EMEA Investments Driving Technology Specialization

Government programs across Europe and the UK are seeing a surge of investments in leading edge technology, materials, and packaging. Industry and academia are coalescing around specialty areas, drawing on established relationships to foster innovation and fill gaps in regional supply chains while also maintaining international bonds. Government initiatives also are picking up in Israel, Saudi Arabia, and some African countries.

(See below for details of government programs in the UK and Europe, Middle East, and Africa, known as EMEA, along with two tables showing select 2024 announcements for government funding and recipients.) This is the third article in a series on government funding around the globe. Part one is here. Part two is here.)

The focus of early government funding initiatives in the EU was on moving the technology readiness levels (TRL) to higher levels, but there has been a shift in recent years as geoanspolitical tension and supply chain issues put the spotlight on national security and regional self-sufficiency.

“It’s clear that with the CHIPS Act, the focus has been more on resilience and making sure there is a good view on the value chain and workforce development,” said Jo De Boeck, chief strategy officer at imec, which won €2.5B of EU CHIPS Act funding to host the NanoIC pilot line. “The money has been sizable in European programs, and quite a big chunk of it was on the open calls for electronic components and systems through the ESCEL program (2014 to 2020), and the notion of pilot lines or higher maturity was part of that already. For instance, with that support we had a lot of collaboration with ASML on scaling. We had projects on photonics and wide bandgap. These were the precursors of the programs today, which are like on steroids, to move specifically to the underlying premise of the CHIPS Act. The pilot line focus as Pillar I for the CHIPS Act has also become important. The tendency of having the industry take a lead in ESCEL projects and move into what it needs in terms of a pilot line and system validation has been a change, for sure.”

The aim of government funding is to trigger private investments. The EU also helps by making it easier to access aid, particularly for Important Projects of Common European Interest (IPCEIs).

“In Europe, the focus on competition has been very strict for semiconductors, but also for other sectors like batteries and health-related sectors,” said De Boeck. “The notion of these IPCEIs is because a market failure was established, similar to the idea of the CHIPS Act, but back then it was less stressed because Covid and the supply chain crisis hadn’t happened yet. These IPCEIs triggered some private investments because member states had access to state aid to support some of these investments in manufacturing. Pillar II of the CHIPS Act aimed to do the same, but with an even faster procedure, so that now about €100 billion has been invested in Europe since February 2022 when the CHIPS Act was formally voted, and that is mainly because of the state aid relaxation to drive toward European interest. The legislation was relaxed under IPCEIs and Pillar II of the CHIPS Act, and most of the money for the investments – if not all – came from the member states, including Germany, France, and others.”

As an international research organization, imec partners with various governments, such as Andalusia in Spain, and Indiana in the U.S. along with Purdue University. The process of selecting where to partner isn’t easy, and typically takes several years from the initial contact to an official announcement.

“First of all, when member states start investing heavily into manufacturing, the first question they ask is, ‘Is workforce there for these investments? Will there be users? Will there be actual customers within the market? How can we trigger the market to grow?’ We have been solicited to bid by some member states, but it’s up to them to judge how complementary they are and what they have in their own regions or states,” said De Boeck. “These questions focus on training and workforce development, which is notably hard to scale. We need a lot of people to train a lot of people. So, we’re working with universities and others to meet the specific needs of the industry and enhance PhD programs, as well as vocational studies for technical staff, which by all statistics are way less mobile than the knowledge workers.”

CMOS 2.0 and pilot lines
Imec’s goal is to share, add, and augment what a region already has in place so that excursions into design lead to projects where its pilot line can help in terms of CMOS 2.0, said De Boeck.

“We have a model in imec and the Netherlands and other places, including our discussions in Spain, where we say we are not an investor. We need cash to be successful. We need to train. You need to build IP, which are typically cost centers rather than investment activities. The money needs to come from the local governments at the start so that we can complement it with industry partnerships. If the government says, ‘That’s what we want,’ then comes the question of, ‘Why isn’t regular collaboration enough to be successful?’”

