On the sting of a tranquil forest an hour’s drive from Stuttgart, the place mountaineering trails snake via the timber and throughout gently rolling hills, sits considered one of Europe’s secret weapons within the world race to develop the world’s most superior semiconductors.
Oberkochen, a small city of simply 8,000 individuals within the south-western state of Baden-Württemberg, is headquarters to Carl Zeiss SMT, the one producer of the mirrors and lenses used on the planet’s most superior chipmaking tools. Its ultra-precise mirrors and lenses are so correct that they’re able to a precision 200 instances larger than the James Webb House Telescope.
Zeiss has “a novel competence”, says Peter Wennink, chief govt of ASML, the Netherlands-based firm that holds a world monopoly on manufacture of the acute ultraviolet lithography (EUV) machines required to make leading edge chips — and is considered one of its most essential clients.
With out Zeiss optics, he says ASML couldn’t make its EUV machines, which use ultraviolet mild to scan chip designs on to silicon wafers at a tiny scale. And with out ASML machines, it might be unimaginable to take advantage of superior chips wanted for future applied sciences resembling synthetic intelligence, autonomous driving and quantum computing.
Superior chipmaking tools is considered one of Europe’s hidden strengths as international locations world wide attempt to seize a share of an business which is on the centre of the fashionable financial system and which is turning into more and more laced with geopolitical threat.
The semiconductor market exceeded $500bn for the primary time in 2021 and is estimated to turn out to be a trillion-dollar business by 2030, in keeping with McKinsey.
Taiwan is the worldwide centre for essentially the most superior chipmaking. By way of semiconductors beneath 10 nanometres — the modern variations of the know-how — Taiwan holds greater than 90 per cent of worldwide market share.
However rising fears about some type of Chinese language navy intervention in Taiwan has prompted governments from the US, Japan and lots of throughout Europe to hurry to incentivise growth of chip manufacturing of their international locations, elevating considerations that an excessive amount of capability will likely be approaching stream on the similar time.
For a lot of international locations, semiconductors are a matter of nationwide safety as massive swaths of the financial system more and more depend on the performance they supply. Extreme shortages through the pandemic have hit manufacturing in a variety of worldwide industries from smartphones and private computer systems to servers and cars.
Europe is decided to not be left behind as this contest gathers tempo.
Earlier this yr the European Fee unveiled a plan to speculate €43bn in an effort to tempt the world’s greatest chipmakers to arrange factories within the bloc. Intel, the US chip large, has pledged an preliminary funding of €33bn within the bloc, together with €17bn for a mega-site in Germany. European chipmakers like STMicroelectronics and Infineon are additionally increasing their amenities in Europe. The EU can also be making an attempt to lure TSMC, the world’s greatest contract chipmaker, to arrange large-scale operations within the bloc.
Brussels hopes the investments will double the EU’s share of the worldwide semiconductor market from lower than 10 per cent at present to twenty per cent by 2030. However extra essential than market share is to cut back the EU’s dependence on producers in Asia resembling TSMC and Samsung at a time when east-west tensions might pose a possible menace to produce.
There are at the very least 81 new chip amenities to be constructed between 2021 and 2025; 10 will likely be inbuilt Europe, in contrast with 14 within the US and 21 in Taiwan, in keeping with the latest knowledge in September from SEMI, a US-based semiconductor business organisation.
Along with the continent’s strong foundations in chemical compounds and supplies, firms resembling Carl Zeiss SMT and ASML and their provide chains will likely be basic to Europe’s ambition to turn out to be one of many world’s most essential suppliers of the highest-end chips.
However essential gaps stay in Europe’s semiconductor push. The quantities of capital required are formidable. And the businesses that need to provide the chip factories warn that there will not be sufficient expert employees to maintain their crops buzzing.
“Whether or not we might attain 20 per cent market share by 2030 is a query mark, however there may be growing stress as a result of not doing something will make the scenario even worse,” says Lars Reger, chief know-how officer at NXP Semiconductor, the Netherlands-based firm.
