The European Commission released last Tuesday its vision to achieve the complete digital transformation of the European Union throughout this decade. It is proposed to allocate 20% of the European recovery fund, about 150,000 million euros, to promote the Digital Decade of Europe. By 2030, at least 80% of adults have digital skills, that all households have gigabit connectivity and cities are covered with 5G, and that the digital transformation reaches the private sector and all public services.
The Communication “Digital Compass 2030: the European path to the digital decade” is based on the strategy of building a Digital Future in Europe, announced by the President of the European Commission, Ursula von der Leyen, in her State of the Union address last year, in which she called for Europe to show greater digital leadership with a common vision for 2030. The document presented on March 9 by the European Commission responds to the request of the European Council last October to set clear digital ambitions for Europe in 2030 and must now be approved by the Parliament, the Council, the Economic and Social Committee and the Committee of the regions.
The “digital compass” establishes a vision so that by 2030 “there will be a successful digital transformation in Europe based on the empowerment of citizens and their technological leadership, to have a more resilient and prosperous society”. It also sets clear and specific objectives in four axes (digital training, infrastructure, business and Government), a framework for action that identifies the basic principles to achieve these objectives and a calendar that ensures that these objectives will be met and, finally, a series of actions that project this European path of digital transformation in the world.
Four basic axes for 2030
The first axis (“skills”) is to ensure that European citizens have digital skills and that professionals have full digital training. The point is that by 2030 at least 80% of all adults should have basic digital knowledge and that there would be 20 million specialists in information and communication technologies in the European Union, apart from the fact that there would be a greater number of women who accessed it. to these jobs.
The second axis (infrastructures) is to have a secure digital infrastructures, with benefits and sustainable. It is desired that by 2030 all households in the European Union can have gigabit connectivity and that all populated areas have 5G coverage; that the production of semiconductors with the latest technology and sustainable is 20% of world production; that 10,000 highly secure and energy-neutral nodes are deployed on the network and that Europe has its first quantum computer.
The third axis is that of the digital transformation of business. Also by the end of this decade, three-quarters of companies should use services based on the information cloud, big data and artificial intelligence and that more than 90% of small and medium-sized companies should have at least a basic level of digital intensity and that the number of leading European companies (unicorns, companies with more than 1 billion dollars of listing on the stock market) should double.
By 2030, all households in the European Union are expected to have gigabit connectivity, all populated areas have 5G coverage and all essential public services are available online, among other goals.
The fourth and last axis of action is that of the digital transformation of public services. By 2030 it is wanted that all essential public services are available online, that all citizens have access to their medical records through the Internet and that 80% of citizens have a digital identifier, an electronic DNI.
In order to speed up their achievement, the Commission will approve a series of projects covering several countries and combining investments from the budget of the European Union, Member States and industry on the basis of recovery and resilience funds and other Community funds. In their plans from recovery funds, Member States are committed to allocating at least 20% of the total budget to the digital priority. Possible multi-country projects include interconnected data processing infrastructure, the design and deployment of the next generation of secure low-power processors, or the connection of public administrations.
The President of the European Commission, Ursula von der Leyen, stressed that with the approval of the recovery and resilience funds, “we have mobilized unprecedented resources to invest in the digital transition” and “we must ensure that all citizens and businesses can to access the best that the digital world has to offer through Europe’s Digital Decade ”.
The Executive Vice President of the European Commission, Margrethe Vestager, assures that “digitization is not an end in itself; it must have a purpose.” For us, she specified when giving an account of the Communiqué, “that this digital decade is successful means becoming in the prosperous, safe and open partner that we want to be for the world ”and“ to ensure that we all benefit from the well-being that an inclusive digital society will bring ”.
Thierry Breton, Commissioner for the Internal Market, added when evaluating the Communication presented that “as a continent, Europe has to ensure that its citizens have access to a selection of the most advanced technologies that make our lives better, safer and even more sustainable. thanks to the fact that we have the capacities to use them ”. With the European Digital Decade, he argued, “together we will achieve a sovereign, digital and resilient Europe in the post-pandemic world.”
