Navigating Europe' Semiconductor Landscape: EU ChipsAct and the Ecosystem

Introduction

The European Union (EU) is making significant efforts to strengthen its position in the global semiconductor industry, driven by geopolitical concerns, supply chain resilience, and the strategic importance of semiconductors for its digital and green transitions.

The advent of AI, Autonomous Driving, increase of Hi-Performance compute, datacenter, 5G advanced and 6G, IOT devices increase are all making focussing on the need for semiconductor self-reliance.

Image from Adobe Stock (Patrick Helmholz)

The following article touches on the salient points, that -

• EU's chips-related acts

• EU Bodies relevant for Chips act

• EU Design companies

• EU Fabs

• Challenges and Opportunities

EU Chips Act

The EU Chips Act (Regulation 2023/1781), adopted in September 2023, is the cornerstone of the EU's strategy.

Its main purpose:

• Strengthen manufacturing activities in the EU

• Stimulate the European design ecosystem

• Support scale-up and innovation across the entire value chain

• Increase the EU's global market share in semiconductor production to 20% by 2030 (from its current 8-9%)

• Ensure security of supply and resilience against future disruptions


  
  

The Act has three pillars:

• Chips for Europe Initiative: This initiative aims to reinforce Europe's technological leadership by facilitating knowledge transfer from research to industrial activities. It includes:


  • Establishing a Design Platform: A cloud-based virtual environment providing access to design facilities, IP libraries, and Electronic Design Automation (EDA) tools

  • Enhancing and developing advanced pilot lines: For prototyping and testing advanced chips

  • Building capacities for Quantum chips: Supporting R&D and production of quantum chips

  • Establishing a network of competence centers: Across the Union to provide technical expertise and foster skills development

  • Setting up a Chips Fund: To facilitate access to debt financing and equity for startups, scale-ups, SMEs, and small mid-caps. This is expected to mobilize around €100 billion in investments by 2030

• Framework for Integrated Production Facilities (IPFs) and Open EU Foundries (OEFs): aims to attract investments and enhance manufacturing capacities. These "first-of-a-kind" facilities in the EU will benefit from streamlined administrative procedures, priority access to resources, and the possibility of state aid

• Coordination Mechanism: This establishes a framework for collaboration between Member States and the Commission to monitor supply, estimate demand, anticipate shortages, and trigger alert systems if necessary

  
  

Important Projects of Common European Interest (IPCEI)

IPCEI (Important Projects of Common European Interest) is a strategic instrument that brings together knowledge, expertise, financial resources, and economic actors across the EU to overcome significant market failures or societal challenges. In the context of semiconductors, IPCEIs support large-scale European consortia with a focus on Research and Development (R&D) and First Industrial Deployment (FID).

The IPCEI on Microelectronics (approved in December 2018, with Austria joining in March 2021) involves companies and Research and Technology Organizations (RTOs) from several EU member states (e.g., France, Germany, Italy, Austria) and the UK. These projects receive funding from the participating countries themselves, not directly from the EU budget.

The IPCEI aims to strengthen European competencies in microelectronics by supporting transnational cooperation projects in areas such as:

• Energy-efficient chips

• Power semiconductors

• Sensors

• Advanced optical equipment

• Compound materials

Summary of Key Differences:

US and Asia also have similar acts providing a greater focus on semiconductors. The differences across some of the KPIs

Feature	US CHIPS Act	EU Chips Act	Asian Strategies (General)
Funding	New federal money, significant tax credits	Primarily mobilizes existing funds, state aid framework	Mix of direct subsidies, tax incentives, national funds
Total Scale	~$53 billion direct, plus tax credits	~€43 billion (public & private mobilized)	Varies by country, often much larger (e.g., S. Korea mega-cluster)
Core Focus	Leading-edge manufacturing, national security	Holistic ecosystem, R&D, advanced & mature nodes	Maintain/extend leadership in existing strengths (e.g., advanced foundry in Taiwan, memory in S. Korea), self-sufficiency in China
Implementation	More straightforward grants, bilateral agreements	Complex, multi-layered (EU, national, IPCEI)	Tailored to national industrial policy and competitive landscape
Geopolitics	Countering China, supply chain diversification	Strategic autonomy, supply chain resilience	Varies: Indispensability (Taiwan), leadership (S. Korea, Japan), self-reliance (China)
Incentives	Direct grants, loans, 25% tax credit	Simplified state aid, R&D funding, pilot lines	Tax breaks, direct subsidies, R&D support, land acquisition

EU Semiconductor Design Companies and their Target Segments

Europe has a strong ecosystem of semiconductor design companies, particularly excelling in specific application areas.