The typical collaboration sees most discussion happening at a distance with imec representatives traveling as needed. If a partnership requires imec to set up a local presence, it can do that or team up with another party, such as TNO in the Netherlands.

“In Spain, for instance, we are looking at something sizable because there’s only so much the Flemish region can support,” said De Boeck. “Politicians in our region tend to be quite brave when it comes to innovation. We need to move fast on many directions, and if we push the bleeding edge, then there are different areas that need to move, as well, so that’s why we would explore an opportunity in Spain or elsewhere. Typically, R&D can lead and then if the country or member states are ready to put their money where their mouth is, there can be investments in manufacturing too.”

Even if politicians say they want to partner with imec, the local industry ecosystem needs to be inviting, along with relationships with the knowledge institutes and universities, which is something that takes time to build.

“We try to check quite a few boxes, including workforce development and the need to move into a direction that is underfunded, and that has a sensible business plan outlook because, typically, our model requires about 75% of the funding of OpEx [operational expenses] to be coming from our partner. So that’s hefty,” De Boeck said.

With the CHIPS Act pilot lines, imec has at least five partners in multiple countries, which were chosen through a lengthy process. “Generally, a strategic research agenda – where the broader community chimes in – pre-dates a call for proposals,” said De Boeck. “Out of that is a call program, and then the network program goes for one or two years. Then there are brokerage events, typically happening at one of the major cities in Europe, often Brussels because the EU Commission is close and an official can come to explain the work program, or someone from CHIPS JU might do that.”

OEMs or IDMs will be able to use the imec pilot lines in the future, but not typically in person. The pilot line is run by operators like a fab with 24/7 full continuous operations, and imec is going to move into a more automated facility, for reasons of throughput, to make the most out of the very large investments.

“We are inviting people to work on the projects that they will have on the pilot line, but that is for IDMs or manufacturers or material suppliers who typically have their value very close to the fab,” said De Boeck. “The physical presence of the design community close to the fab is not required, because we have the PDKs [process design kits] to help them understand what we could build for them, and then have them be creative with the tools from the library, run simulations, etc. This access will be supported by the design platform that the Commission will establish in the pilot line through Pillar I. Every technology node — the leading edge to the less leading edge to mature nodes — all come with this PDK.”

Users need to pay for the EDA tools and access to the PDK, including manuals and licenses. Academia can access a minimum version at lower costs.

“In some cases, because imec is a value chain aggregator, we collect different projects from smaller players or educational settings and we put them together on a single mask set,” he said. “Hence, sharing the costs with many players, such that we can provide them with a number of chips – not thousands and thousands, but a few, maybe ten of them – that they can test and then validate.”

Imec can support everything from foundries that want to build new memory on top to design exploration for a chiplet-based navigation system or phase projects for R&D. In addition, IMEC IC link offers programs for design-related activities on power devices, imagers, and leading edge.

UK strategy and role in the supply chain
The UK government currently is transitioning from a Conservative to Labor government, but as with the U.S., the hope is that semiconductor policy remains bipartisan, enabling funding to continue. While the UK does have some fabs, it is better known for innovation in design – particularly by Arm – along with packaging, heterogeneous systems, and hybridization. With its funding and initiatives, the UK government aims to play to its strengths and retain leverage in the global supply chain, rather than try to establish end-to-end independence.

“The Semiconductor Strategy took a 10-year view and it’s typical that it would have cross-party alignment,” said Andrew Tyrer, deputy director of semiconductors at Innovate UK, a government agency that liaises with industry and which recently announced £11.5 million for 16 semiconductor scale-ups. “There are cross-party scientific committees who helped to write and curate the strategy, and they tend to be agnostic in terms of politics as they’re looking for science outcomes that reach farther into the future.”

Despite leaving the European Union in 2020, the UK recently joined the EU Chips Joint Undertaking after investing more than €40 million to be eligible to access Horizon Europe and EU Chips Act funds. Some of that funding is reserved for fabs built in Europe, but the UK can now bid as a research partner.

