Infineon Adds to Doubts About Europe’s Chipmaking Ambitions

(Bloomberg) -- The European Union’s plan to become a powerhouse in producing next-generation semiconductors will do little to help the region’s vital industries today, one of its biggest homegrown chipmakers said Thursday.

“We think Europe should focus on bringing modern, but not state-of-the art technology” to meet local demand, Helmut Gassel, Infineon Technologies AG’s chief marketing officer, said in an interview.

As chip shortages ripple through industry after industry -- preventing companies from fulfilling demand for products from cars to game consoles and refrigerators -- the EU wants to double its chip production to at least 20% of global supply in the next decade.

Read More: Chip Crisis in ‘Danger Zone’ as Wait Times Reach New Record

The approach aims to boost the design and production of 20-nanometer to 10-nanometer chips with the help of a European alliance of chipmakers, research centers and national governments. It would then target production below 5-nanometers down to 2-nanometers, an ambitious goal not yet reached by industry leaders Taiwan Semiconductor Manufacturing Co. or South Korea’s Samsung Electronics Co.

But the goals for the cutting-edge chips that are more expensive to make have drawn skepticism from the industry. The decline of the region’s consumer electronics industry in recent decades has left Europe without obvious customers for the smallest and most powerful components. Carmakers, whose vehicles have room to hide older, bulkier chips, are where most of the demand for semiconductors lies for now.

Only fully autonomous vehicles would eventually be able to take advantage of the higher computing power found in the more advanced chips, Gassel said. The German company is one of the world’s largest suppliers of automotive chips.

“The vast majority, if not all of the components, in a car today and in the next five years to come, won’t take any benefit from anything below 20-nanometers,” said Gassel. “If your product doesn’t need the functionality, then you will not use it because every time you shrink” transistors on chips, the cost goes up exponentially.

STMicroelectronics NV Chief Executive Officer Jean-Marc Chery has also distanced his company from the EU’s ambition. “If it’s about advanced technologies, we don’t have any reason to participate,” Chery told French news channel BFM TV this month. “That’s marginal to our activities.”

Gassel said if the alliance’s plans were more targeted to the European ecosystem, including automotive, industrial and internet-of-things production, the company would be willing to participate.

Read More: EU’s Breton Says Time to Fix ‘Naive’ Approach to Chip Supply

Speed Need

The architect of the EU chip plan, Industry Commissioner Thierry Breton, pushed back at a press conference later on Thursday, saying his job is to “prepare for the next market and it will come sooner than we think.”

For now, European chip suppliers were focused on car components as that’s where the market lies, said Breton. However, he said Europe will need very high-speed processors to power 5G wireless networks and so-called edge computing, where devices process data themselves instead of transmitting it back to a data center.

Pointing to foreign companies like TSMC, Samsung and Intel Corp. that are already making plans to produce semiconductors below 5 nanometers, Breton said “if others see the market, I don’t see why, in Europe, we don’t see the market.”

ASML Holding NV, the Dutch producer of chip manufacturing equipment, backed him up. The prospect of new innovations means it makes “perfect sense” to build a European production base, ASML Chief Executive Officer Peter Wennink said at the press conference alongside Breton.

(Adds Breton, ASML CEO reaction from 10th paragraph)

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