BMW recently temporarily halted production at its plant in Regensburg, Germany. The reason for this was a shortage of chips. These components play an indispensable role in not only cars, but also in a wide range of other products. The European Commission wants to reduce the European Union's (EU) dependence on foreign chip production by bringing production to the EU. Where do these plans stand?
The chip shortage is a global problem. The COVID-19 pandemic is increasing demand for devices that incorporate chips, such as laptops and smartphones. The demand has increased due to the greater number of home workers, among other things. But also due to the increased need for entertainment in the form of game consoles, for example. The shortage has been exacerbated by other problems, including drought in Taiwan. Indeed, chip production requires a lot of water. However, consider also a fire earlier this year at a Japanese factory of chip manufacturer Renesas.
Factories temporarily close doors
For companies, the chip shortage can cause major problems. The automotive industry, among others, is greatly affected. Audi, Ford, General Motors, Land Rover, Scania and Volvo, among others, had to temporarily close factories. And most recently, so did BMW.
Unfortunately, it does not look as though the shortage will be resolved in the short term. Back in May, Intel CEO Pat Gelsinger predicted that the chip shortage would persist for years to come. This is in line with the expectations of IBM CEO Jim Whitehurst, who also anticipates chip shortages for at least another two years. The Eindhoven-based chip manufacturer NXP predicts that the shortage will last until at least the end of this year.
The European Commission is also looking at the chip shortage with concern. The commission wants to bring semiconductor production to European soil. This should reduce the EU's dependence on foreign manufacturers. Among other things, subsidies should persuade chip makers to open factories in the EU.
Taiwan Semiconductor Manifacturing Co.
Several parties are showing interest in them. The most recent example is Taiwan Semiconductor Manifacturing Co (TSMC), the world's largest chip manufacturer. Japanese business newspaper Nikkei recently reported that TSMC is considering opening a chip factory in Germany. This would be the company's first factory on European soil. Board chairman Mark Liu reported to TSMC shareholders that the German plans are being seriously evaluated. A decision reportedly depends on TSMC's customers' need for such a German plant.
The news follows on from recent reports. For instance, Digitimes recently reported that TSMC is considering a German chip factory. Specifically, this would involve a 12nm chip factory in the vicinity of the city of Dresden. Liu, however, leaves the location open.
Intel
Intel is also showing interest in opening a European chip factory. The Financial Times reports that Intel has plans for two chip factories. The US company would like to invest $20 billion in these factories over a 10-year period. Over the full lifetime of the factories, this amount could reach $100 billion. Both Benelux and Germany have been mentioned as possible sites.
The US company is reportedly considering spreading its investments in European chip production across several EU member states. Different steps of the production process will be carried out in different member states in this regard. For instance, Intel is considering housing production in one location, while packaging takes place in another.
Bosch
Bosch opened a chip factory in Dresden, Germany, in June. The factory opened its doors six months earlier than planned in view of the chip shortage in the automotive sector, among others. Construction of the plant started in mid-2018. Bosch is investing around a billion euros in the chip factory.
The chip factory is located in 'Silicon Saxony', the main location for semiconductor production in Europe. The location is home to some 300 tech companies. Chip factories of GlobalFoundries and Infineon have also been located in Silicon Saxony for some time.
Alliance
Just recently, the European Commission announced an alliance to promote the production of advanced chips. Among other things, the alliance will evaluate how to boost chip production on European soil. And how the EU can increase its independence in this area. The alliance should focus not only on solving the current chip shortage. But also towards making the EU more competitive in the chip market.
Both public and private parties can apply for the alliance. A prerequisite is that they are based in the EU. And that they meet certain cybersecurity requirements.
Author: Wouter Hoeffnagel
Image: Tobias Dahlberg via Pixabay
