable to disruptions in the global supply chain and our dependence on Asia will persist”.
Semiconductor manufacturing, a globalised process
Bringing semiconductor manufacturing back to Europe is easier said than done. Today it is a highly globalised process, where even leading chip design companies outsource production to external companies. “The various production steps – Wölk explains – are spread across different regions of the world. The main ones are: front-end production, i.e. the production of so-called wafers (thin silicon disks) that are supplied with circuits and processed in such a way that chips are eventually created. The back-end production follows and involves the testing, assembly and packaging of the chips”.
Many large semiconductor manufacturers have decided to outsource back-end production to specialised service providers in the Asian market. These suppliers are known as Outsourced Semiconductor Assembly and Test Vendors (OSAT).
Investment alone is not enough
“The EU’s ambitious plan will be difficult to realise in the current semiconductor manufacturing environment. Simply relocating front-end production will not solve Europe’s dependence on semiconductors: OSAT capacities must be increased to the same extent as front-end production. Otherwise, the localisation of semiconductor production in Europe will remain incomplete and ineffective, as chips will still have to be sent abroad to be made ready for use”, says Tobias Wölk.
There is also a lack of adequate manpower to achieve such ambitious goals. And another critical issue is the dependence on Chinese silicon production. Silicon, the most important raw material for microchips, is largely produced in China. In 2023 alone, the Country produced about 6.6 million tonnes of silicon, about ten times more than the second largest producing Country, Russia.
“Close cooperation between industry, government and institutions (such as universities and schools) – Tobias Wölk concludes – is crucial to train and attract the necessary skilled labour force. At the same time, bureaucratic barriers must be removed and investment in research, development and infrastructure must be substantially increased. Only through a coordinated and integrated approach Europe can realise its vision of a strong and independent semiconductor industry, and be able to compete successfully in the global market”.