“Resilience often comes from having lots of eggs in different baskets,” said Tyrer. “Events such as the pandemic and the Suez ship blockage got people thinking about the benefits of onshoring certain parts of the supply chain, while realizing they could not do it all. If you look at some of the main manufacturers, they are starting to diversify where their plants are. For example, there are new plants being built in India, Singapore, and Malaysia, so even in one geographic region you might have fabs in two or more countries. Then you can spread that resilience. The fab is the end unit, but no one country holds all the chips, excuse the pun, in terms of power. What we’re trying to do is maintain our position in design and IP but, also, we have a world-leading competence in compound semiconductors. There’s a big cluster in South Wales, and we’ve got the Compound Semiconductor Application Catapult, which Innovate UK funds to enhance that strength.”

UKRI also recently funded two Innovation Knowledge Centers. A University of Bristol-led IKC focuses on wide or ultra-wide bandgap (WBG or UWBG) compound semiconductors, and a University of Southampton-led IKC focuses on silicon photonics technologies.

“The IKCs were run via a public call,” said Tyrer. “The challenge is defining the scope, so we said we wanted an IKC in novel and emerging semiconductor technologies with relevance to information and communications technology devices. You might end up with several very strong proposals addressing different technologies, and they are then independently assessed by a team from both academia and industry. We put an upper limit on how much each proposed activity can cost over a certain time period, and then people bid into that. Obviously, not everyone’s successful. Normally when you run a call, you’ll get maybe a third of the proposals that aren’t high enough quality to be funded, and we can try and re-address those with the organizations directly via feedback. Two-thirds might be high enough quality to be fundable, but we can only fund a third of those because of our budgets. It’s very competitive, but it’s making sure you have a balance across what you’re doing so they’re not all upskilling in the same area. We have what’s called a portfolio view. We might say, ‘Okay, we’ve got too many in design, so we won’t fund all those in design, but we’ll have some in packaging or heterogeneous systems.’ We balance where the skills efforts going, knowing that would help everyone in the economy.”

For example, Ansys is involved in a UKRI-funded project focused on circular economy strategies, lifecycle assessment, critical raw materials, renewable energy technologies, and information and communication systems.

Workforce development
In March 2024, the Netherlands announced €2.5 billion to strengthen the business climate for the chip industry in Brainport Eindhoven, where Eindhoven University of Technology (TU/e) and ASML are located. Meanwhile, ASML is investing €80 million in TU/e over 10 years for a new clean room, more joint research, and more PhD candidates.

Both initiatives aim to support workforce development, but funding is only one step of the journey. To succeed, the university and city need to attract more students, hire more professors, and build more housing and infrastructure to accommodate them.

“In the field of chips and integrated circuits, whether it’s photonic or electronic, there are now about 20 to 30 professors involved at TU/e, mostly in electrical engineering,” said Martijn Heck, professor in the Photonic Integration Group of the EE department at TU/e.  “Out of those, maybe 7 or 8 are contributing to the bigger things. A lot of them are junior and have to focus on teaching, and that is not manageable anymore. We have Beethoven, the CHIPS Act, and pilot lines. The pressure on chips is enormous. I was talking with the Ministry of Foreign Affairs and they said they want to have a winter school, or another summer school, and they have money. I said, ‘Okay. I can contribute to the program, but we have no professors left to actually organize anything. That’s one. And do we have students left to attend those schools, because we already have two others?’ And they said, ‘How many students do you have in this field?’ I said, ‘Actually, chip-related is 30 per year, in the master.’ And they were shocked. There is a complete disconnect between people trying to make policy and what they want on one hand, and what is actually happening on the floor. They bring in money to make policy, but that still costs the university because you have to do two times the actual effort with service calls, additional courses, handling more students. You need more people. And I’m not sure the funding can actually facilitate that, because an investment of five years is not the same as offering someone a permanent contract. That’s always a discrepancy.”

