Europe Is Trying to Reclaim Its Lost Chipmaking Glory
bloomberg.com
bloomberg.com
It is really sad how the domestic/western production became irrelevant. We lost it just like we lost our lead in solar energy (which was also based in the Dresden area by the way). And (at least solar) in my opinion for completely stupid reasons. The supposedly business-friendly German government went yolo, free trade and slashed the subsidies. And now they are turning around and trying to create industries from nothing? For solar, the ship has sailed, and for chips I think it is also way too late. Why didn't we support the industry we had?
China is steamrolling us, because 1) they think and act strategic, 2) size-wise, they are not one country but many countries and city-states working as one and 3) they are beating us at our own game because we have a slavish devotion to WTO principles while they will use protectionism if it benefits them. The thing is: Europe could have done most of this, too.
>The US is steamrolling us, because 1) they think and act strategic, 2) size-wise, they are not one country but many countries and city-states working as one and 3) they are beating us at our own game because we have a slavish devotion to WTO principles while they will use protectionism if it benefits them.
This is as true overall IMO. I'm not going anywhere special with this comment (and not bashing neither the US or PRC) but I though it worthwhile to keep in mind that China isn't doing anything others aren't too in similar ways. I don't think it will change though but we got a perfectly good litmus test of how it is now in the sale of ARM (though UK isn't in the EU of course). If it's sold we (as in Europeans) clearly haven't learnt yet.
You can knock the US however you want, but you can’t claim that it doesn’t allow it’s existing infrastructure (eg laws, courts, currency, etc) to be equally open to foreign companies. Unlike in China, foreign companies can sue US companies and win if they’re in the right, and no one doubts that ability based on nationalistic favor.
International free trade is profitable in the long term if everybody is buying your goods, which was the case for the US and UK a century ago. China is using the resulting situation to its great benefit.
I think the fundamental differentiation is the degree of state involvement, Han nationalism etc..
I don't want to use this word because it's a trigger and possibly misleading but 'Fascist' might actually be the best word to describe what China is right now. The economy is not centrally planned, but managed in coordination with major actors who often seem to want to participate in 'nation building'. There's a strong Han-nationalism among the people, very strong sense of national identity, mass propaganda, ethnocentrism. All of those later qualities are an important part of what is happening, but we in the West tend to think of them as 'cultural' issues. But really it's part of the overall picture. I think a lot of workers wouldn't be working quite as hard if there weren't some kind of national/cultural glory in it.
https://en.wikipedia.org/wiki/Xi_Zhongxun#As_Guangdong's_top...
... the father of Xi Jinping.
[1] https://www.chicagotribune.com/business/ct-biz-us-china-trad...
About Huawei: Getting a fair trial is impossible. The evidence is mostly "three letter agency said so". The US justice system is not going to let Huawei be Innocent until proven guilty. It's not even about courts but straight to Guilty as proven by politics. Cisco is at least as big a danger in any system but they aren't Chinese so that's a different matter. (Look at the massive amount of "accidental backdoors" Cisco keeps churning out for a great example of real danger to network security.)
If you believe hacking is one sided or lopsided I would recommend you read some books about the topic. There are some pretty good ones from former NSA people for example. The fact is the US is by far the one who does the most hacking. No-one should be in doubt of that and I don't think anyone are after Snowden. You just seem to believe that "your" hacking is more okay than theirs. It really isn't. Besides, the NSA and CIA steals trade secrets and IP too as whistleblowers have stated multiple times.
We didn't force businesses to enter IP transfer. They weighted the cost benefits of market access and made the decision on their own. And there were negotiations. We offered market access, what did they offer in exchange. And you can imagine there were complex rules and strings attached with the deals. And its not always about IP being exchanged or a full transfer of IP. Or IP used in their Chinese ventures are few generations old and no longer market competitive globally, but in China it still was. Obviously companies are not stupid, they operated with their best interest in mind. The fundamental point is these agreements are bilateral and consensual.
