With ASML and NXP, the small Netherlands is a European heavyweight in semiconductors. It can’t afford not to join the new program IPCEI to strengthen the EU chip industry. The decisive factor is how the Dutch industry’s plans relate to the EU’s wishes.
In an online gathering with Dutch small and medium-sized companies, organized by Holland Semiconductors, Patrick Pype, director of European Affairs at NXP Semiconductors, warmly welcomed more stimulus for microelectronics. In Pype’s view, Europe needs to initiate and strengthen the actions for a drastic increase in both design and processing knowledge as well as manufacturing capabilities.
“Europe can’t be strong economically without achieving technological sovereignty in certain domains,” stated Pype. “We have to think an order of magnitude bigger, and an IPCEI – an Important Project of Common European Interest – is the ideal platform to bring together enough critical mass and to really make a difference in Europe compared to the rest of the world.”
Pype urged the Netherlands to match Germany’s and France’s investments in a new IPCEI 2 initiative. The Dutch should put enough critical mass behind this program “to form a level playing field with our competitors and colleagues in other European countries,” said Pype. “This way, the Netherlands can keep on staying in the top position with their microelectronics ecosystem.”
At the political EU level, Thierry Breton, the Commissioner for Internal Market, is pushing his one-sided European priorities. Last year, he unfolded an ambitious plan for an industrial alliance to design and produce advanced chips. Back then, a 2nm fab was his goal, recently he turned it down a notch to 20-10nm. “A collective approach can help us leverage our existing strengths and embrace new opportunities as advanced processor chips play an ever more important role for Europe’s industrial strategy and digital sovereignty,” Breton said in a statement.
Pype has a different view on what strategic manufacturing means for Europe. At least, he has other priorities for a stronger EU semiconductor industry. In the Holland Semiconductors meeting, he made it clear he welcomes new EU funds, but he sees no need for a leading-edge wafer fab on this continent. “If they want, it’s welcome,” voiced Pype diplomatically. “But let’s not focus on it, let’s focus on building strength and specialized technologies in analog design and technologies where Europe has the lead now.”
For NXP, not surprisingly, that means continuing investments to keep the Nijmegen fab world-class for automotive markets. It need not be 2nm devices, not even the 20-10nm chips for which the European Commission is preparing a chip alliance – as Bits&Chips reported, ST has already bowed out from this initiative, stating that it’s not playing in the single-digit nanometer league. Although Pype didn’t fully discard the idea, he also made NXP’s position clear: not on our priority list.
However bold Breton’s statement, Tim Tiek, CEO of Bruco and board member of Holland Semiconductors, made it clear that he welcomes the new spirit. “The ambition is really good. Apart from the 2nm fab discussion, the whole fact that there’s a willingness to invest is really good. Basically, everything we do is driven by semiconductors and we see an increased awareness in Europe that semiconductors are important. For sure, 2021 will be remembered as a year of significant change in our industry. How it will turn out and how we can influence it, that’s another thing. But it will be a very dynamic, turbulent year.”
Relaxed state aid
The EU offers the IPCEI instruments allowing member states to address market failures by pooling resources under relaxed state-aid rules. For IPCEI projects, state aid opportunities and competition frameworks are broadened, making it easier for member states to invest larger and larger amounts in major projects and for companies to collaborate on the exchange of knowledge. In doing so, the instrument provides an opportunity to give impetus to large-scale joint investment plans. France, Germany and Italy set up an IPCEI covering microelectronics in 2018, recently joined by Austria. The Netherlands hasn’t participated in this one, but there’s a big chance the Dutch will join the second edition in the making.
For the Netherlands, IPCEI is a bit of an uncommon instrument because it’s highly targeted towards specific industries. Dutch politics tend to stimulate more generic policies to strengthen the economy. “It’s quite a new road for the Netherlands,” Maud van Haeren, policy advisor at the Ministery for Economic Affairs, said in the Holland Semiconductors meeting. For Germany and France, it’s a much more common road to take, “but considering the important position that the Netherlands has in the semiconductor industry, we’re actively participating in all European discussions on this. We’re pushing very hard to stay at the table there.”
“IPCEI is not a European fund in the sense that there’s European money in it,” explained Van Haeren. The funding comes from the member states that choose to participate in the particular program. “It’s basically a set of rules that widens the state-aid possibilities for a specific strategic sector or industry. They have to contribute to the EU objectives, so they have to be really significant in impact, and they have to be very competitive, very innovative. They have to create value and they have to have spillover effects within the whole of the EU.” IPCEI projects have more weight behind them and can also facilitate up to the first industrial deployment. “Quite different from other European instrumentation.”
Companies, national governments and the European Commission have been working on a second IPCEI for some time now. The German Recovery and Resilience Facility (RRF, colloquially known as the corona recovery fund) proposal is reported to include three IPCEIs: for hydrogen, cloud infrastructure and services, and microelectronics.
It should come as no surprise that Dutch semiconductor companies welcome IPCEI participation. The problem is that a newly formed cabinet will have to decide on this. In the meantime, preparations are ongoing. The Netherlands Enterprise Agency (Rijksdienst voor Ondernemend Nederland, RVO) is currently gauging interest for a microelectronics IPCEI for small and medium-sized companies active in manufacturing, fabrication, assembly and design.
“However, this doesn’t yet mean that the Netherlands will join a second European IPCEI for microelectronics,” the RVO website states. Based on the information RVO collects, the government agency will assess which Dutch proposals fit within an overarching European project. The projects must offer participants the opportunity to develop further technical solutions and economies of scale. The emphasis is on investment projects, but research and development is eligible as well.
Although there can’t be a Dutch political commitment on the RRF until there’s a new cabinet, Van Haeren pointed out that other member states aren’t sitting idly by. “We’re pushing it and there’s a lot of support for it and it’s high on the priority list. But this final political commitment has to come from a new government. That’s making it a little bit challenging to navigate the European landscape properly.”
The big question is where all this money is best spent. Apart from design and processing knowledge, Pype’s priorities are with strengthening the existing value chains. He made it clear that it’s more important to invest in vital professional value chains like automotive, industrial communication and health, rather than to focus on the mass production of chips targeted at consumer applications like mobile phones. “We shouldn’t do everything,” he noted, “but we should have control over critical parts of the value chains, without missing any essential links. In the Netherlands, we have a lot of large companies, SMEs, research institutes and universities that play a role, from IC design to full systems and embedded software integration.”
In the discussion initiated by Holland Semiconductors – a network of seventy SMEs – it became clear that the group hasn’t yet formulated priorities. “It’s important that all of our members share their ideas on investing in our semiconductor industry, how to expand and secure our strengths. We can then converge those inputs into a strong plan on behalf of SMEs, and act as one voice to our politicians,” commented Tim Tiek. But he also warned that most of those discussions are with the larger companies. “It would be very strong to also involve the small and medium enterprises. We can’t expect that our politicians know everything about this very complex industry and landscape. We have to come with proposals and good ideas.”
In fact, the smaller companies are mainly dependent on the larger ones writing the roadmaps for the Dutch ecosystem. Last October, the Ministry of Economic Affairs already made it clear in a letter to parliament that IPCEI projects are an exception to the rules and put high financial demands on member states. The Netherlands will only deploy them selectively “as part of a clear strategy for a particular value chain or industry,” according to the letter, warning that care must be taken to ensure that IPCEI doesn’t grow into an instrument to protect existing industries with a strong lobby.”