The Commission plans to shortly initiate a broad process of discussion and consultation of the process, with the participation of citizens, of the vision and of the principles contained in the “digital compass”. It is expected to start the consultation of the digital principles of the document, its discussion and commitment with the Member States, with the European Parliament and with the regional and business social and economic representatives throughout this year and launch a multisectoral forum for discussion of the document.
The objective, as formally stated in the document of “digital objectives for 2030”, is to have a proposal for an operational program of the digital policy by the end of summer and “progress towards the inter-institutional declaration on the Digital Principles by the end of 2021” .
Skepticism on some targets
Some of the objectives set out for the Digital Decade of Europe are fully feasible, such as that at least 80% of all adults have basic digital skills and that there will be 20 million specialists in information and communication technologies in 2030, as well like that all European homes can have a broadband connection, of at least one gigabit per second, and that all populated areas are covered with 5G by the end of this decade. Many of these objectives, however, are quite difficult to define and quantify, such as what it means to have “basic digital capabilities” and what are their limits, or what is understood by “essential public services” (“key services”, in the document ) and which ones are not.
Some other objective, especially that “at least 20% of the world production in value of last generation semiconductors is manufactured in Europe and in a sustainable way”, has caused controversy. Now, it is clarified in the document, the European production of all types of semiconductors is 10%, with which it is wanted to at least double the European world share in ten years. Also, wanting to double the number of “unicorns” in the European Union seems quite voluntaristic.
For Europe to be truly sovereign in digital matters, it must have its own data centers that are also respectful of the environment, but also contain the programs to analyze and process data, as large providers of cloud services do. such as AWS from Amazon, Azure from Microsoft or Cloud from Google, not counting Chinese, Japanese competitors or IBM and Apple, which are also allocating extensive resources to this key segment of activity. It remains to be seen how the Gaia-X initiative evolves in the coming years. Having own quantum computing by 2030 could be a equally strategic issue but, unlike semiconductors or cloud services, there is not yet a market or clearly established rivals to beat.
Globalized chip market
The issue of sovereign semiconductor manufacturing is current since the United States Government prohibited a couple of years ago that Huawei supplied chips not only manufactured by American companies but also with production machinery that had some equipment and software developed by companies based in the United States. This meant that until last September Huawei hoarded all the chips that it could, and especially the orders made until then to TSMC, without there being any stocks in the warehouses of any manufacturer in the world.
With the pandemic, the fall in semiconductor stocks went unnoticed, because demand was also low (apart from that of Huawei and other Chinese companies affected by the veto). With the rebound in activity starting in the summer, automakers have found they had no chip supplies for their cars and have had to stop manufacturing of various models in many factories.
The shortage of semiconductors for automobiles, as for other products such as smartphones or computers, is so serious that it is not expected to normalize at least until the end of the year, as several manufacturers have highlighted in recent weeks. The manufacture of a chip, from the insolation of a wafer to its encapsulation and final verification, is a long and complex process involving different companies, sometimes from different countries. And building a chip factory from scratch takes at least three years.
Car chips, moreover, have the problem that they cost little money, typically one euro and a low profit margin compared, for example, with processors for smartphones, which cost several tens of euros. This means that large manufacturers of advanced custom semiconductors, such as the Taiwanese TSMC or the Korean Samsung, have little interest in making them for car chips and prioritize others with higher margins.
It so happens that Europe has two major car chip designers and manufacturers, Infineon and NXP. But, although the design is its own, it only manufactures part of its production, because the other part is subcontracted to other companies, especially TSMC. This Taiwanese company cannot cope, because it has also received many orders from Qualcomm, Apple, Nvidia, AMD and its compatriot MediaTek, with the increase in demand in recent months. Even American automakers, such as General Motors or Ford, have run out of chips, victims of their government’s policy towards China.
Europe has two European chipmakers, Infineon and STMicroelectronics, which together account for 10% of the world semiconductor market, although not of its production. The first was founded in 1999, the result of a spin-off of the Siemens semiconductor division, which led to the creation of Infineon, and STMicroelectronics comes from the merger at the end of the eighties of the Italian SGS Microelettronica and the French Thomson, giving place to SGS-Thomson Microelectronics and finally STMicroelectronics.
