EU and others have no chance of chip independence.
EU and others have no chance of chip independence.
The Global Battle for Semiconductor Independence
Our world today relies heavily on semiconductors, those tiny slivers of silicon that power our phones, computers, cars, and even stock markets. They have become the digital backbone of our modern society, playing a crucial role in everything from everyday consumer electronics to military technology. In fact, some of the first chips ever made were used in missile guidance systems, highlighting their significance in military applications.
Currently, chips are powering a wide range of military devices, from fighter jets and howitzers to radios and radar. They are even playing a role in ongoing conflicts such as the Russian-Ukraine war, where HIMARS rocket launchers, Javelin anti-tank missiles, and Starlink communications satellites rely on the power of chips. Moreover, the intensifying territorial disputes in East Asia, particularly in the East and South China Seas, pose a risk of escalating into a major conflict, and chips are at the center of the arms race in the region.
Adding another layer of complexity is the rise of artificial intelligence (AI), which has created a demand for specialized AI chips. However, there is currently a scarcity of AI chips, further fueling tensions in the global semiconductor industry.
In response to the shortages and frictions, the European Union (EU) has introduced the Chips Act, a €43 billion investment package aimed at boosting local production and reducing international dependencies. However, according to Chris Miller, the author of “Chip War,” achieving semiconductor independence is a daunting task, not only for the EU but for any country or region. Miller argues that the global supply chain is too interconnected and globalized, making true independence an unrealistic goal.
“The problem is that the supply chain is simply too globalized and interconnected,” says Miller. “Independence is hopeless.”
Miller’s book, “Chip War,” recounts the decades-long battle for semiconductor control, with the rivalry between the United States and China taking center stage. This rivalry has resulted in a divided industry, with Beijing seeking to bolster self-sufficiency in semiconductors. China is currently the world’s largest importer of chips, spending more money importing them than on oil. In response, the United States has imposed strict export controls on chip technology, disrupting China’s trade with Taiwan, which is a major producer of semiconductors.
China has also encountered obstacles in its dealings with the EU, particularly in its reliance on ASML, the world’s leading manufacturer of high-end chipmaking equipment. Without ASML’s gear, Chinese firms will struggle to produce advanced chips. To counter this dependency, the EU has recently restricted exports of advanced chip manufacturing equipment, further straining the relationship between China and the EU.
However, the EU’s plans for semiconductor independence face several challenges. While the EU aims to produce 20% of the world’s semiconductors by 2030, Miller believes that achieving this goal will require strong support from member states and companies. He points to Germany as an example, where enormous subsidies have attracted major chip manufacturers like Intel and Taiwan’s TSMC to build chip factories in the country.
While achieving complete independence may be unrealistic, the EU already possesses unique strengths in certain areas of the semiconductor industry. For instance, the bloc is home to world leaders in machine tools and power semiconductors. Miller suggests that Europe should focus on leveraging its historical strengths in research and development-intensive manufacturing industries. The goal is to cultivate profitable chip companies with technological leadership positions, which Europe already has in some niche areas.
In conclusion, the battle for semiconductor independence is a complex and global challenge. Although achieving complete independence may be near impossible due to the interconnected nature of the global supply chain, regions like the EU can still strive to boost their capabilities and reduce dependencies. By leveraging existing strengths and investing in R&D-intensive manufacturing industries, the EU can position itself as a key player in the global semiconductor landscape, ensuring a more resilient and secure future.