>not letting through many companies to give their own home grown a chance (eg Facebook, Google, etc) Inaccurate. To operate in China you need to adhere to Chinese laws and regulations. Notably the 互联网安全法, 网络信息管理条例. They state internet information service is responsible for the content and the content must abide by following rules. This results in the "censorship" people experience. The key point is these laws are not discriminatory. Whether its Chinese or US businesses, the service can operate if they abide by the rules. Google.com, Facebook.com etc chose not to adhere to them so they cannot operate. But Bing, LinkedIn for example is available. Internet services that deals with people saying stuff on the internet is the hardest to comply, others are easier. And a lot of internet services are available. Ex cloud computing (AWS, Azure, Office365 ), E-Commerce (Amazon, Kindle), icloud, app store, Airbnb, oracle and many others. Google does have business presence in China still, Ex Ads. Google could make different products available if they decide.
> inaccessible courts that never punishes IP theft. Not sure about how it is now. IP protection is getting a lot stronger these days. For Chinese government and the courts, its in their interest to protect IP, whether for Chinese or foreign companies. And any sizable Chinese company will have foreign markets, foreign companies can sue them in their home country. So these days Chinese companies have to take IP rights into consideration during their business development.
> Currency manipulation, artificially lower currency. I think the consensus from economists is that China is not artificially lower currency. In the past 12 months. RMB to USD went up by 10%.
Lastly I think any trade related issues are negotiable between China and US governments. For example, we opened financial markets after US phase 1 trade deal. The EU and China investment deal has lots of provisions on market access, no IP transfer, fair treatment and competition, rules on state subsidies, rules on state owned firms and non-discriminatory commerce etc. The deal also creates an arbitral tribunal framework for settling disputes.
We are not looking to dominate US or the west. We are looking for an equal, cooperative and win-win relationship. Both the US and China can be prosperous. It doesn't have to be zero sum game. Only one can win and the other must fail. Any trade related issue is always up for negotiations. The question is whether US will want to negotiate or seeks to destroy china.
Germany is taxing companies and people too much (40-50%) so capital is leaving the country.
Actually, the same can be said about most of the western Europe.
The specific problem with chip manufacturing is that this is a dirty business requiring lots of chemicals and lots of water. There is simply no way anything like that can happen in Western Europe now. You will have millions of sanctimonious kids with nothing more meaningful in their lives than marching with signs about saving the ground, etc, and then angry politicians will get on soapboxes and denounce the greedy-ground-polluters in order to win elections, and so Europe will continue to buy their chips from factories located in East Asia or America, where there are jurisdictions in which people have other things to give their life meaning.
Manufacturing has been pouring into East Asia not because asians are better at manufacturing, but because they value it enough to make systematic efforts to attract and promote it. It's about values and worldviews much more than a simple thing like tax rates (although East Asia has reasonable business tax rates, they have phenomenally cheap credit for manufacturers, good infrastructure, and very stable regulations.)
The tariffs should match the cost of said overhead.
The combination of rigid environmental/labor practices in the developed world with an equally fanatical devotion to unfettered cross-border capitol flows and 'trade' is systematically immiserating the West and leading to massive net environmental damage even though both of these goals: cosmopolitanism and environmentalism, are individually the darlings of western elites.
It’s caused numerous cultural and environmental problems.
Look at the sad state of the US today.
We didn’t even have the production capability to make n-95 masks.
Meanwhile, company spokesmen tell us that if we want change we should push our legislators; while having wholesale monopolies on lobbyists who do everything they can to ensure offshoring is extremely profitable.
Which grows the warchest of those screwing us over that much more.
Moreover the environment is not some fragile thing that is "destroyed" by a chip plant. So here, too, there is a lack of understanding about what is happening so that people can make claims of personal righteousness (and the "environment" is just a place-holder that can and is swapped out for other concerns that yield more self-righteousness credits per unit effort at the drop of a hat).
Of course there is Ireland, but that's a fundamentally different situation -- Ireland exists as a type of corporate welcome mat and shouldn't be categorized with "europe" when you are talking about business climate/regulations.
What are you thinking of?
Has it though? The West is up against governments. TSMC is part owned by their government. SMIC is part owned by their government. Samsung's share of South Korean GDP is so large that it might as well be the government.
In the face of such organized and concentrated competition, what's so sad about some private businesses falling short?
