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The EU’s Efforts When Facing The Risk Of Automotive Semiconductor Chip Crisis


The European Union (EU) is intensifying its efforts to enhance its semiconductor manufacturing capacity, aiming to reduce the supply dependence and safeguard its supply sources against China’s plan to restrict the export of semiconductor materials.

Rising Demand for Automotive Semiconductor Chips

Semiconductors are increasingly integrated into various vehicle models, with each model incorporating multiple types of chip-containing modules, ranging from Engine Control Units (ECUs) to driver assistance systems. On average, a car comprises hundreds of semiconductor components with around 1,400 different chips. Along with the advancement of electric and hybrid vehicles featuring advanced technological functionalities, this number could escalate to 3,000 chips per vehicle.

Automotive semiconductor chip

In the context of surging demand for electric vehicles, the German Automotive Association (VDA) forecasts that the demand for automotive semiconductors will increase from approximately 8% in 2021 to 14% by 2030, with the market size expected to triple, reaching $150 billion from $50 billion in 2021.

The association also expresses concerns about the declining self-sufficiency ability in automotive semiconductor supply during this period. If no action is taken in terms of the domestic development and foundries construction investment, the automotive semiconductor chip industry will become increasingly dependent on foreign sources. To enhance semiconductor supply capabilities, the EU Chip Act proposes an investment of up to €43 billion to double semiconductor market share from 10% to 20% by 2030.

The EU Facing the Automotive Semiconductor Chip Crisis

Automotive semiconductor chip

The high demand amidst a semiconductor supply chain relying on international sources poses a risk. There are predictions of a crisis as China’s imposition of export restrictions on gallium and germanium raises concerns among EU manufacturers and governments. Currently, China accounts for approximately 80% of gallium supply, a key component of semiconductors, especially in automotive and electric vehicle component manufacturing.

Carlos Tavares, the CEO of Stellantis, points out that restricting semiconductor exports in the automotive industry does not mean Western markets are withdrawing from China. “We’re not in conflict with any Chinese suppliers. In this case, the EU must cooperate with the Chinese government to find a solution.”

In an interview, Renault Chairman Jean-Dominique Senard also expressed concerns about the EU’s overreliance on Chinese supplies, citing pressures to develop self-sufficient supply chains.

With similar concerns, the EU has proposed The Green Deal Industrial Plan to support EU industries against supply chain disruptions. While the future of self-sufficiency remains further, the EU aims to increase influence in the semiconductor industry, gradually developing in trade agreements and attracting investments to the EU.

Germany “Pave the Way” for EU’s Strengthening in Semiconductor Supply Chain

Germany emerges as a semiconductor hub with billions of dollars in investments from Intel and Infineon, semiconductor “giants” in the EU seeking to expand production capacity. In the coming decade, the country is expected to develop not only in manufacturing but also in the entire semiconductor supply chain, including research, design, fabrication, and packaging.

Automotive semiconductor chip

Apart from Germany, Poland also attracts €4.3 billion in investments from American companies in semiconductor testing, assembly, and production facilities sectors.

While the future development of the EU in automotive semiconductor chips is promissing, it will take considerable time. In the near future, the EU will still depend on supplies from other countries and work towards gradually achieving self-sufficiency in semiconductor supply.

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