Image source @ Visual China
Wen 丨 Chen Gen
Affected by the epidemic, the global chip shortage has not eased for a long time, resulting in more and more supply disruptions, factory shutdowns, and the European Union is increasing investment in the chip field in the context of global chip shortages.
On February 8, local time, the European Commission announced the Chip Act, which has attracted much attention from the outside world, which plans to significantly increase the EU's share of global chip production. By 2030, the EU plans to increase its share of global chip production from the current 10 percent to 20 percent. Under the bill, the EU will invest more than 43 billion euros (about 312.7 billion yuan) of public and private funds to support chip production, pilot projects and start-ups.
As soon as the "Chip Act" was promulgated, it immediately attracted the attention of the industry. In today's digital economy, chip capabilities have become the core competitiveness of a country. Globally, the dispute between chip production and supply has escalated again, and the storm is coming.
The EU joins the chip battlefield
The introduction of the "Chip Act" in the European Union can be said to be expected.
At present, chips have become the soul of the market, but also one of the three elements of the information industry, chips from science and technology, science and technology to prosper the country. From household consumer goods such as televisions, washing machines, mobile phones, and computers to traditional industries, or to various types of CNC machine tools in traditional industries and missiles, satellites, rockets, warships, etc. in the defense industry, they are inseparable from chips. The chip market grew from $33 billion in 1987 to $433 billion in 2020, and the increase in digitization means continued high growth potential.
However, since the second half of 2020, the uneasiness and anxiety of "lack of cores" have fermented and spread in the semiconductor industry. The impact of chip shortages has spread across many industries, including car production stoppages, lack of cores in small household appliances, price increases in graphics cards, and shortages of mobile phones.
The car, an important European industry, has also been hit hard by the ongoing shortage of chip supply: manufacturers such as Volkswagen have had to cut production frequently; car production in some EU member states has even fallen by a third; and some European consumers need to wait months or even a year to pick up cars due to lack of inventory, highlighting the EU's excessive dependence on foreign chip suppliers.
In fact, in the 1990s, the EU accounted for more than 40% of the global chip market. However, in 2010, the EU's share of global semiconductor trade had fallen to 13%, and then to 9% in 2017. Europe still offers cutting-edge inputs (wafers and manufacturing equipment), but European companies do not make the highest-end chips. Foundries in Europe are not investing enough to keep up with the industry's rapid pace of innovation, and in 2020, total investment in European foundries accounts for only 3% of the world.com.
Among them, major foundries in Europe, including Global foundries in Germany, STMicroelectronics in France and Italy, Bosch in Germany, Infineon in Germany and NXP in the Netherlands, account for a small share of global capacity and production, accounting for about 10% of global production. The only Europeans that can produce modern chips are Global Foundries and STMicroelectronics, but even their products are several generations behind the latest products from Taiwan, South Korea and the United States.
In fact, the current state of the European chip industry stems from its industrial and innovation ecosystem. For a long time, European chip innovation has been characterized by strong basic research and the dominance of large consumer goods companies, which has supported the development of the consumer industry. Initially, Europe's semiconductor industry was in the hands of large integrated companies such as Philips in the Netherlands and Siemens in Germany, similar to Japan, where these technologies were initially used for commercial purposes.
By focusing on the consumer electronics market, investment in the production of chips for computers and electronic devices was missed. Clearly, a focus on consumer electronics is more conducive to mass production than to start-ups of technology companies, while economies of scale and the development of leading companies are limited by the segmentation of the European market. At the same time, Compared with the United States and Asia, European companies have received less attention and support at the national level. In addition, due to the relatively small and fragmented venture capital markets, European companies have fewer access to capital.
For these historical industrial reasons and systemic characteristics, Europe is not a leader in ICT. Therefore, in order to strengthen the autonomy of the chip industry, it is not difficult to understand the hope of the European Commission to further integrate the chip research and development industry and build its own production capacity.
