Paul van Gerven
31 March

For a while now, we’ve been reading that Europe used to be a semiconductor powerhouse, sporting a manufacturing market share of 40+ percent in the 1990s. Where does that figure come from, and is it correct?

“Europe’s current share of the global semiconductor market sits at around 10 percent, down from a heady 44 percent in 1990,” Intel’s Pat Gelsinger wrote in the Financial Times almost a year ago. If you’re trying to convince public authorities to subsidize the fabs you’d like to build, it’s doesn’t hurt to point out that Europe’s semiconductor industry has suffered a terrible decline. As it turns out, however, that never happened.

Gelsinger’s figures trace back to a 2020 report from the Boston Consulting Group and the Semiconductor Industry Association, which shows a graph depicting global semiconductor manufacturing capacity by region as a function of time. Europe’s market share starts at 44 percent in 1990 and decreases over time to 9 percent in 2020, in line with Gelsinger’s statement. Many media outlets, too, have been citing these figures.

SIA BCG global capacity
Taken from the 2020 report “Government incentives and US competitiveness in semiconductor manufacturing” by SIA and BCG.

Top 10

However, as Hans-Peter Kleinhans, director Technology and Geopolitics at the Stiftung Neue Verantwortung think tank, has pointed out, the data used for that graph doesn’t include capacity below 5,000 wafers per month or 8 inches. Depending on the manufacturing mix in different regions, this could very well have a major distorting effect, especially because 8-inch fabs only started coming online in the 90s.

Indeed, according to data published by the European Semiconductor Industry Association (ESIA) Europe’s fab capacity share was 10.1 percent in 1995. In terms of sales, it was 9.5 percent in 1989, according to a report by Dataquest. In 1990, the sales of Philips Semiconductors – the only European chip company in the worldwide sales top 10 at the time – amounted to 3.5 percent of a 54.3 billion dollar market.

ESIA fab capacity
Source: ESIA, based on data from Semi

Scratch

So much for the narrative of rejuvenating Europe’s chip manufacturing prowess. In reality, Europe’s market share has been relatively steady over the years, at least in terms of wafer capacity. It’s been hovering around 10 percent since 1995, although it seems a decline has set in lately. It’s hard to translate wafer area to sales figures given the difference in added value between products made in Europe and Asia or the US, but it stands to reason that Europe’s sales share will probably be significantly lower than 10 percent.

To be fair, the European Commission didn’t take Gelsinger’s bait, not publicly at least. In speeches and interviews, EC officials didn’t play to a ‘restore our former glory’ angle when pushing the EU Chips Act. Instead, they referred to a market share of 10ish percent as unbecoming for one of the world’s biggest economic blocs, especially considering the strategic importance of semiconductors.

At least that 10 percent is in the right ballpark. And yet, from another perspective, it’s irrelevant. While the EC wants to double Europe’s semiconductor manufacturing capacity by 2030, it’s specifically targeting leading-edge chips with the EU Chips Act. Since Europe hasn’t been producing those for quite a while, it’s not a matter of doubling capacity but of starting from scratch.

Main picture credit: EC – Audiovisual service