The recent global semiconductor shortage that has plagued a number of major industries has caught the attention of the European Union, which has pledged to produce its own supply of chips by the end of the decade.
According to a draft document obtained by Bloomberg, EU officials are planning to produce at least 20% of the global share of semiconductors by 2030, in an effort to reduce significant risks stemming from dependencies on US and Asian tech companies. The document is still subject to change, but is due to be presented to the European Commission next week. “A reduction in critical dependencies will enable the EU to become digitally sovereign and better able to assert European interests,” the document read.
The EU has already been in discussions over potentially creating a new factory that would increase Europe’s semiconductor manufacturing levels. As part of its goals, the EU is looking to boost its semiconductor production to a pace that is faster than some of the current industry leaders, including Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co.
The global semiconductor shortage became evident in the beginning of 2020, when the Covid-19 pandemic created new and pent-up demand for vehicles and electronics, both of which require sophisticated chip technology. Fast-forward a year later, numerous auto-manufacturing and electronics giants are still struggling to secure a viable supply chain of semiconductors, as chip producers are increasingly unable to keep up with global demand.
In fact, some vehicle makers have even been forced to cut back manufacturing on some of their higher-end and best-selling models, especially in the US. Ford and GM have both recently announced a round of production cuts at several of their factories, and plan to divert the limited supply of chips that they do have to their highest-margin vehicles. According to data compiled by AlixPartners, it is estimated that the global auto industry may lose upwards of $61 billion in sales this year due to the ongoing chip shortage.
Information for this briefing was found via Bloomberg. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.