Europe in the Intelligent Age 2025

–Cultivating ecosystems and global leaders. Given the global interdependencies of the semiconductor value chain, ecosystems tend to be transcontinental, but high operating costs render Europe less attractive for joint ventures and co-investments. A new fast-tracking “important project of common European interest” programme could be introduced to support European consolidation and leadership in semiconductor manufacturing equipment for lithography, depositions and other priority capabilities. Europe could also consider incentives for foreign hyper-scalers to expand their presence in Europe or pursue joint ventures with local firms in leading edge manufacturing, advanced packaging facilities and advanced substrates. Value chain priorities No region is self-sufficient all through the semiconductor value chain, but Europe can effectively compete by creating a robust foundation for technological leadership in certain promising areas, including (Figure 10): –Early-stage R&D and materials. Europe can double down on its global leadership in early- stage R&D in new materials, such as leading- edge logic, power, optical as well as process technologies and leading-edge equipment. There is also an opportunity to strengthen business models to better monetize market strengths. –Strongholds for automotive, industrial and power electronics. With its strong industrial domain expertise, the EU is well-positioned to combine specialized chips, operating systems and software stacks for specific industry applications, such as advanced driver-assistance systems (ADAS), connectivity modules and extensive sensor networks. –Chip design. Europe’s strengths in areas such as CPU IP could be leveraged to build and scale true centres of excellence for leading- edge semiconductor design, e.g. for automotive and industrial AI chips. To remain competitive, Europe will need to build a highly-skilled talent pool, which it can leverage to leapfrog in next- generation chip innovation – especially for quantum and neuromorphic computing, crucial for real-time processing in robotics, IoT and AI. With some of the world’s top applied research institutes, Europe is well-positioned to drive these breakthroughs. –Front-end manufacturing. Europe could consider actively driving critical scale in front- end manufacturing, in mature (where there is an ongoing conversion from legacy 200 millimeter (mm) to more efficient 300 mm fabs), advanced (where European players can pool and team up with global leaders in foundry) and leading edge (where Europe should stay the course and ensure presence above a critical threshold). –Back-end manufacturing. Europe could consider building up an innovative back-end manufacturing capability with an ambition of around 5-10% market share. This may reduce reliance on foreign supply chains to safeguard against global disruptions. Joint ventures could help build these capabilities quickly, particularly if regions can be identified with a competitive cost base and access to renewable energy. Europe in the Intelligent Age: From Ideas to Action 28