It so happens that the most advanced semiconductor production lines are designed and manufactured in the Netherlands, the only ones that manufacture chips with extreme ultraviolet rays, by ASML, and that is widely used by TSMC, which is one of its large customers. But ASML’s manufacturing lines use, in part, software design tools from US companies, and this leaves the Dutch company having trouble exporting its product to Chinese companies, such as SMIC, which is also vetoed by the US government.
Demand justifying its own chip factory
Reinhard Ploss, CEO of Germany’s Infineon, the main European chip manufacturer, was very skeptical in an article in the Financial Times last Saturday that only with money Europe can be sovereign in the manufacture of chips and compete with states. and Asia. At present, in Ploss’s view, Europe does not have a large enough technology sector to generate a demand for chips to justify the establishment of a semiconductor factory on a global scale.
Infineon has chip factories in Germany and Austria, but outsources much of its needs to TSMC, UMC and Globalfoundries for chips under 90 nanometers. “If we had unlimited resources, obviously we would invest in factories of chips of less than 90 nanometers, and it would be an option to make the chips with other companies, but it does not make sense to do it individually,” Ploss argues to the financial newspaper. In addition, he adds, having a chip factory is only profitable if you are constantly operating at full capacity.
At the moment, Europe produces around 7% of the chips, United States 12% and Asia 80%. Europe’s demand for chips is 10%, according to the European Commission, and that of the United States around 21%, although the calculation is very complex, because much demand for chips is re-exported to products that are assembled abroad. For example, Qualcomm designs its processors for smartphones, which are manufactured by TSMC in Taiwan, and then shipped to factories that assemble the smartphones, a small portion of which are shipped as finished products to the United States, without Qualcomm seeing any of their products. chips. China buys about 70% of the world semiconductor market, but its domestic market does not reach 25%, because imported chips are re-exported in finished products.
It is intended to allocate 20% of the community recovery funds to promote the European Digital Decade in 2030 and “together achieve a sovereign, digital and resilient Europe in the post-pandemic world”
To have a profitable high-tech chip factory, which requires an investment of several billion dollars, you need a large volume of production. TSMC, for example, can establish a chip factory on US soil if it has guaranteed orders of several billion dollars a year from NVidia, Apple or Qualcomm and high subsidies and tax breaks from the states where the plant is located, to justify production and labor costs higher than in Taiwan. But it would not be possible only with subsidies and without a high demand for guaranteed production.
The volume of investment in chip factories is also related to the demand they have and that expected in the future, because it is an investment for several years to come. European semiconductor manufacturers invest about 4% of the total sector, compared to 63% in the Asia Pacific area, according to Ploss. TSMC will invest € 20 billion in a new plant in Taiwan while Infineon plans to invest € 1.6 billion in 2021, in part to build a new plant in Austria.
To balance these investments, a joint effort should be made between the United States and Europe to create high demand that would allow chips to be made outside of Taiwan or China, says Infineon’s CEO. But according to some reports, as the Financial Times says, Brussels is more inclined to persuade TSMC or Samsung to manufacture chips in Europe rather than convince companies like Infineon to change their outsourcing model and manufacture more on European soil.
Infineon specializes in the manufacture of high-power, high-profit automotive chips, which account for 40% of its business, and is also a world leader in high-power sensors, with almost a fifth of the world market. These chips work at much higher voltages and currents than computer chips, for example, and require very large structures, tens of nanometers, so that the chips do not melt.
A two-nanometer chip factory would be of little use to Infineon’s products, even though it would be the most advanced in the world. And an alliance with other European chip companies, like STMicroelectronics, doesn’t see much sense in Ploss either, because “it could exceed critical market shares.” And a merger with Glonski could lead to a cultural conflict, with too many politicians involved.
The objective of creating a “European champion” of chips is extremely complex, according to the opinion of the CEO of Infineon, because it is not a question only of investment but of creating a demand for chips with sufficient turnover to justify the investment and also be capable of having the manufacturing plant permanently occupied. Apart from having the right staff to make it work.