The chip industry is in a storm
On February 8, local time, the European Union announced the advent of the Chip Act. The Chip Act proposes a comprehensive set of measures to ensure the EU's supply security, resilience and technology leadership in semiconductor technologies and applications. This includes increasing investment in the chip sector and building new frameworks to ensure security of supply.
From the perspective of increasing investment in the chip field, according to the bill, by 2030, in addition to the 30 billion euros of public investment that plans to support existing semiconductor research and innovation projects, the EU will increase public and private investment of 15 billion euros, with a total investment of about 45 billion euros, to support chip production, pilot projects and start-ups, and most importantly, to build large chip manufacturing plants.
In addition, the bill includes a series of policy propositions including the European Chip Initiative, a new framework to ensure security of supply, and a chip fund to facilitate access to financing, including: design tools and pilot production lines for the prototyping, testing and experimentation of cutting-edge chips deployed across Europe; the development of certification procedures for energy-efficient and safe chips to ensure the quality and safety of key applications; attracting investors to establish chip production facilities in Europe; and supporting innovative start-ups, large-scale enterprises and SMEs to obtain equity financing Developing skills, talent, and innovation in microelectronics; developing policy toolboxes for anticipating and responding to semiconductor shortages and crises to ensure security of supply; and establishing international semiconductor partnerships with like-minded countries.
Among other things, there is a coordination mechanism between member states and the committee to monitor semiconductor supply, estimate demand and forecast shortages. It will monitor the semiconductor value chain by gathering key intelligence from companies to map key weaknesses and bottlenecks. It will bring together common crisis assessments and coordinate actions taken from the new emergency toolbox. It will also work together to respond quickly and decisively by making full use of national and EU instruments.
The goal of the bill is to increase the EU's share of global chip production from the current 10% to 20% by 2030, and to be able to produce chips of 2nm and below to meet their own and world market needs. The EU's Chip Act is undoubtedly a signal for the EU to join the chip battlefield, but on closer inspection, the goals and methods of the Chip Act still seem to be very vague.
First, the European Commission's stated goal is to double the EU's share of the high-end chip market from 10 percent to 20 percent. However, the current share of high-end chip manufacturing in the EU is actually 0, and the EU has a 10% market share in the overall semiconductor production capacity, but most of them are at the low end of technical standards.
Within the EU standard for "high-end chips", only the latest generation of chips (5nm) produced by Samsung and TSMC meets the requirements, while only three other companies have developed second-generation (less than 10nm) production capacity (Samsung, TSMC and Intel), and none of them currently has a high-end wafer foundry in the EU.
In fact, the current process technology of EU manufacturers is still stuck at 22nm and above, while there is no cutting-edge chip (7nm and below). The chips of EU manufacturers also have a strong dependence on design, packaging and assembly, and the idea that local EU manufacturers can catch up with 2 nanometers is obviously unrealistic.
Moreover, while it is not possible to directly compare the subsidy systems of different countries, the scale of related public investments announced by the United States and China is much larger. Biden's infrastructure plan includes a $50 billion public investment program for the semiconductor industry, while the Chinese government plans to invest $170 billion between 2014 and 2024. European governments lack incentives or resources that rival those of the United States or China, after all, the EU itself lacks sufficient resources or tax authority to provide subsidies, and its main tool in supporting the chip industry has always been to allow governments to provide other prohibited state aid.
And, you know, the technological upgrading of the semiconductor industry is a major capital expenditure investment, which is based on huge funds piled up. ASML's Extreme Ultravidet Lithography sells for a staggering $120 million.
And, it's just one piece of equipment, not the entire production line. A production line, in addition to lithography machine, also needs etching machine, thin film deposition equipment, single crystal furnace, CVD, developer, ion implantation machine, CMP polishing machine and so on. When calculating costs, remember to count the 20% annual maintenance cost, or you can count, because if you want to stay at the top of the line, you basically have to update every year. Under the huge capital expenditure, the effect of the EU's 45 billion euros investment is still unknown.