I think the sad thing they were talking about is those businesses not getting the support they needed, because of an incompetent lack of strategic vision on the part of their governments'. It's like sending your army to a gunfight only armed with knives.
Kernels, on the other hand, is something we have a huge advantage over everybody else. Amazon with its FreeRTOS and L4 based companies are here. Xen is from here. And tons of embedded. With chinese chips and sensors and german kernels.
Their GDP should be 3 times larger than EU of US, and they are doing things to make that true
We should never be a factor to them but our egos require us to imagine they are thinking about us at all
The only time they acknowledge us is to placate our egos. Reassure us that it isn't a big deal that their economy is about to be larger, and reassure us that they wont do the same things we all did with the rest of the world (and hope we ignore what they do internally, they aren't sending drones for our domestic rights abuses either).
Let’s just zoom out for a second and admit Europe has done this for centuries already, with just about everything.
Chips production is one thing, but the whole ecosystem matters. So these chips produced in Europe must be sent back to Asia for integration in final products. Or a miracle will happen and European Union will resurrect manufacturing? I doubt, because manufacturing means missing climate goals.
The robots that assemble the electronic circuits are also largely built in EU. (And, of course, in Japan, too.)
What made Apple to order their iPhone production from a Chinese company was not the availability of relevant hardware elsewhere; certainly the US has it. It was the nimbleness of that company, the willingness to move fast and make things available fast. Paradoxically, less red tape and less corporate shenanigans. Cheap labor? Maybe, but it did not appear to be the major factor, and wages at Foxconn were / are not as low, by EU standards even.
And this is compared to US; in Germany, things would be even slower, to say nothing of France (which is a real industrial powerhouse nevertheless).
Um, the CNC machines that iPhone production uses are actually made in the US and shipped to China because the Chinese CNC machines can't handle the tolerance.
So, why is Apple shipping it there then?
Cheap labor is the answer.
And, why is Apple starting to ship production away from China?
Cheap labor is still the answer.
As we found out, the supply chains in China weren't that robust. You can put them wherever without a lot of problem and they take about 12 months to come up to speed. That's not very long at all in the manufacturing world.
Maybe a price that would allow such speed in an American company exists, but likely it's sky-high.
The Chinese one was sky-high, too. It's just that the Chinese government ate the cost.
[0] apparently they once moved 12K workers from one line to another at midnight for a last minute design change
I don't understand - do you think there is no manufacturing in Europe?
To give a concrete example - some European car factories are shut down due to... lack of chips.
A lot of minor manufacturing, plus a lot of assembly to be able to call the final product e.g. "german made" and have the associated tax-cuts...
Europe is the second largest manufacturer of cars for example. And half the world's planes are made here. That's not minor.
> plus a lot of assembly
Right... assembling chips into things for example.
Wasn't that the point? The chips don't need to be sent to Asia in order to put them in products.
Modern supply chains are really complex. Your laptop might uses chips manufactured in Taiwan by Dutch lithography machines, have a screen build in South Korea using German automation devices, run on software made in the USA, all shipped on a Japanese-build vessel.
They use Chinese components... to manufacture planes... in Europe.
"plus a lot of assembly to be able to call the final product e.g. "german made" and have the associated tax-cuts..."
Or, in your words:
"They use Chinese components... to manufacture planes... in Europe."
By contrast, the Chinese COMAC airplane consists largely of of imported parts.
There is also some final component assembly (but that is not a major portion of value add), it is used to capture subsidies and claim that stuff is "made in X" when it is assembled from parts made all over the world.
The problem is that this is critically depending on IP -- e.g. your designs not being stolen -- and also there are some industries where manufacturing knowledge is the value-add rather than the design. In those situations, Europe can't compete because the factories are elsewhere. America suffers from the same issues and is also falling behind, so this is a general issue with "the west".
Not that this is a bad thing as such, and it's not like it's all gone.
Also, because a lot of these companies don't produce the latest shiny gadget or manipulative abusive online website that would be literally illegal such as Facebook or Uber (both of which have little actual "innovation" outside of the business model), some people (Americans especially, it seems) seem to think Europe is some backwater where no actual high-tech industry is done, all the while typing on their computer made possible by companies such as ASML, FEI, Neways, and many more. Shrug.
