Skeptics say more government subsidies, skilled workers, and end customers are needed.
kr-asia.com, May. 30, 2024 –
For over three decades, Dresden has been at the heart of European chipmaking, and for most of that time, Jens Drews has had a front row seat to the ebbs and flows of the industry.
In 1996, he watched as Advanced Micro Devices of the US took farmland in the eastern German city, known for its baroque architecture and nicknamed the "Florence on the Elbe," and built a sprawling clean room to produce processor chips for computers.
A decade and half or so later, another American company, Globalfoundries, bought the facility and turned it into a major supplier to global chip developers. Covering an area the size of seven football fields, it is the biggest contract chipmaking facility in Europe.
Drews, whose career spans both companies, is now witnessing what could be the area's most significant change yet.
"We've seen tremendous investment, tremendous interest in the region," Drews, director of communication and government relations with Globalfoundries, told Nikkei Asia. But that, he added, is after a period "of almost 20 years of nothing."
Among the companies moving into or expanding in the region are top German chipmaker Infineon, which is building a EUR 5 billion euro (USD 5.3 billion) plant, and key automotive supplier Robert Bosch, which is spending EUR 3 billion (USD 3.2 billion) to expand its plants there and elsewhere in Germany.
New arrivals include Taiwan Semiconductor Manufacturing Company (TSMC). The world's largest contract chipmaker plans to start construction later this year on a EUR 10 billion (USD 10.6 billion) chip facility–its first in Europe–right next to Bosch's factory, with investments from NXP, Infineon, and Bosch. Globalfoundries is also mulling a multibillion-EUR expansion in the city.
Fraunhofer, Europe's top application-oriented research institute, is expanding its R&D facilities for next-generation advanced chip packaging technologies and computing in memory solutions in Dresden.
This rush to expand is raising hopes that Europe can become a major player in advanced semiconductors, vital components that power everything from smartphones to fighter jets. But local industry veterans like Drews question whether the sudden surge in investment and recent government support will pay off.
The European Union's share of global chip production capacity is about 8%, according to the European Semiconductor Industry Association, down from over 10% in the 1990s. In advanced chips, Europe in the 1990s led the world, accounting for 44% of output, according to data from the Boston Consulting Group. That dominance is long gone, with Asia now accounting for more than 90% of cutting-edge production.
Attempts have been made to reboot the EU chip industry. In 2013, then-European Commission vice president Neelie Kroes spearheaded an industrial strategy for electronics that aimed at doubling the bloc's semiconductor production. The initiative achieved only limited success, due to the relatively small 10 billion euro incentive package and a lack of public awareness.
Now, following the major supply chain disruptions of the Covid-19 era, the EU is trying again. In 2022, it followed the US and Japan in unveiling incentives for the chip industry, including a EUR 43 billion (USD 45.8 billion) package to boost local production from 10% to 20% by 2030.