Semiconductors play a crucial role in critical infrastructure and national security, making them highly sought-after and globally traded products. However, the global semiconductor industry is facing shortages due to the COVID-19 pandemic, geopolitical tensions, and the specialized nature of the value chain. With their recent study, Blandine Laperche and Dimitri Uzunidis highlight the specialized nature of the semiconductor value chain, with different regions specializing in specific segments of the chain. The United States excels in R&D-intensive activities, while East Asia leads in wafer fabrication, and China dominates in assembly, packaging, and testing. Moreover, the concentration of manufacturing capacity in China and East Asia, particularly South Korea and Taiwan, raises concerns about dependence and supply chain vulnerabilities.
In the European context, the research acknowledges that Europe lags behind its competitors in the semiconductor industry, accounting for 10% of global output and 20% of consumption. Europe has focused on R&D and design (Fabless) and hosts leading semiconductor research institutions. Recognizing the weaknesses in the global supply chain, European countries are implementing industrial policies to boost domestic semiconductor manufacturing. The European Chips Act aims to pool €43 billion of public and private investment to strengthen the electronics design ecosystem and establish necessary manufacturing capacity. However, achieving self-sufficiency is challenging and requires substantial investments.
The research also discusses two contrasting strategies for Europe: relocation of production and strengthening existing ecosystems. Relocating production to Europe faces challenges due to the concentration of R&D, design, and manufacturing units and the lengthy setup processes for new factories. Instead, strengthening existing European ecosystems that emphasize innovation and design could be a viable option. By verticalizing the sector and closely aligning European semiconductor players with sectors where Europe already has a competitive advantage, such as e-health, AI, data security, defense, and aerospace, Europe can enhance its position in the semiconductor industry. Building strong business ecosystems around European leaders could tap into the resources of a larger European innovation ecosystem.
However, the researchers caution against the fragmented approach of developing multiple projects across European member states and attempting to produce advanced semiconductors. Such a strategy may not align with the actual demand in Europe and could be financially risky. Additionally, challenges such as dependence on rare earths and the significant water requirements for chip production need to be considered, particularly in the context of climate change.
The research concludes that a broader analysis framework is required to understand the relationships firms can create with external actors, including companies and public institutions. This entails promoting dynamic ecosystems that bring together component designers, end-product manufacturers, service developers, research laboratories, and other stakeholders. Such a strategic orientation can lead to differentiation, increased value, and visibility of technology development. Furthermore, prioritizing investments in strategic sectors and supporting innovative and small user companies can foster growth and resilience in the semiconductor industry.
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Laperche B., Uzunidis D. (2023), Innovation ecosystems in core digital technologies, In Innovation Ecosystems in the New Economic Era: Digital Revolution and Ecological Transition, L. Adatto, C. Aouinaït, S. T. K. Le, M. Mongo (eds.), Business & Innovation, Brussels, Peter Lang. https://www.peterlang.com/document/1314628
