The strategies of Europe and India to emerge from the semiconductor crisis

The zero Covid policy of the Chinese government risks further slowing down the exit from the semiconductor crisis. The harsh containment measures imposed in Shanghai to curb the resumption of infections have caused an endless queue of ships waiting to dock outside the port. The busiest seaport in the world is heavily congested with the potential to trigger a new global shock on seaborne trade and supply chains. It is estimated that there are more than 500 container ships waiting to load and unload cargo. During the 2020 lockdown, the queue of vessels in and out of the port of Shanghai had never risen above 200. The Chinese government is also expanding the containment measures to the rest of China, extending them to about fifty cities, including Beijing.

The only prospect currently feasible, albeit quite expensive in terms of time and resources, is the diversification of semiconductor supply sources. In this sense, Europe and India are on the move. Intel has selected Germany as the location for a massive new chip manufacturing complex, intended to reduce dependence on imports and alleviate the supply crisis. Intel’s announcement comes after the European Commission last month outlined plans to encourage semiconductor manufacturing in Europe. The European Chips Act will mobilize over 43 billion euros to overcome this crisis.
Construction of the Intel chip manufacturing plant is expected to begin in the first half of 2023 and production will start in 2027. The company also plans to invest in France, Ireland, Italy, Poland and Spain, with the goal of create a European microchip ecosystem. In particular, a chip assembly and packaging plant should be built in our country for a potential investment of up to 4.5 billion euros, which should come into operation between 2025 and 2027.

India also intends to play a leading role in the global chip supply chain. The value of the Indian chip market is expected to rise from $ 15 billion in 2020 to $ 63 billion by 2026. The indian government has already stationed a first $ 10 billion incentive plan and will further expand the financial benefits for companies that will invest in the production of semiconductors and displays. The Taiwanese company Foxconn has started a partnership with Vedanta, the main Indian aluminium producer with interests also in the oil and telecommunications industries, for the construction of a chip production plant in India. Other industry players may soon follow suit. Since Beijing has imposed strict regulations to curb the power of the big tech companies, many of them have decided to move to India.