Others agree. Paul Koenraad is a member of the Photonics and Semiconductor NanoPhysics Group in the Department of Applied Physics at TU/e and Dean of the TU/e Graduate School. He also was involved in setting up the government’s Beethoven plan, noting there was a request from industry to train more talent.

“In that part of talent development, you have to place what TU/e is going to do, and that’s to grow by almost 2,000 master students, from 13,000 total students to 15,000,” said Koenraad. “That means the four master’s departments – electrical engineering, computer science, mechanical engineering, and applied physics – typically will have 500 new students entering per year. For that we need staff, because in the calculation of what the cost will be, I have really pushed that we keep the student to staff ratio equal to what we have now. You need some serious people to do that.”

Workforce development also came up at the recent PIC Summit Europe for photonic integration technology, held in Eindhoven.

“We were discussing talent, investments, and of course the state of technology,” said Heck. “With a lot of deep-tech technologies, Europe is maybe losing, and what is the root cause of why are we not competitive? One part where you can hypothesize is the lack of talent, and mobility of talent, that we have internally across Europe. Also, the attractiveness of Europe for non-European talent. There was a nice talk from Rudy De Winter –– founder of ExFAB, one of the few successful semicon companies in Europe –– and he said, ‘The easy way out is to say we need more money. But if you go a little further, it’s all about people, and the relevant people, with the relevant kind of education and mindset.’ It’s not just about university-educated people, in general. It’s about, ‘What are they really going to contribute?’ Deep tech is something else than having an academic way of working.”

Heck suggests Asia currently leads the world in terms of talent, particularly when it comes to getting things up to the manufacturing level. But regions that rely on Asian talent have to be careful because those countries are moving up, so their talent may be less inclined to leave.

“If you want to be attractive for international talent, that means somewhere else loses the people, so there’s also a downside,” said Heck. “It’s a logistics problem in Europe. We need to move the people around so we can stay competitive. In Asia, they are well-educated and they still have a system where people are service-oriented and working hard. When you talk to international talent, one of our main selling points is work-life balance. For some countries the political climate is an issue, but most of these countries in Asia are relatively stable. So more and more, we are less able to cause the brain drain for those countries. At Eindhoven, we are still looking to other countries for our students, and that’s fine, but if you look at EEs and how many Dutch students versus international students, it is 50/50 now and not 70% Dutch, 30% international, as it used to be. The easy option in the past was to go to Asia, but nowadays also the hard option is to go to Asia.”

The UK faces similar issues. “If you’re doing a computer science degree now, the world is your oyster if you want to go work in AI, semiconductors, cyber security, etc.,” said Innovate UK’s Tyrer. “There’s a whole chain that needs to be built to have a more resilient skill base, from STEM at school age into undergrad, post-grad, doctorates, and then into industry. There are a couple of things we’re doing. EPSRC funds Centres for Doctoral Training (CDT) with a bespoke focus so you can get PhDs more tuned to some of the market demands. We also have something called Knowledge Transfer Partnerships, which is where you sponsor a postdoc who goes into industry and transfers his or her skills into that company. It’s a great recruitment tool because it means people with postdocs often end up going into a company and staying and working there and transferring those skills permanently.” Innovate UK also funds a competition for an organization to run or develop a skills course for the general public or in-house staff.

Finding talent is more of a challenge for certain regions and specialties. For example, a cluster has formed in South Wales, where there are suddenly lots of up-and-coming companies.

“But where do they go for workers?” said Tyrer. “They don’t want to poach people from each other because then it becomes cyclical and a race of who wants to pay the most money. So we’re trying to get away from that, to work with, for instance, the Catapult, who will develop a course for local businesses to enable people to come in and learn those skills. Then they’ve got a guaranteed job, but also a career path. So it’s very much getting in at the beginning, identifying where the skills gaps are – be it design, compound semi, packaging – and then getting people to a level where they can then go in a company and be trained within that company and upskilled, because you’ll also need local skills training. In the big fabs, you can automate, and that’s a bit different. In terms of die cutting and packaging, most of that is computerized already. As we’re not building lots of fabs, it’s not so prevalent for us. But automation and productivity is something that is being invested in heavily.”

