Intel is beating cash in Europe to make chips
Intel's chief executive has called for a public-private partnership for microchip manufacturing in Europe. All the details
Interviewed by La Stampa during the World Economic Forum in Davos, Pat Gelsinger, CEO of the American microchip company Intel, said the company is willing to invest in Europe even "massively", but needs the "participation of governments ".
Gelsinger confirms a long-known reality: a plant for the production of advanced semiconductors requires an investment of tens of billions of dollars and about four years to build. Already the former German Chancellor Angela Merkel had said, in this regard, that "the production of competitive chips, with the size of 3 or 2 nanometers, for example, is essentially impossible without state subsidies".
THE OBJECTIVES OF THE EUROPEAN UNION ON MICROCHIP
Microchips, or semiconductors, are components necessary for making cars, computers, household appliances, smartphones and similar technological devices, among other things: they are therefore crucial for the future development and competitiveness of economies.
The European Union, the United States, China and many of the other major world economies are working to "bring home" the manufacturing of microchips, that is, to install factories directly on their territory or in the immediate vicinity, in order to guarantee certainty. of supplies. In fact, there is a crisis in the supply of these components that has been going on for a long time and which, according to Gelsinger, will hardly be resolved "before 2024".
The European Union is currently worth less than 10 per cent of global semiconductor production; the Commission's goal is to bring that share to 20 per cent by 2030 and, to do so, it has developed a stimulus plan for the sector that is still somewhat vague (the European Chips Act). Chip manufacturing and packaging is concentrated in Asia, particularly Taiwan and South Korea; the segment of the design of these components, on the other hand, is dominated by the United States.
WHAT INTEL WANTS TO DO IN EUROPE
Intel has a large investment plan for Europe, worth about $ 80 billion, where it intends to create an integrated system for microchips: it means that it does not want to concentrate all stages of the value chain in a single state, but to distribute them in various parts of the continent. For example, it intends to open two factories in Germany, in Magdeburg, between 2025 and 2027. The company has also reached an agreement in principle with Italy for the opening of a testing and packaging plant (from the value , perhaps, of 4 billion).
THE REQUEST FOR INCENTIVES
Given the amount of capital required and long construction times, Gelsinger told the press that Intel needs political stability, favorable legislation and "chip manufacturing incentives." The European Union allows the disbursement of subsidies for semiconductor plants, provided, however, that the latter are of an advanced level; however, these do not seem to be the components most requested by European industries, mainly automotive and non-technological.
CHANGE APPROACH TO CHAINS?
The CEO of Intel then argues that "we need to move from a supply chain that until now has been according to the principle of just in time to one based on the just in case model".
Just-in-time refers to a procurement model designed to be "lean" and to minimize inventories and waiting times between the moment the materials arrive in the factory and the moment they are transformed into finished products. . A model of this type aims to minimize production costs and involves many passages around the world; it has worked well for a long time, but has gone into crisis with the coronavirus pandemic and its continuous open-close.
A just-in-case approach, on the other hand, pays more attention to stock conservation to mitigate the backlash to the production of any logistical hitches and to respond to sudden increases in market demand.
IS IT THE END OF GLOBALIZATION?
The coronavirus pandemic and the geopolitical competition between the United States and China seem to have led to a rethinking of globalization. Not surprisingly, there is a lot of talk about "regionalization" and "shortening" of supply chains: no longer scattered around the world, that is, but concentrated near the final markets. Furthermore, the various links of the value chain will be installed in allied countries, to reduce the risk of hostile governments hindering or blocking the supply of raw materials and essential components: in this case, the term friend-shoring (or, more simply, of "globalization between friends").
According to Pat Gelsinger, however, we are not seeing the end of globalization “because today we are more interconnected than ever. But we need to change mentality and attitude in the production of chips and semiconductors ”, that is, reduce manufacturing dependence on Asia.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/innovazione/intel-microchip-europa-sostegno-governi/ on Tue, 24 May 2022 10:19:20 +0000.