Brussels’ attempts to persuade Taiwan’s semiconductor industry to set up shop in the EU may be paying off, as a Taiwanese government minister has said that the island nation is looking to cooperate with three Eastern European countries. If the plan goes ahead, it would mark a significant win for the EU’s ambition to reclaim its position as a chip-making juggernaut.
Earlier this year, the European Commission announced that it planned to grow Europe’s share of the semiconductor market to 20% by 2030. As part of its efforts to reach that goal, the EU has been cosying up to Taiwan, home to the world’s biggest semiconductor manufacturer, Taiwan Semiconductor Manufacturing Company (TSMC). The nation famously dominates the Asia-Pacific chip-making capacity.
TSMC is also not averse to setting up plants in other nations, having signed a deal in November with Sony to set up a new factory in Japan. Recently, Arizona secured a $12bn deal with the chipmaker for a new factory in Phoenix.
If the EU can woo Taiwan's leadership, then Brussels would be closer to reaching its goal. Over the past few months, it's made every effort to do just that.
At a virtual Taiwan-EU investment summit in October, Sabine Weyland, director general of the European Commission trade section, made a point about the values Taiwan and the EU shared.
"Not only because Taiwan excels in the production of semiconductors, but also because technology is ultimately a question of security," she said. "We want the EU's digital agenda to be shaped together with our like-minded partners and according to our common values."
While that may sound like a tough sell given neither the EU nor its member states have any formal diplomatic ties with the China-claimed country, it seems like Taiwan may be warming up to the idea.
TSMC recently said it was considering Germany as the destination for its first European factory. This week, Kung Ming-hsin, Taiwan's National Development Council boss, told reporters that plans are underway to see if Taiwan could collaborate with three Eastern European nations – Slovakia, the Czech Republic and Lithuania – on semiconductors. He made the announcement after visiting the countries in October, Reuters reported.
The Taiwan official made no commitment to setting up a factory in the EU. He was unclear as to what form the potential new collaboration would take or whether the nation would simply stick to the scholarships for technical training that it has already promised those countries.
"Many countries can play different roles," Kung said, adding that Taiwan will set up working groups with Slovakia, the Czech Republic and Lithuania to figure out what form the collaboration would take.
The potential chip investment into the three Eastern European nations can also be seen as a way for Taiwan to repay them for their Covid-19 vaccine donations and for their support against growing pressure from China.
Europe and Taiwan deal could boost EU chip strategy
Whatever the commitment, Brussels is likely to welcome it with open arms given the EU's outspoken goal of supplying 20% of the global semiconductor market by 2030. The trading bloc made that goal known earlier this year after the pandemic caused massive semiconductor shortages in the auto industry in Europe as well as the rest of the world.
Europe used to be a big leader in the world of microprocessors. Back in the 1990s, it had 44% of the global chip manufacturing market. However, that market share had collapsed to a measly 9% by 2020.
Europe lost its lead for a number of reasons, chief among them being manufacturers opting to move their business to emerging markets with cheaper labour and new technologies – such as smartphones – making the chips produced on the continent obsolete.
European Commissioner Ursula von der Leyen plans to change that and a potential deepening of semiconductor collaboration between the EU and Taiwan could play a big part in achieving that goal. However, it's not the only part.
The European Commission has also pledged $160bn of its Covid-19 recovery fund to tech projects on the continent and, in September, it introduced the so-called "Chips Act," as reported by Tech Monitor.
von der Leyen championed the new piece of legislation as a way for the EU to ensure its "tech sovereignty." The European Commission plans to present a proposal of the Chips Act in the first half of 2022.
von Der Leyen has made an effort of promoting the Chips Act and the push to break the US and China's dominance of the microprocessor market in the past few months, such as visiting EUV lithography technology provider ASML in November.
The EU has already had some successes. In September, Infineon opened its $1.6bn chip factory for 300-milimeter chips in Villach, Austria. Martin Selmayr, head of representation for the European Commission in Austria, argued that the opening came at right time and that it would enable the EU to become more independent.
"It is not only about Europe's competitiveness, but also about Europe's sovereignty," Selmayr said at the time. "If we depend on Asia for a key industry like semiconductors, we will be left behind. We will not let that happen."
Of course, the EU is not alone in attempting to shore up the supply of semiconductors.
"Beijing, Washington, and Brussels will protect their sovereignties and hedge against external shocks by building sufficient onshore chip-making capacity by 2030," analysts wrote in a recent thematic research report from Globaldata. "This will ensure steady local supplies of chips for their defence and security establishments and local industries."
This summer, the US senate approved a bill that would put $52bn towards domestic semiconductor manufacturing.
China has announced a $1.4tn state programme to invest in R&D, including for artificial intelligence, 5G and semiconductors, according to a recent GlobalData report. A Semiconductor Industry Association white paper puts China's semiconductor investments at around $150bn from 2014 through 2030.
South Korea has also recently announced a $451bn semiconductor investment package to aid the nation's industry.
While the EU still has a long to go to reclaim its leadership role in the semiconductor market, teaming up with Taiwan could certainly help it get closer.