IPCEI fails to address European dithering

December 20, 2018 // By Peter Clarke
With the tensions of a US-China trade war and the possibilities of a return to protectionism via high tariff barriers, it might be seen that Europe allowing subsidy for R&D and innovation to companies via a microelectronics IPCEI (Important Project of Common European Interest) is an appropriate response.

It may yet be, but two things stand as caveats around this plan.

Firstly, Europe has dithered on the topic of microelectronics and should have executed much earlier and either mobilized far greater sums of money or none at all. Secondly, moving tax-payers' funds around is never enough (see Europe approves state-aid for electronics worth €1.75 billion).

What is required is a change of economic climate that will drive entrepreneurism, drive those sitting on capital to put that money to work and drive speed of execution. I am sorry to say that IPCEI demonstrates the continuing problem in European wealth creation rather more than it represents a solution.

It is often said that all regions support their champion companies but that somehow Europe fails to do this and our declining market share in various parts of the electronics supply chain is a result. China is set to account for about 20 percent of the world's semiconductor fab capacity by the end of 2020, according to trade organization SEMI.

The National IC Fund being used to drive China's rise in semiconductors and reduce its semiconductor trade deficit has accumulated more than 140 billion yuan (US$21.5 billion) and spurred rapid gains throughout the region's IC supply chain. A second phase is aiming to raise another 150 to 200 billion yuan ($23 to $30 billion), according to SEMI.

That is just in the semiconductor sector alone and it makes the European Union's allowance of up $2 billion state support for microelectronics seem rather small in comparison. We have already seen how the $10 billion budget set by the Abu Dhabi sovereign wealth fund Mubadala was not quite enough to get Globalfoundries to the top table in semiconductor manufacturing (see GloFo rethinks its future, drops 7nm FinFET).

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