trend:
The US government promises to support the production of microchips with 76 billion US dollars. China has promised another US$143 billion for this industry by the end of 2022. How does the EU stand with its Chips Act over 43 billion euros in public and private investments in this environment?
Andreas Gerstenmayer:
Apparently, people have recognized that microelectronics is a crucial technology of the future. A few years ago, the EU set up two programs that make it possible to promote investments in this area. Otherwise, EU competition law actually only allows investments in research and development. As AT&S, we are also involved in the two previous Important Programs of Common European Interest (IPCEI). This shows the major disadvantage of the EU: it is slow.
Is it because of the EU institutions?
At first only four countries were involved in the first IPCEI, but through great effort we were able to join Austria. But even with only five states involved, it took years to get the commitments so we might start implementing the plans. 20 countries are involved in the second IPCEI, and the entire EU has a say in the Chips Act. This is also understandable, because the programs are financed from the national budgets.
The budgets are too small to be able to handle the large investments required in this industry.
In the USA and China, the subsidies and guarantees come from one pot. So would something like an EU fund make sense?
I wouldn’t be so sure regarding that, because 27 countries would also have to coordinate the modalities according to which this money is advertised and allocated. However, the way the programs are currently set up, it is becoming apparent that, with the exception of Germany, France and Italy, the states and their budgets are actually too small to be able to make the large investments required in this sector. The projects that we submitted in Brussels would need around 300 million euros in funding from Austria. In the budget, however, we currently see that only 175 million euros are earmarked for this.
How important is the time factor when it comes to a European chip industry?
If Europe carries on as it is with the Chips Act, there is a risk that some big players will make their investments in the US because things are simply faster there. We have a very dynamic industry that is developing quickly. You can’t wait for institutions, but go where the chances of success are greatest and projects can be implemented fastest. Europe must make up for its locational disadvantages with subsidies. If you look at how many companies are currently investing in individual US locations, you will also notice that EUR 43 billion does not get you very far.
In what way?
The energy cost is very high, the labor cost is very high, and the supply chain is also missing because there are very few sources of material and equipment. If you want to start a new industry, you have to support it appropriately. Some regions do this with funding rates of up to 40 percent. If Europe is not competitive there, investments flow to other regions.
It’s regarding competitiveness. We are the only company in Europe that has so far used the so-called backend for microchips.
So you want more funding?
It’s not regarding getting pockets full of money, it’s regarding being competitive. As AT&S, we are the only company in Europe that has so far used the so-called backend for microchips. Everything that is needed around the silicon chip itself, such as the connection technology, the housing and the like, now comes from Asia. Complete independence will therefore not realistically be achievable.
So we will continue to be dependent on the international division of labor?
It can be assumed. Backend investments are provided for in the Chips Act, but so far they have not existed. You can see how weak Europe is in this area and how vague the Chips Act is still worded. It would be a great opportunity to bring these areas of technology to Europe and build a new high-tech sector.
Intel has announced a production facility in Germany, and TSCM, the chip giant from Taiwan, is now to invest in Germany. Are these first successes?
Over time, this will help build an ecosystem for this previously absent high technology. Universities and research institutes will also benefit from this.
How do you currently expect energy costs to develop at AT&S?
We expect them to continue to rise. In recent months, the share of energy in our total costs has doubled. We react with energy savings, increase efficiency and rely on good supply contracts.
Are the AT&S plants currently affected by the Covid wave in China?
The peak has already been passed, and we were still able to supply all customers. Now we are happy to be able to visit the locations and our customers in China once more.
TO PERSON
Andreas Gerstenmayer, 57, has been CEO of AT&S since 2010. The printed circuit board manufacturer, headquartered in Leoben, is part of two European funding programs (IPCEI).
The interview is the trend. Taken from the PREMIUM issue of January 13, 2023.
