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In an increasingly interconnected and technology-driven world, the importance of microelectronics as a foundational pillar of innovation cannot be overstated. Megatrends such as artificial intelligence or the metaverse as well as critical infrastructures such as power plants or telecommunications networks, are heavily dependent on microelectronics. At the same time, the global semiconductor chip shortage that started in 2020 showed clearly how fragile the industry’s globalized supply chains are. The increasingly tense geopolitical situation added an additional layer of uncertainty.
To reduce dependencies and secure digital sovereignty, countries around the world have set up comprehensive, multi-billion-dollar funding programs, including the EU and Germany. A comprehensive and holistic microelectronics strategy is required to guide these efforts and ensure sustainable impact. To implement this strategy, roughly € 115 billion of public and private investment is required over 10 years. Considering all synergy effects, the positive impact on the global macroeconomic situation is estimated to reach over € 3 trillion in 2035. This report presents such a potential strategy for Germany, consisting of four coherent strategic programs.
We identified 14 strategic options to strengthen Germany’s digital sovereignty which can be clustered in the four coherent programs, based on their thematic similarity and implementation synergies.
Chip design makes a major contribution to the overall value of microelectronics, as new designs drive innovation and enable tailored and more efficient applications. Enabling application industries to develop their own optimized designs empowers them to utilize these benefits, and fosters innovation and customization in the microelectronics domain. As chip design is currently heavily dominated by the US, albeit with European companies holding strong positions in the applications domain, high entry barriers hinder even large companies from successfully developing their own chips. However, with improved basic conditions, there is a clear opportunity even for smaller European companies to enter and establish a strong counterweight with their own chip designs.
The success of such efforts strongly depends on a prospering ecosystem, which needs to be established. This is the aim of the first strategic program. At its center, a chip design campus brings together relevant players of different sizes, from start-ups to global enterprises, and across the full microelectronics value chain, starting from research, via manufacturing, to the application. Informal exchange and knowledge-sharing between players will be critical for the ecosystem’s success. There should be regular activities bringing employees from different companies together, exchanging ideas, and discussing the latest research and possible applications.
Europe already has a diverse and active microelectronics ecosystem with players across large parts of the value chain. This is a stronghold that Europe should leverage and further support. Strategic investments in parts of the value chain can lead to benefits for the whole ecosystem e.g., increased demand for materials and tools providers when investing in a new microelectronics fabrication site.
Many of the other strategic options already directly and indirectly strengthen and expand the existing ecosystem in different aspects. This includes the active integration of European companies and research institutions into the design campus presented in the previous program. Additionally, there is a need to establish unified and strong representation of industry interests, as these are currently scattered across multiple organizations, limiting their influence and effectiveness.
To achieve the goal of a 20% market share, Europe and Germany need to master significant growth. And while strategically distributed public funding is definitely one prerequisite, providing a sustainable environment for the industry and professionals is another cornerstone required to achieve sufficient growth. Particularly with regard to the expected talent gap of roughly 350,000 people in Europe by 2030, Germany has to be perceived as a go-to location for international semiconductor professionals and their families. At the same time, professionalizing research structures and promoting closer collaboration with the industry facilitates the successful transfer of cutting-edge ideas into real-world applications and will sustainably strengthen the German and European economy. The design campus from program 1 can be used to bring industry and research closer together and drive necessary investments in commercializing innovative research results.
The fourth program covers further important fields for expansion, namely memory chips and photovoltaic cells. While nearly all electrical devices depend on memory chips, production capacities are located in only a few, politically exposed countries such as South Korea, China, Japan, and Taiwan. Germany does not necessarily require its own production, but capacities for memory chips should be built up with partners, e.g., in Europe or the US. This addresses the widespread need for storage solutions and reduces the current volatile dependency.
Additionally, investing in European production capacities for next-generation photovoltaic cells with higher efficiencies (over 30%) is a promising action to reduce the dependency on Chinese manufacturers and promote the commercialization of innovative photovoltaic technologies.
By pursuing the strategic options presented in this report, Germany and Europe can lay a solid foundation for a holistic and sustainable microelectronics strategy, enhancing their digital sovereignty while driving innovation and fostering a thriving microelectronics ecosystem. Implementation, however, will require substantial investment and commitment from both government and industry. The government has to ignite the spark with targeted measures and support the ecosystem in coordinating and steering the efforts. Both sides have to invest strategically in the future of the industry and in Germany’s digital sovereignty. However, the industry has to align and take ownership of the strategy implementation. It is time to join forces.
Marcus Gloger, Stanislav Huley, Dr. Richard Weller, Julian Höhler, Ruoyu Jiang, Jan Philipp Otter, Kerstin Rohde, and Adrian Roseanu also contributed to this report.