What should have been an uplifting introduction to the first year of college after the pandemic became a two-hour warning about “the perma crisis.” War, fragile production chains and a lack of almost everything: energy, talent, education budgets and above all: chips.
The opening of the academic year, Monday afternoon at Eindhoven University of Technology, was the stage for geopolitical reflections by European Commissioner Thierry Breton (internal market), Minister of Economic Affairs and Climate Policy Micky Adriaansens and ASML CEO Peter Wennink. Their joint conclusion is that Europe has all the ingredients to become more independent and autonomous on the world stage, but that cannot be done without trading with ‘system rival’ China. And certainly not without Europe’s most important ally, the US.
Semiconductors remain a headache for European industry. Breton indicated in his speech that Europe can no longer remain dependent on Taiwanese producer TSMC. 50 to 75 percent of all semiconductors come from Taiwan. However, China considers Taiwan a renegade province to be annexed. Breton: “If Taiwan is blocked by China, we will run out of chips here in two weeks.”
Breton wants “a new balance” and hopes that by 2030 Europe will supply about 20 percent of global production of chips (now it is barely 8 percent). To this end, the EU put together a EUR 43 billion stimulus plan in February – the Chips Act. That subsidy pot convinced Intel to build large chip factories for 17 billion euros in Magdeburg, Germany. According to German media, 40 percent of the Intel investment covered by grants.
The EU is not yet getting the chip manufacturer TSMC to build a factory in Europe
Despite these extensive support packages, Breton is unable to convince TSMC, the largest and most advanced chip producer, to build a factory in Europe. In June, TSMC chief executive Mark Liu indicated that TSMC is currently no expansion plans in the EU, even if the EU is promising billions.
Conversations with Taiwan
According to Hsin Hsin Chen, the diplomat who represents Taiwan in the Netherlands, Europe would do well to first strengthen trade relations with Taiwan. NRC Chen spoke last week in The Hague about the mounting tensions surrounding Taiwan. The island was surrounded by Chinese warships in August after a visit from American politicians – under the guise of a military exercise.
Hisn Hsin Chen: “The EU is very keen to ask TSCM to invest in Europe. We are already trying seven years conclude a trade agreement between Taiwan and the EU. Such an investment agreement would benefit both sides and pave the way for a Taiwanese company to invest in Europe.”
The first exploratory talks between the EU and Taiwan started in 2015 and have been paused, presumably at the urging of China, with which the EU signed an investment agreement in 2020. However, that agreement already disappeared in 2021 as a result of human rights violations by China. A revival seems to have completely disappeared as China refuses to condemn Russia’s invasion of Ukraine.
So the way seems clear for talks with Taiwan, Chan concludes. “But in 2022 we have not even started a formal negotiation,” said the diplomat, who was present at the first exploratory talks.
New factories in Arizona
However, when the suggestion for a trade agreement between the EU and Taiwan is presented to him, European Commissioner Thierry Breton resolutely holds back. “No no. We’re not going to get into that discussion. The Chips Act is a project that welcomes companies in Europe with public support. But of course that goes on our conditions and then companies can make their own assessment.”
The US made already in 2020 for such a trade deal with Taiwan and recently announced that talks will begin in October. It may be a coincidence, but TSMC is building new factories in Arizona – with a hefty subsidy from the US government.
Even though TSMC founder Morris Chang had interview claimed in April that moving chip production to other countries is a “pointless exercise”. It drives up costs and there are too few classified employees, Chang said.
Also read: Where is the US tech front against China so sought after?
The EU cannot afford to antagonize China. This also applies to a sensitive topic in which the Netherlands is closely involved: the export of ASML’s chip machines to China. These lithography machines are crucial for the production of chips. The US is pushing for a halt in the supply of conventional lithography machines, so that China cannot further develop its own chip industry.
70,000 vacancies Brainport region
The EU sees little in such an export restriction of current technology, says Breton, and that also applies to Minister Adriaansens of Economic Affairs. China’s throttling also has consequences for the chip shortage. ASML CEO Peter Wennink: “There is no such thing as old chip technology. It is precisely older chip machines that are most needed at the moment to solve the shortages.”
But the biggest challenge, according to Wennink, is filling 70,000 vacancies in the Brainport region. The ASML workforce in Veldhoven is also expected to double in the coming years. If this region is to remain relevant, we need more talent, from mechanics to top technicians.”