Government programs in the UK and Europe, Middle East, and Africa (EMEA)

UK government programs
The UK government announced its Semiconductor Strategy in May 2023 with an investment of up to £200 million from 2023 to 2025, and up to £1 billion over a decade.

• Steered by the UK Semiconductor Institute, the focus is on innovation and design rather than manufacturing, though the country does have some fabs.
• Key agencies within the government are the Engineering and Physical Sciences Research Council (EPSRC), UK Research and Innovation (UKRI), and Innovate UK.
• Following a departmental shuffle in February 2023, the government launched a Department for Science, Innovation and Technology (DSIT) to focus on optimizing public R&D investment and increasing private R&D.
• DSIT published a report in October 2024 into semiconductor-related economic activity in the UK.

European government programs
Europe has been funding tech innovation for years with major programs such as the New European Industrial Strategy for Electronics in 2013, which aimed to mobilize €100 billion in private investments through a combination of EU and member state funding. The ESCEL Joint Undertaking (Electronic Components and Systems for European Leadership) started in 2014 after merging two previous initiatives and this was followed by the Key Digital Technologies JU.

• The EU CHIPS Act entered into force in September 2023 with a budget of €43 billion ($47B) and a goal to boost production capacity from 10% of the global market to 20% by 2030.
• In November 2023, the Chips Joint Undertaking (Chips JU) was launched to deploy pilot lines with €1.67 billion of EU funding, to be matched by funds from EU Member States, plus private funds.
• In February 2024, CHIPS JU announced €216 million for proposals to support research and innovation initiatives.
• CHIPS JU replaced the earlier JUs and is the main implementer of the EU CHIPS Act.

The EU Chips Act is partly funded by a €100 billion research and innovation program, Horizon Europe (2019). Other funding bodies include the European Research Council, the European Innovation Council established under Horizon with a budget of €10.1 billion, and NextGenerationEU, a post-pandemic recovery plan with a combined EU/member state budget of €806.9 billion.

Individual countries also have semiconductor initiatives, such as Spain’s PERTE of microelectronics and semiconductors, and Germany’s joint investments with Infineon, Intel, and Wolfspeed in regional hubs such as Silicon Saxony. Other countries with chip ambitions include Italy and Poland.

Workforce initiatives include a SEMI Europe-led consortium organized by the EU Commission’s Erasmus+ program to enhance diversity, equity, and inclusion in the European microelectronics sector.

Middle East and Africa government programs
The Israeli government supports chip companies via its Ministry of Economy and Industry’s Encouragement of Capital Investment Law and the Israeli Innovation Authority. For example, in June 2023, it was reported that Intel would get a government grant at a rate of 12.8% of the investment amount, which equaled a $3.2 billion grant for a $25 billion plant in Kiryat Gat. And the IIA backed Quantum Machines to open the Israeli Quantum Computing Center research facility in June 2024.

The UAE and Saudi Arabia both have growing chip ambitions. For example, the International Institute for Management Development reported on UAE’s ascent and the country is reportedly in talks with TSMC and Samsung. Meanwhile, Saudi’s Public Investment Fund launched Alat in February 2024, aiming to make the country a global hub for sustainable technology manufacturing focused on advanced technologies and electronics. In June 2024 at the Future of Semiconductors forum in Riyadh, the country launched a National Semiconductor Hub with funding to attract chip makers to the country.

Countries on the African continent could become a more important part of the global supply chain due to its abundance of natural resources, such as graphite, silica, and quartz. It also could grow its manufacturing capacity. For example, in June 2024, South Korea signed a multi-nation deal to cooperate on mining, energy, and manufacturing. And in May 2024, the U.S. Trade and Development Agency signed a grant agreement with Kenya-based Semiconductor Technologies Limited for a feasibility study to develop a fab for legacy chips.

Tables:

Table of select government programs announced in 2024 in the UK, Europe, and Saudi Arabia

Table of select recipients of government funding announced in 2024 in the UK, Europe, and Israel