The European Union consumes hundreds of millions of chips every year, but only a handful of them are made within the bloc. Although countries like Germany are encouraging chipmakers to build fabs there, it is unlikely that the EU will ever become completely independent from other countries as far as semiconductor supply is concerned. That is according to Margrethe Vestager, EU's Commissioner for Competition.
Leading contract makers of semiconductors -- such as Intel, Samsung Foundry, and Taiwan Semiconductor Manufacturing Co. -- spend around $30 billion per year on capital expenditures and billions on developing new process technologies. Analysts believe that a country, or a group of countries, that wants to build a competitive semiconductor industry locally would need to spend over $150 billion over a period of five years on direct help, tax breaks, and incentives. However, the chances of success are extremely low.
The EU official believes that such investments are impossible to make, which is why the bloc will continue to rely on internal and external chip supply.
"The numbers I hear of, sort of, the upfront investments to be fully self-sufficient, that makes it not doable," said Vestager in an interview with CNBC. "What is important is that there is a different level of production capacity in Europe."
It is noteworthy that Europe does not produce smartphones or PCs, two kinds of applications that need chips made using leading-edge fabrication technologies. Meanwhile, the EU produces cars, consumer electronics, and other things that do not need chips made using the latest nodes. Thus, the bloc wants to expand production of chips for these products to protect its economy. It also does not want supply chains to be disrupted by China or tensions with the U.S. and Germany.
"You would need a lot of chips that come from legacy technology, a lot of the chips that goes into sort of internet of things, your fridge, your coffeemaker, that's legacy technology, and it will take quite some time because that sort of migrates into leading edge," said Vestager.
At present, about 10% of the global chip supply is produced in Europe, down from 40% in 1990. The current goal that the block has is to expand its global chip production market share to 20% by 2030, which is already a very ambitious goal as chip manufacturing is growing. Vestager admits that to accomplish this goal, the EU needs to support local makers of semiconductors. Unfortunately, Margrethe Vestager does not announce any particular plans at this time.