>I doubt, because manufacturing means missing climate goals.
So you are saying a chip factory can not be powered by green energy. Why? Taiwan does it, too: https://www.evwind.es/2020/07/08/orsted-taiwans-tsmc-sign-wo...
TSMC is under a perceived threat from China, and the US has prohibted the Chinese from using TSMC.
This leaves a lot of business open to take. The US wants it back on their soil with the TSMC plant in Arizona.
The Europeans want something similar.
After all we have ASML here in the middle of western europe and god knows how many mid-sized factories. Surely this is not a stupid idea. Perhaps we can make the chips for Huawei here in Germany so everyone knows the phones and routers are safe and secure to use.
I'm not sure how those factories compare though.
If we can ship bananas from Guatemala to Portland before they turn yellow, I'm certain that we could send chips from a Western fab to an Eastern assembly plant.
I think the bigger challenge is perhaps getting the boules/substrates. My understanding is that the best ones come from Japan, and if your fab yield is low, you're getting far more raw inputs than finished outputs. One solution to that problem would be to make the silicon crystal in the same region as the fabs. Another would be to set up a distributor corporation that buys in massive bulk to get shipping costs down, then slowly sells off inventory to manufacturers.
There are some essential chemicals involved in semiconductor fabrication as well, but I think you can probably find those in any region of the first world.
There's a graveyard of EU decisions like this, having a non American owned AWS type company, etc, etc.
Europe is not good at promoting growth on the other hand. Living standards have fallen in the last 20 years.
For example 25 to 31k Euro GDP per capita for 2012-2019
Why is state intervention necessary? Because the private sector is too healthy, it's making profits but it isn't investing. The hornets are hibernating in the summer, you gotta poke the nest. If you cut taxes they are just going to hibernate even deeper.
The easiest answer is to just do helicopter money or universal basic income if you want to call it that. The better answer is to let the state invest, except the EU has failed to do so and when it did, each time the money disappeared via corruption, why even bother? So a EU UBI is our last hope.
" The better answer is to let the state invest" - it's never easy.
Or rather, the 'easiest' it can be is when you have money coming out of the ground (or water) i.e. Statoil.
Airbus is a commendable success, but in a way, it's more structurally solvable: build planes, much like the other one's but better in some ways, and supply the domestic market.
The planes are not that-that hard to build, but it requires investment and very long term planning.
With chips ... which tech? Who are the customers? Where is the business going to be in 10 years? Can the EU do things to require/guarantee income for the project?
It's for the same reason the EU hasn't invested to create the next FAANG either.
That said - I'm surprised they haven't tried with some things like Netflix, AirBnB and Uber, which have tremendous individual and cultural impact and are not necessarily difficult in terms of tech.
And this will lead us to nowhere in term of chipmaking glory, but increase the huge pile of wasted money.
Even if we don't speak too much about it, but a lot of French and European money has already been distributed like that for the "cloud" and "virtualization" things, and so far it was completely wasted without any useful outcome.
chip production is not simply buying off the shelf equipment and magically you can get to 10nm max yield that is profitable.
equipment is one part of the whole production process. ASML may know how to build EUV but their skillset is not running the fab. if all you need is equipment, why Intel is struggling with 10nm for so long?
Unlike the green initiatives funding (try and get that as a startup hah), money going straight to multibillion euro companies might not be a bad thing in this case.
It's a shame really that most manufacturing of western (EU, US, most ex-soviet states) has been moved to the asian markets. Bert Hubert did a good article about this and the telecom industry a while ago[0].
We see this behaviour all throughout the western world, where we shift money around "creating value" without actually producing anything of note.
But yes, CPU and Co are hard and unprofitable without monopoly which US build by making that tech corner unprofitable for anybody else. Possibly just by complicating things with other layer - software compatibility. And strategic gov care. Good for US.
