Insight Bite: EU seeks digital sovereignty with semiconductor funding

In yet another example of pandemic-induced digital transformation, more than half the countries in the European Union have pledged $175 billion from coronavirus recovery funds to establish Europe as a global semiconductor hub.

The funding committed by 18 EU member states aims to cultivate a homegrown semiconductor industry, reducing dependence on China and the US for production of the next generation chips used in self-driving cars, AI, aerospace, data centres, and supercomputers.

At present, European semiconductor firms represent just a tenth of the $530 billion global market, making the region heavily reliant on global supply chains that have come under increased strain from the decoupling of the US and China.

This precarious supply threatens to stifle innovation, pushing Europe to secure its own digital sovereignty by matching the world’s semiconductor heavyweights:

“Europe has all it takes to diversify and reduce critical dependencies, while remaining open” said Sais Thierry Breton, Commissioner for Internal Market in a statement on the declaration. “We’ll therefore need to set ambitious plans, from design of chips to advanced manufacturing progressing towards 2nm nodes, with the aim of differentiating and leading on our most important value chains.”

 The funding could give another lease of life to a market that saw an astonishing 2020. Several of the biggest players placed their largest bets last year, with AMD spending $35 billion to buy Xilinx, Analog merging with Maxim, and Intel offloading its memory unit to SK Hynix for $9 bn.

While it might be difficult to imagine significantly more deal-making for these industry leaders in 2021, this injection of capital into the European market could help drive a different type of consolidation. To reduce dependency on imports in the fragmented post-pandemic geopolitical landscape, we are now likely to see more regional deal-making with local partnerships and acquisitions both in Europe and elsewhere.

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