Why does Europe not produce computer chips?

Cold war in the computer

The US government is doing everything possible: Your stimulus package of 1.9 billion dollars, which came into force on Thursday, is one of the largest in history. It adds to the hundreds of billions earmarked for infrastructure projects and technology funding. The EU and China act in a similar way, only on a smaller scale. With gigantic loan programs they want to save their economic potential through the crisis and occupy future markets. At the center of the struggle is currently a small device: computer chips. Because microprocessors do not only promise profit. For governments, they are also a crucial tool in building up their power.

Semiconductors are the small, ever faster beating heart of digitization, without them no society can function today. "Memory chips and processors are a basic technology," explains the New Responsibility Foundation, a think tank in Berlin. Every industry depends on them; all hopes for artificial intelligence, self-driving cars or super-fast computers rest on them. Those who make chips make others dependent on themselves. "That is why semiconductors are at the center of the growing rivalry between the US and China," the foundation said.

Global chip production is now concentrated in a few countries. The USA, Taiwan, South Korea, Japan, Europe and, increasingly, China share the market among themselves - and at the same time are dependent on each other. Because none of them have the entire range of production on their territory. Some specialize in individual production steps such as design, production or assembly, while others specialize in certain technologies such as memory chips or processors. Nobody has yet achieved "strategic autonomy" here.

The value chain is global and therefore prone to failure. The car manufacturers recently felt this. Problems with the delivery of chips from Taiwan put the production lines at a standstill at Ford and Toyota, and Volkswagen was unable to manufacture thousands of cars. With far-reaching consequences: Among other things, "the production disruptions in the automotive industry caused by delivery problems have prompted us to lower the forecast for economic growth for Germany," according to Deutsche Bank. This is how the world felt its dependence on the small country.

Taiwan "is potentially the most critical link in the entire semiconductor value chain," explains the New Responsibility Foundation. This gives the chip industry geopolitical importance. Because Beijing regards Taiwan as a province, "Taiwan lies in the center of gravity of Chinese security policy," said Mathieu Duchatel from the Paris Montaigne Institute to the Bloomberg information service. The Taipei government faces a potential risk of invasion. The US government, in turn, has made the Taiwan issue its main focus in Asia and continues to deliver weapons to the country.

US President Joe Biden has now placed the fields of semiconductors, artificial intelligence and networks at the center of his Asia strategy. This is about the fight of the »techno-democracies« against »techno-autocracies«, that is, China. Computer chips are a national security issue, Senator John Cornyn Bloomberg said, "because they run everything from F-35 stealth bombers to our cell phones."

Washington is now luring chip production to the USA with tax breaks and subsidies under the “CHIPS for America Act”. Taiwan's TSMC is building a factory in Arizona, South Korea's Samsung in Texas. In addition, Biden wants to secure the deliveries from Taiwan, he wants to "guarantee that the supply chains are reliable". And finally, his predecessor Donald Trump had already started cutting China off from US chip technology in order to stop the rise of corporations like Huawei or SMI, China's largest chip producer. This is where the Biden government ties in: This week it decided to take a "hard line" in selling technology to Huawei. "There is a new awareness of the importance of semiconductors in this geopolitical battle," commented Lindsay Graham of the German Marshall Fund.

Washington is working on bringing the chip production chain under its control in order to become self-sufficient and make others dependent on themselves. The message is heard in Beijing. China builds semiconductors itself. However, it is estimated that they are five years behind in development. In the competition for ever more powerful technology, this means that China has de facto no viable chip production. The five-year plan adopted by the KP at the beginning of March therefore contains billions in aid for the domestic industry.

To stop China's rise, the US government is calling on other western states to cooperate. "We have to face this challenge together," said an employee of the State Department at the end of February. This is aimed primarily at Europe, and the EU Commission is offering itself to Washington as a partner against China. She presented a transatlantic technology and trade council as well as a strategy for how Europe and the USA could regulate the world market together, including protection of "critical technologies" from competitors. "Our combined global power remains unrivaled," the commission advertises.

In addition, the EU is striving for strategic autonomy for computer chips. In the past 20 years, production in the EU countries has been cut drastically, with parts moving to cheaper Asia, including Taiwan. In order to secure the supply of Europe and to achieve “technological sovereignty”, the EU states are to produce a fifth of the most modern semiconductors worldwide by the end of the decade - so far it is only a tenth.

To this end, the construction of modern semiconductor factories through a Europe-wide alliance of chip producers, telecommunications and car companies is being considered. According to EU Industry Commissioner Thierry Breton, the schedule has not yet been set. But one thing is certain: "Without an autonomous European capacity for microelectronics there will be no digital sovereignty in Europe." The project is backed by 19 EU countries, currently estimated at 30 billion euros. That could be too little, however - the investments of the Taiwanese TSMC alone will amount to 28 billion euros this year. In addition, Europe can hardly hope for chip exports, since Japan, the USA and China for their part are aiming for self-sufficiency.

Nevertheless, the project is being carried through. The EU member states have committed themselves to earmarking at least 20 percent of the money from the new reconstruction fund for the “digital” priority. "In the world after the pandemic, we will create a digitally independent Europe," said Breton this week. "This is Europe's digital decade." US President Biden sees it differently. The new mega-stimulus package will open up new opportunities for the US to fight, "he said on Friday. For his part, China's President Xi Jinping had made it clear at the party congress in early March: "The East is rising, the West is falling."

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