Key EU Semiconductor Design Companies and their Target Segments

Company / Entity	Headquarters Location (Primary)	Core Competency / Description	Key Target Segments
NXP Semiconductors	Netherlands	Global leader in secure connectivity solutions for embedded applications	Automotive (ADAS, in-car networking, infotainment), Industrial & IoT, Mobile, Communications Infrastructure
Infineon Technologies	Germany	World leader in power semiconductors and microcontrollers	Automotive (power electronics, safety, microcontrollers), Industrial Power Control, Power Management & Multimarket (consumer electronics, computing), Sensing & Security
STMicroelectronics	Switzerland/France	Broad-range semiconductor company	Automotive (power, ADAS, chassis & safety), Industrial, Personal Electronics, Communications Equipment, Computers & Peripherals (strong in MEMS, microcontrollers, power management)
Dialog Semiconductor	UK (Acquired by Renesas)	Power Management ICs (PMICs) and custom mixed-signal ICs	Mobile, Automotive, Computing, Industrial IoT
Nordic Semiconductor	Norway	Specializes in ultra-low power wireless solutions	IoT (Bluetooth Low Energy, cellular IoT), Smart Home, Health, Industrial
ams OSRAM	Austria/Germany	Leaders in optical solutions and sensors	Automotive (lighting, sensing), Industrial (automation, medical), Consumer (mobile, wearables)
Fraunhofer Institutes	Germany	Primarily research organizations; crucial role in chip design	Innovative digital & mixed-signal ICs, Neuromorphic hardware, Chiplet technology (collaborates with industry on design projects)
Soitec	France	Global leader in engineered substrates (SOI wafers)

Key EU Semiconductor Fabs and their general focus/locations:

Company	Location	Key Capabilities/Notes
STMicroelectronics	Crolles, France	Capable of 28nm, 55nm, 65nm nodes. Specializing in Foundry, SiGe BiCMOS, FD-SOI. Includes 200mm and 300mm fabs, with plans to increase 300mm production capacity to 14,000 wpw by 2027, potentially up to 20,000 wpw.
	Agrate Brianza, Italy	Key site with several fab lines (including a 300mm fab) and an R&D center. Aims to double current 300mm capacity to 4,000 wafers per week (wpw) by 2027, with modular expansions up to 14,000 wpw. 200mm plant to refocus on MEMS.
Infineon Technologies	Dresden, Germany	Major production site, strong in power semiconductors and microcontrollers. Known for "legacy chips" crucial for automotive and industrial applications. Investing heavily in new fabs (Smart Power Fab), with initial production expected by Autumn 2026, focusing on SiC and GaN processes. Also a partner in the ESMC joint venture with TSMC, Bosch, and NXP.
	Villach, Austria	Significant site for power electronics. Increased capacity for SiC and GaN power semiconductors in 2023, operating as "One Virtual Fab" with Kulim, Malaysia for wide-bandgap technologies.
Bosch	Dresden, Germany	Opened a new semiconductor factory in 2021, focusing on chips for automotive and IoT applications. This highly automated, 300mm wafer fab is Bosch's first AIoT factory.
NXP Semiconductors	Nijmegen, Netherlands	NXP is a major European design company (headquartered in the Netherlands). While much of its manufacturing is outsourced, they have internal fab capabilities at Nijmegen, which is one of the largest chip manufacturing plants in Europe.
Texas Instruments	Freising, Germany	Produces analog chips. Capacity: 37,500 wafers per month (200mm wafers). Nodes: 1000nm, 180nm.
X-FAB	Corbeil-Essonnes, France	Specializes in analog/mixed-signal and MEMS foundry services, working on a range of mature nodes including 180nm, 130nm, and 110nm BCD-on-SOI and RF-SOI.
	Dresden, Germany	Specializes in analog/mixed-signal and MEMS foundry services. Processes include 350nm, 250nm, 180nm, and 130nm CMOS logic and mixed-signal.
	Erfurt, Germany	Specializes in analog/mixed-signal and MEMS foundry services. Processes include modular 1.0µm CMOS mixed-signal (analog, high voltage, EEPROM), special micromechanical sensor processes (MEMS), and smart power options.
	Itzehoe, Germany	Specializes in analog/mixed-signal and MEMS foundry services, focusing on physical sensors, MOEMS, RF-MEMS, and novel technology development, including wafer-level packaging.
UMC	Singapore (Fab 12i)	Note: While not in the EU, UMC is a key partner. Fab 12i works on 130nm to 40nm nodes with a monthly capacity of 53,000 300mm wafers.
Intel	Magdeburg, Germany	Intel announced a massive investment (over €30 billion) for two new leading-edge fabs, aiming for advanced node manufacturing (potentially 1.8nm and below). The project is currently delayed, with reevaluation expected in 2026 for an operational launch in 2029-2030.
TSMC	Dresden, Germany	TSMC, in a joint venture (ESMC) with Bosch, Infineon, and NXP, is establishing its first European site. It will focus on automotive and industrial applications, likely at mature nodes (e.g., 28nm, 22nm planar CMOS and 16nm, 12nm FinFET process technology) with a planned monthly production capacity of 40,000 300mm wafers. Groundbreaking ceremony held in August 2024.