So there is only one way ahead: technology change like eg. making CPUs from graphene. Just example, maybe graphene is useless for that but you got an idea - escape forward :)
And if you try to imagine CPUs and other electronic few hundreds years ahead: build one or two fabs per continent or country is stupid - you need to have possibility to order custom ASIC from home - it need to be such easy ! <- imagination seeds :) But usual way is to get easy access to standarised components of known properties - no backdoors included - so it need to be easy to build as much "on premise" as possible.
I know it's not really helping but such electronic industry shape is a must, whatever it is US, China or Europe.
The question of political will is very real, but financial firepower? Chip manufacturering is expensive, but is Bloomberg suggestion that the EU doesn’t have the same financial firepower as Apple? Sure you also need to build a few fabs, and while expensive, it’s not that expensive if you’re a government (or the EU).
More realistic the EU members will fight over in which countries to spend the money.
Europe is just as natural a fit as Arizona for high-end chip manufacturing.
Perhaps more as the main equipment manufacturers are here.
Government sugar daddies. The dark secret neoliberals don't want you to know.
> Taiwan Semiconductor Manufacturing Company Ltd. was officially formed in 1987 as a joint venture between the Taiwan government (21%), Dutch multinational electronics giant Philips (28%), and other private investors.
Source: https://semiwiki.com/semiconductor-manufacturers/tsmc/1539-a...
EU is a few decades old failed experiment, Europe exists for thousands of years.
There is only talk of subsidizing EU chip production, because a few German car executives got worried.
Why do people say this with such conviction?
Norway and Switzerland have some words for you.
More likely just the EEC was the 'greatest thing' and the EU, essentially the political version, is possibly a negative drag.
There's not much indication that the trade-plus-politics version of Europe is any better than the 'mostly trade' version.
"But all those good things are only apparent when taken away, the UK is only just now learning that. "
Like the ability to give it's population lifesaving vaccines months faster than the EU?
It will take a decade before we know which actions between EU and UK were specifically problematic, my bet is that it's mostly going to be a wash but it's hard to measure the geopolitical effect and things like leverage on trade - but even there, there might be an EEC-like way to do that. Finally, it'd be much less controversial, as there are almost no skeptics of the free market.
The EU changes nothing regarding that, on the contrary, by being European as well as of X nationality, it helps overcome traditional national rivalries. One of the main points in recent Catalonian and Scottish independence movements has been that due to the EU, the economic and legal impact will be minimal.
> On the other hand, many people feel like their countries are constantly giving handouts to the less developed ones and feel like that money could have gone to them personally instead
And they don't realise that the improvements in neighbouring countries concern them as well, by adding extra markets and expanding them ( a better developed Romania can buy more German-made washing machines, etc.).
The cheap labor that moves is a positive contribution.
Then there's the incalculable positive from EU sponsored and made possible programmes of cultural and educational exchanges.
The worst thing about the EU is its lacking marketing. Most of the bureaucratic problems with it aren't really that far from the same thing in countries.
Bernard Connolly has predicted it all in the 90's.
Despite constant screeching about its imminent demise, the EU still hasn't failed. And "Europe", at least as we think of it, only goes back to Renaissance diplomacy at best, but realistically to the Peace of Westphalia.
But the quasi-universality of Roman legal principles is itself very recent, and didn't start to emerge before the late 1700's, very much in the spirit of statecraft launched by the Westphalian era.
Is Britain part of Europe? Well, it's not a yes/no type of question. "In some ways, but not in others" would probably be the best answer.
The UK is part of Europe, that's for sure.
That they use 'Europe' to refer to 'The Continent' is an artifact of their singularity on the Island. Lind of like Quebecers refer to the 'Rest of Canada' as often just 'Canada'.
It's as much a part of Europe as Norway is for example, but neither of them belong to the EU.
Greece was devastated after the German-enforced austerity after the 2008 economic crisis. We the EU taxpayers had to give the biggest loan in history to the most bankrupt country in history, so that they could repay the German banks, who overinvested in Greece in the previous decade.
Why? China isn't dominating the chip-making industry, but if it were only about labor costs, they probably would. That's a hole in your theory.
Also creating conditions were things like higher labor costs prevent strategic industries from being located in your territory is a political decision, and political decisions can be changed.
Either I am a highly unusual statistical fluke, or your comment is bollocks.