“It’s all about relevancy,” mentioned Wennink at ASML. “You need to keep related within the geopolitical context.”
Does it make sense?
Europe’s bold plan for microchips, which is constructed across the European Chips Act, has not been met with common approval.
Some critics, together with business executives, have recommended that Europe was losing taxpayers’ money. Much better, they argue, can be to spend the cash on increasing capability of the mature chip applied sciences which are consumed by Europe’s personal industries — resembling automotive and industrial purposes — slightly than face the big prices of making an attempt to develop the most recent chips. The decline of Europe’s cell phone business had left the continent with out apparent clients for superior chips.
As the price of producing increasingly complicated chips has escalated, “fewer firms have been capable of sustain”, says one chip firm govt. “Lots of people who dropped out of the race have been in Europe.”
That has left Europe’s provide chain with out a number of the key capabilities wanted for superior semiconductor manufacturing.
Yang Wang, senior analyst in London with consultancy Counterpoint Analysis, factors out that there are not any chip designers in Europe who work in 7 nanometre and beneath nodes variations of the know-how.
“Not one of the world’s high 10 chip designers are primarily based in Europe whereas the US leads the world in semiconductor designs,” he says.
The EU does have present clusters of semiconductor provide chains, resembling Leuven in Belgium, Dresden in Germany and Grenoble in France, however Europe should ramp up chip design capabilities, and funding into the ecosystem for superior chipmaking in addition to investing in chip manufacturing itself, business specialists say.
Funding can also be a vital issue. The extra superior the chip being made, the extra capital-intensive is the method. For instance, TSMC’s capital expenditure for 2022 will likely be $36bn, and this month the corporate introduced plans to triple its funding in Arizona from $12bn to $40bn within the coming years, the place it’s going to additionally carry the extra superior 3nm know-how by 2026.
The US this yr handed its personal Chips and Science Act, a $52.7bn bundle of incentives and tax breaks.
Constructing a provide chain as difficult because the one required for essentially the most superior chip know-how will take years to assemble — and require much more taxpayer help, say business executives. International locations resembling China, Taiwan and South Korea have invested billions over many years to help their chip producers.
“The European Chips Act is a good device, as a result of it places us on the similar stage of incentives worldwide,” says Jean-Marc Chery, chief govt of STMicroelectronics, a Geneva-based firm which provides chips for the automotive and industrial markets with primarily mature applied sciences. “But when we have now to construct [advanced technology] and big fabs . . . then it’s not very aggressive.”
However Europe just isn’t ranging from scratch.
The EU’s maintain on superior chip tools is one essential benefit. With EUV machines from ASML, the world’s greatest chipmakers resembling TSMC, Samsung and Intel are capable of problem the bounds of physics, packing increasingly processing transistors on to smaller and smaller chips. At the moment essentially the most leading edge in mass manufacturing is 3nm — a reference to the dimensions of every transistor on a chip — however know-how is taking this to 2nm and beneath.
“With out EUVs, you wouldn’t be capable to get to those massive densities of transistors in a chip,” says Thomas Stammler, Zeiss chief know-how officer. “As we’re the one one supplying EUV, we take this additionally as an obligation to broaden and help the chip business . . . and we’re already engaged on the following era of EUV.”
Past ASML and Zeiss, through which ASML has a 25 per cent stake, Germany’s Trumpf is a world chief within the lasers utilized by EUV machines. At 220,000C, the plasma created by Trumpf’s lasers — used to generate EUV mild — is nearly 40 instances hotter than the floor of the Solar.
Such superior know-how permits the EUVs to assist firms resembling Apple squeeze as many as 16bn transistors on the central processing unit of its MacBook at present, in contrast with 1,000 transistors within the electronics gadgets within the Nineteen Seventies.
Europe additionally has a powerful benefit in its capacity to supply the extremely customised, complicated supplies and chemical compounds utilized in superior chipmaking. These primarily come from a handful of European firms resembling Merck, BASF and Solvay, and from Japanese firms resembling JSR and Shin-Etsu Chemical.
