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EU Semiconductor Targets Hitting Speed Bumps – Large Project Pipeline Remains

Analyst Team trader
Updated 20 Jun 2024

As leading semiconductor stocks continue to boost markets in the US and Asia, the European Union's grand vision to bolster its own chip industry is facing a series of setbacks, as key projects by leading companies are experiencing delays.

As name like Nvidia, AMD, Micron, Broadcom, and TSMC, become further entrenched in the social consciousness due to their recent successes, European firms continue to linger. It is not merely the location of the company itself, but the location of the manufacturing that is in play, and those with plans in the EU are not moving at the pace originally intended.

Wolfspeed, a U.S.-based semiconductor company, has postponed its plans to build a $3 billion plant in Germany, while Intel's massive $33 billion investment in Magdeburg also faces a pause due to regulatory hurdles. These developments could impede the EU's strategic goal of securing 20% of the global semiconductor market share by 2030, a target many experts believe is slipping away.

Companies including Intel, TSMC, and GlobalFoundries have announced major expansion plans within Europe in the hopes of reducing the 27-nation bloc's reliance on chips made in Asia. This is a crucial pivot given the heightened trade tensions and the need for supply chain resiliency. The EU launched the Chips Act in 2022, backed by public and private investments totalling 43 billion euros, to strengthen local production capabilities.

Despite these proactive measures, the region’s stride towards autonomy in semiconductor production seems hindered. Wolfspeed's pivot from constructing its German facility towards expanding in New York is a blow to the EU's plans. Furthermore, Intel's Magdeburg venture is facing headwinds stemming from environmental concerns, specifically topsoil preservation, which makes the likelihood of construction commencing this year increasingly doubtful.

TSMC appears to be forging ahead with an $11 billion project in Dresden, working alongside car chip manufacturers such as Robert Bosch, NXP, and Infeneon. Meanwhile, STMicroelectronics is set to construct a 5 billion-euro silicon carbide plant in Italy, which recently received the green light from the EU, and Onsemi plans a sizable expansion in the Czech Republic, awaiting approval for their $2 billion investment. Infineon is also making a substantial investment in Dresden with a 5 billion-euro power chip plant anticipated to be operational by 2026, contingent on EU aid approval.

All these developments, however, cannot obscure the overall context that the EU's target for the semiconductor industry looks increasingly unattainable, according to chip experts. The juxtaposition of bold industrial targets and real-world challenges highlights the tension at the heart of the EU’s tech ambitions. Delays are not just administrative or regulatory speed bumps; they symbolize the considerable challenges inherent in matching the rapid pace of global semiconductor development.

The delay in Wolfspeed’s German plant and the stumbling blocks faced by Intel reflect the complexities and obstacles within the European Union's aspirations to become more self-reliant in semiconductor production. While investments and plans show a readiness to advance, the recent setbacks underscore the fragility of timing and approval processes, which will be instrumental in determining whether the EU can meet its ambitious technological and economic goals in the semiconductor arena.

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The AskTraders Analyst Team features experts in technical and fundamental analysis, as well as traders specializing in stocks, forex, and cryptocurrency.