Chips are down on sovereignty
The semiconductor industry has always been going through cycles alternating between overproduction and shortages, especially due to technology evolutions. This time may be different: the global health and consequently economic crisis is affecting the industry more than its natural cycles. At the same time, semiconductors are at the core of national sovereignty issues as they are driving all our identity and telecom, transactions and health systems.
The Covid-19 pandemic and healthcare decisions made by governments worldwide has led to an increased demand for electronics in 2020 and 2021: the rapid switch to remote work has triggered a rush on microcomputers, handsets and other communication means, while lockdowns increased demand for home leisure resources such as TV sets or game consoles.
The US-based Semiconductor Industry Association (SIA) estimates global sales of semiconductors increased 5.1% in 2020 to US$ 433.1 billion (EUR 357 billion) and are projected to increase by 8.4% in 2021.
Many industries are suffering from this chip shortage, including mobile communications, automotive, healthcare, consumer electronics, etc. Consequently, many players have already announced they will not be able to keep their product production schedules or are simply postponing product launches and deliveries. Supply chains are increasingly complex and multinational, often having their roots in China, Taiwan and other Asian countries. Semiconductor vendors are allocating their limited capacities according to their own rules, often privileging high-margin products over basic chips and local strategic customers over other ones in distant world regions.
Sovereignty issues were demonstrated by the ongoing trade war between US and China launched during Donald Trump mandate, that has affected the relations between Huawei, TSMC, SMIC, Samsung and others, and their customers.
Our secure transactions industry is affected event more than others: semiconductors are at the core of everything we produce or manage. For instance, SIM cards vendors are confronted to semiconductor vendors allocating less chips than they need, thus jeopardizing their production, leading to extended lead times and growing costs. Also, the SIM card industry is evolving towards an increasing proportion of eSIMs, making forecasting even more difficult than before.
With the evolution to 5G and later 6G, handsets are increasingly the center of our security and of our connected life. Digital identity projects rely on handsets and on SIMs as Secure Elements to provide safe and reliable identities for each of us to perform our daily tasks and benefit from our rights.
More people are realizing the industry which is at the core of our identity is relying on foreign sources of semiconductors, leaving us dependent on their ability and will to deliver semiconductors. Also, when we expand the role of SIM chips in our lives, shouldn’t we reaffirm our sovereignty and make sure these chips are designed and made in the EU?
The US industry is asking the same questions and SIA (Semiconductor Industry Association) member companies Broadcom, IBM, Intel, NVIDIA and Qualcomm are already pressing President Joe Biden’s administration for support by providing grants or tax credits.
As many industry sectors are affected by these shortages, governments and societies at large are favorable to supporting European semiconductor manufacturers and more generally reindustrializing Europe. In such a situation, European semiconductor vendors could be expected to set up priorities in supporting their European customers and as their design and production would be based in Europe, there would be a better certainty about security of the chips themselves, thanks to better regulations and control.
A group of European Union (EU) countries including France, Germany, Spain and Italy unveiled a plan to collaborate to improve the region’s position in the global semiconductor market and reduce dependency on imports from Asia and the US, according to Mobile World Live. The representatives from 17 EU countries signed-up to a joint goal of increasing Europe’s influence in the semiconductor market. The group estimates Europe holds a 10% share of the EUR 440 billion industry, a statistic the partners believe is “well below its economic standing”.
However, developing the semiconductor industry in Europe is far from being an easy task: investments are huge and need to be renewed often, and expanding industrial estates is often facing the opposition of residents and a high regulatory cost. European politicians, industrialists and societies will have to reach a consensus on reindustrialization which may be the result of the public understanding on sovereignty issues. Our secure transactions industry has a role to play in making everyone sensitive to identity and sovereignty matters.