It additionally has one of many world’s foremost analysis hubs in IMEC, the nanotechnology analysis centre exterior Brussels that’s utilized by essentially the most superior chipmakers to construct prototypes. Different world-renowned analysis centres embrace Germany’s Fraunhofer institutes and France’s CEA-Leti.
However there are nonetheless challenges. Different international locations are investing way over these in Europe to construct up their very own chipmaking capabilities, and ecosystems are already beginning to develop round new crops.
In Europe vital chemical and materials suppliers have been slower to speculate than these within the US and Taiwan. Some within the business counsel it’s because the European Chips Act doesn’t sufficiently cowl funding past chipmaking, or as a result of European environmental laws make increasing chemical amenities harder. And naturally, Europe’s gasoline disaster has pushed up already excessive vitality costs, forcing the bloc’s energy-intensive chemical compounds business to close or droop manufacturing of some merchandise. Increasing in Europe proper now just isn’t enticing with out sturdy incentives, say business executives.
“Provide of chemical compounds to the brand new semiconductor fabs require investments in devoted property. Due to this fact, an absence of state help would undoubtedly be a hurdle for suppliers of chemical compounds,” Solvay president Rodrigo Elizondo tells the Monetary Instances. “In our view, the absence of a strong regional provide of chemical compounds will certainly jeopardise the operations of European semiconductor fabs.”
BASF and Solvay count on chemical and materials shortages within the coming years when the brand new chip capacities ramp up, until investments are made in these areas.
“Everybody talks about semiconductor manufacturing, however not sufficient consideration is given to the chemical compounds wanted to supply these microchips,” says Lothar Laupichler, BASF’s digital supplies senior vice-president. “It nearly looks like chemical compounds are checked out like water or electrical energy, you open the tap and it comes proper out, however this can be a false impression.”
Kai Beckmann, member of the chief board of Merck and chief govt of its electronics division, provides: “We have to look into this collectively with the European Union, as a result of we’re speaking about very extremely specialised materials that might not be effectively captured within the European ambitions.”
Discovering the employees
Europe faces one much more fundamental drawback: discovering sufficient expert employees. A survey by the European Labour Authority of the largest labour shortages within the EU discovered that engineers and technicians — the pillars of the chip business — have been among the many high 4 expertise shortfalls in 10 international locations.
Firms resembling Germany’s Infineon, Edwards Vacuum within the UK, which is the essential part and subsystem supplier to ASML, and AT&S in Austria, one of many main suppliers of the high-end chip substrates on which semiconductors are mounted, have all warned that international expertise will likely be essential to the additional improvement and sustainability of Europe’s semiconductor business.
Andreas Gerstenmayer, AT&S chief govt, says his firm is struggling to search out the 800 expert employees it wants for its new analysis and improvement centre in Austria. “We’ve got to achieve out globally to rent expertise, as a result of the expertise and the know-how [of chip substrates] will not be but obtainable right here.”
Martin Stöckl, Infineon’s human assets boss, says the entire provide chain will likely be chasing the identical expertise, making issues worse. “The expertise scarcity subject is severe in Europe,” he says. “If you happen to do a fast calculation, we [Infineon] will construct a brand new fab, STMicroelectronics and Intel are increasing too. We [companies] will want at the very least 1000’s extra engineers and technicians within the coming years.”
But the battle is way from misplaced, say business executives.
Regardless of all of the challenges, business executives are upbeat about Europe’s prospects on this vital business. Having firms resembling ASML, Zeiss and Trumpf just isn’t a nasty place to begin.
“Europe did retain actual power over time in semiconductor manufacturing tools,” says a senior Intel govt. “That has actually given it an opportunity to re-enter the market that in any other case it might not have had. With out these beachheads, it might have been very, very troublesome for Europe to return again.”
Extra reporting by Peggy Hollinger and Joe Miller
Cartography and knowledge visualisation by Liz Faunce and Alan Smith
