Industry executives and experts share their predictions for 2023. Read them in this 15th annual VMblog.com series exclusive.
2023 Will Be the Year of the Semiconductor
By John Durcan, Senior Technologist for the Emerging Business & Technology Division of IDA Ireland
As integrated circuits continue to transform most of society, the United States and Europe have recently taken bold steps to supercharge their domestic semiconductor industries as an antidote to supply chain vicissitudes. The importance of this transformation can’t be understated given how crucial it is to ensure a reliable supply of chips for key industries from vehicles to consumer electronics. In automobiles alone, the global market for semiconductors is expected to reach $73.3 billion (US) by 2028, with a CAGR of 11.5%.
However, the major factor that will make 2023 the year of the semiconductor is the CHIPS and Science Act signed by President Biden in August 2022 and the European Chips Act passed by the European Commission in February 2022. The American program appropriates $52.7 billion for semiconductor incentives, establishes a 25% tax credit for investments in domestic manufacturing and authorizes $170 billion for R&D programs. Meanwhile, the €43 billion European effort includes provisions like €15 billion in public and private investment on top of €30 billion of public funding as well as focus on key areas such as research, manufacturing and partnerships to help encourage growth.
We will be rolling our sleeves up in 2023
USA
Scaling up the resource-intensive semiconductor industry with its multi-billion-dollar fabs has reached the now-or-never stage because it takes years to roll out such investments; current-day planning might not be realized until some years in the future. With so many key industries in the United States and Europe depending on a supply of chips, revamping the supply chain by creating and enlarging sources closer to home not only cuts shipping costs but removes the supply chain uncertainty that is so economically dangerous.
Semiconductors are clearly becoming top of mind, with companies not only able to tap into these new government funding sources but a revved-up chip industry encourages overall forward momentum. Consider the 5nm fab being built by Taiwanese giant TSMC near Phoenix, which is where Apple intends to source its future chips. In fact, TSMC recently announced it will construct a second fab nearby.
Europe
Major overseas investments are also being announced by leading domestic companies. Intel will spend as much as €80 billion in the EU over the next decade along the entire semiconductor value chain – from research and development to manufacturing to state-of-the art packaging technologies. For example, the company is expanding its manufacturing facilities in Leixlip, Ireland, for new process technologies and enlarged foundry services, bringing its total investment there to more than €30 billion.
While the United States is among the larger producers of semiconductors, European nations rank relatively low today given the size of their economies so tracking activities there to revitalize this critical industry provides a useful snapshot of what the world market might look like over time. The EU has targeted an increase in its share of the global semiconductor industry from 9% now up to 30% by 2030. The following ambitious goals will likely reshape the region’s future.
1. European Collaboration
Given the magnitude of desired growth, certain factors are most important to enable this European industry expansion. Collaboration and inclusion should be elements in fostering growth, with partnerships between government, research organizations and industry as well as between EU and American companies and programs. For example, Intel’s massive European investments have identified Germany, France and Poland in addition to Ireland for new facilities. Another key area for collaboration is between small and medium-sized enterprises – which comprise the vast majority of EU businesses – and larger manufacturing companies, strongly benefitting everyone.
2. Talent
Finding talent and skills development are essential to create the workforce needed to run the facilities and fabs of tomorrow. Europe already has a diverse, largely well-educated work force but additional effort must be made to create new STEM graduates and retrain other professionals for hiring into the growing industry there. For example, Ireland has a wealth of tech courses and retraining programs aimed at producing the kind of employees required for the jobs in electronics that are flourishing in the nation. The prevalence of tech talent in Ireland led Qualcom to enlarge its operation there via a €78 million R&D center for ASIC research that is bringing on board hundreds of microelectronics engineers. Central to Ireland’s drive is a focus on bringing together strong R&D talent from all over the globe gathered in academic research centres including IPIC Centre for photonics and the Tyndall Institute.
3. The Environment
Prioritizing sustainability is an important element in building up Europe’s semiconductor industry. The region’s green transition and net-zero carbon emissions goal mandate attention to optimizing production lines, lowering energy usage and perhaps using renewables. Europe must rebuild its chip industry but not do so at the cost of the climate.
4. Innovation
Ultimately, it’s the capabilities of the new electronic technologies coming out of the labs that will help both Europe and America transform their semiconductor industries. New-generation technologies utilize AI, pervasive computing and cloud-to-edge infrastructure, with the computer chip at the core of this transformation. For example, a key technique going forward involves layering processes onto a chip – such as a layer of intelligence – so the devices have greater functionality. Successfully managing this evolution gives the nations that invest in these technologies a huge advantage within the world economy. It’s been estimated that the overall European economy would experience between €77 billion and €85 billion in additional GDP over the next decade through chip investment alone.
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ABOUT THE AUTHOR
John Durcan is senior technologist for the Emerging Business & Technology Division of IDA Ireland.