Of course, in any case, the EU's Chip Act has brought new variables to the competition in the chip industry, and the chip industry is about to come.
The complete industrial chain is the core of the advantage
At present, the semiconductor industry chain is actually a monopoly model dominated by the United States. From the 1990s to the present, American semiconductor companies have maintained a competitive edge in microprocessors and other leading devices, and continue to maintain a leading position in other product areas. In addition, American semiconductor companies also maintain a leading position in research and development, design and process technology.
According to the American Semiconductor Association SIA "2020Factbook" report, U.S. companies have the largest market share in 2019, reaching 47%. Industries in other countries account for 5 to 19 percent of the global market; U.S. semiconductor companies account for about 81 percent of all semiconductor wafer manufacturing capacity; and semiconductor companies in the Asia-Pacific region account for the majority of U.S. production capacity, about 10 percent. About 44 percent of U.S. companies have front-end semiconductor wafer capacity in the U.S., followed by Singapore, Taiwan, Europe and Japan.
In fact, the reason why the United States can have the ability to monopolize chips is not only because the United States has a monopoly of core technology, but also because the United States controls the global industrial chain. The chip industry is very dependent on the globalized industrial system. At present, 23 countries and regions in the world have the ability to participate in many aspects of the semiconductor industry.
Taking the lithography machine as an example, there are more than 100,000 parts in a high-end EUV lithography machine, and there are more than 5,000 suppliers worldwide. From the analysis of lithography mechanism, the United States light source accounted for 27%, the Dutch cavity and the British vacuum accounted for 32%, Japanese materials accounted for 27%, and the German optical system accounted for 14%. Lithography machine is the crystallization of globalization, if a country or a region to do a lithography machine is unrealistic. Therefore, the research and development of lithography machines can not become the only goal, in the great power game, to create a complete industrial chain of semiconductors is the core.
Under such circumstances, the global chip industry is in a precise balance in which the interest chains cover each other and the development demands each other. It is precisely because of this that chips have become a key battlefield in the Sino-US science and technology war In the past four years, the US government has successively taken measures such as inclusion in the entity list and suppression of domestic enterprises such as Huawei, SMIC, loongson, etc., which has continuously hindered the development of China's semiconductor industry.
U.S. measures to restrict technology transfers to China have put China's chip industry struggling to catch up. In fact, over the past few decades, China has spent tens of billions of dollars trying to stand out from the competition from semiconductors, faster computers and smartphones, and more cutting-edge devices. Currently, China is replacing chips imported from the United States with domestic chips and chips purchased from non-U.S. companies. According to a report by investment bank UBS, Huawei's mobile phones, launched as early as 2019, no longer contain any U.S. chips.
But even so, in terms of key categories, the mainland is almost blank. China still lacks the production capacity of high-end chips. It can be said that from the design software to the various parts of the manufacturing chip, as well as the photoresist and special gases required in the chip manufacturing process, we are currently difficult to meet the manufacturing needs of higher-end chips, and the completely independent technology is still lagging at 28nm.
It is not difficult to understand why the United States will be so wary of the European Union's "Chip Act", shortly after the release of the "Chip Act", THE US Secretary of Commerce Raimondo urgently issued a statement, saying that although the US semiconductor supply chain is leading the world, but in fact it is still fragile, the US Secretary of Commerce hopes that the US Congress must approve as soon as possible, President Biden proposed to invest 52 billion US dollars to increase the domestic chip research and development and manufacturing program.
In addition, including China and Europe, South Korea and Japan are also making efforts in the semiconductor field. Whether China, the European Union and other major countries in the world can catch up later depends on the core technology and the ability to build a chip industry chain. It is foreseeable that in the next decade, the global semiconductor field, especially the various links around the chip, will also usher in a global battle, which is also a protracted battle to test innovation, calmness and persistence.