Fighting back

NESTLED in the foothills of the French Alps, Grenoble feels more like a skiing base camp than the centre of one of Europe’s hottest technology clusters. But the message at Semicon Europa, a recent industry shindig in the city, was clear. Europe may no longer be a force in mass chipmaking but it is poised for a comeback thanks to its strength in technologies well suited to a new world of interconnected objects and ultra-low power consumption.

This is more than wishful thinking, though, so far, it is hard to spot in the numbers. Gone are the 1990s when Europe produced 15% or more of the world’s chips. Firms headquartered in Europe now account for only 8-9% of global semiconductor revenues, which hit $315 billion in 2013 according to Gartner, a market-research firm (see chart). Microprocessors and memory chips are mass-produced mainly in Asia and America these days; the cost of building a “fab”, as chip-fabrication factories are called, is too high for all but the largest-scale endeavours.

Not so with the specialised and diverse applications that are being thrown up as chipmaking shifts from PCs and servers to mobile phones and tablets, and to the sensors and other devices that make up the “internet of things”. Here, Europe is well placed to benefit.

Production of the micro-electromechanical systems (MEMS) at the heart of sensors is likely to double in the next couple of years. STMicroelectronics (ST), part of the Grenoble cluster, and Robert Bosch of Germany are world leaders in that niche. Another strength is in components that use little energy and promote battery life, a field in which Infineon of Germany, ST and smaller firms such as Norway’s Nordic Semiconductor are active.

So is GreenPeak Technologies in the Netherlands. Its founder Cees Links, who helped to create and standardise wireless communication (Wi-Fi) in the 1990s, has come up with a parallel system for “small data” communication in the smart home. His firm shipped 1m chips in 2011, he says; it is now shipping 1m a week. Other European sparks have not escaped notice: Qualcomm, an American fabless chipmaker, is to buy CSR (Cambridge Silicon Radio), a British Bluetooth specialist, for $2.5 billion, it said on October 15th.

Europe’s semiconductor industry is often underestimated, reckons Heinz Kundert, president of SEMI Europe, an industry body. Research and development is still strong, thanks especially to three world-class institutes: Imec in Belgium, Fraunhofer in Germany and CEA-Leti in Grenoble.

Although Europe is turning out fewer chips than it did, it is playing a bigger role earlier in the process, points out Luc van den Hove, who runs Imec. ASML, a Dutch firm, makes 85% of the industry’s lithography tools. Soitec, a start-up, has created a new material for making chip transistors with CEA-Leti and ST, which it says uses 40% less energy than the standard version. In May Samsung of South Korea licensed the technology from ST. Higher up the chain, ARM Holdings of Britain provides designs to fabless chipmakers such as Qualcomm; over 80% of mobile phones now incorporate them.

Overall, Europe provides 20% of the world electronics industry’s equipment and materials, 12% of subsystems such as boards and modules and 16% of stand-alone and embedded systems, according to an experts’ report in February to the European Commission. The trick to increasing market share, it said, is to expand what Europe does best and collaborate across borders.

European firms have struggled with the pace of commercialisation, says Linley Gwennap of the Linley Group, a consulting firm: “It’s not just coming up with some big new technology but keeping up with all the little changes to make it suitable for users,” he says. Europe is beginning to bridge the gap between innovation and commercialisation, says André-Jacques Auberton-Hervé, boss of Soitec. Jim Tully of Gartner is positive but cautious. “I don’t think we’ll see a growth of European semiconductor firms that will match either the scale here before or the scale in other parts of the world,” he says. “The industry will continue to be significantly smaller—but it could be more profitable.” That alone would be no mean feat.