Revenues and CAGR:

European semiconductor market reached over €51.2 billion in sales in 2022.24 The EU aims to quadruple its production capacity to meet the 20% global market share target by 2030, indicating an ambitious growth trajectory

Where Does Germany and EU Fit in the Future of Semiconductors?

Germany's Role:

• Germany is a pivotal player within the European semiconductor landscape.

• Germany has a long history in electrical engineering and a strong existing electronics industry

• Germany excels in "legacy chips" (trailing nodes) critical for the automotive, energy, and industrial sectors. It's also a leader in sensor technology, specialized microprocessors, and photonics

• Germany, along with Japan, the USA, and the Netherlands, contributes a large proportion of the equipment used in chip production (e.g., optics for lithography, metrology). This makes its role in the global supply chain reciprocal

• Germany is a major recipient of new fab investments under the EU Chips Act, with Intel's multi-billion euro investment in Magdeburg and TSMC's new fab in Dresden. These investments aim to bring more advanced manufacturing capabilities to Germany.

• German research institutions like the Fraunhofer Institutes are at the forefront of chip design innovation, packaging, and heterogeneous system integration.


• Germany boasts a highly skilled workforce in the semiconductor sector.


EU's Role:

The EU aims to move from a relatively low share of global chip production to a more strategically autonomous and competitive position.

• The primary driver is to reduce reliance on Asian and US production, especially for critical components, to prevent future supply chain disruptions.

• Ensuring control over key technologies for its digital and green transitions, defense, and critical infrastructure.

• The Chips Act and IPCEI initiatives are designed to foster innovation across the entire value chain, from materials and design to advanced manufacturing and packaging.



• The EU is actively attracting major global players like Intel and TSMC to establish fabs within its borders.

• Beyond just fabs, the EU is focusing on strengthening its design capabilities, R&D, and the entire supply chain, including equipment manufacturers, materials suppliers, and packaging.

• While aiming for advanced logic, Europe recognizes its strengths in automotive, industrial, power electronics, and IoT, and will continue to build on these.

Challenges for European/German Semiconductor Industry

• Global Competition

• Capital Intensity

• Technological Lag in Advanced Logic

• Supply Chain Dependencies

• Talent Pipeline

• Energy Costs

  
  

Opportunities for European/German Semiconductor Industry

• EU Chips Act and IPCEI

• Strong End-User Markets

• Leadership in Specific Technologies

• Research Excellence:

• Green and Digital Transition

• Strategic Autonomy

• Attracting Major Players

• Chiplet Technology

• Equipment and Materials Leadership

In conclusion, Europe, led by Germany, is at a critical juncture in its semiconductor journey. While significant challenges remain, the concerted efforts through the EU Chips Act, strategic investments, and leveraging existing strengths present a substantial opportunity to reshape its role in the future of the global semiconductor industry, moving towards greater resilience and technological sovereignty.

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