Competition, open innovation, and growth challenges in the semiconductor industry: the case of Europe’s clusters

Abstract

In recent years, public policymakers in Europe have become increasingly aware of the need to support Europe’s failing semiconductor industry. This is an emerging policy area, and this paper examines the current state of the industry in Europe and assesses its potential future. It contends that the competitiveness of the industry will be related to its innovative capacity, especially its capability to engage in processes of open innovation. The industry in Europe is largely located in a number of discrete regional clusters, and the analysis focuses on data collected from a series of interviews with lead representatives of these clusters. The analysis indicates that the challenges facing the industry stem from the structure of the industry in Europe and the structure of the wider European technology industry. It is concluded that policies, such as the introduction of the European Chips Act, are likely to have a limited, or even negative, impact on the types of open innovation–led growth that will improve long-term competitiveness.

Europe’s semiconductor industry at a crossroads: Industrial policy and regional clusters

“…While the proportion of the semiconductor market accounted for by European firms has declined in the past thirty years, the industry remains well established and still possesses several advantages. The most significant of these are the existence of a number of key clusters, namely Leuven (DSP Valley, Belgium); Dresden (Silicon Saxony, Germany); Eindhoven (Netherlands); and Grenoble (France) (European Commission, 2013;Huggins et al, 2022). The DSP Valley cluster is characterised by activity in life sciences, nanotechnology, mechatronics, smart systems, and cleantech, and is home to several innovative companies and knowledge centres that interact closely.…”

“…Indeed, as future demand for advanced chips is forecast to be in areas related to artificial intelligence and autonomous technology, two areas at the heart of Europe"s innovation agenda (Aurik et al, 2021), there appears to be a realistic possibility of achieving this. Furthermore, focussing on path creation can also have positive knock-on effects for other related industries within a region facilitating economic diversification (Mewes and Broekel, 2020) Yet, in reality, each European semiconductor cluster is too small to compete at the global scale, and if they are to compete globally they need to be even better connected (Huggins et al, 2022). While European clusters are already cooperating and working together at some level, such as in the context of sharing information and intelligence, there is a lack of large-scale pan-European cooperation that will allow them to compete with existing industry groups in the US and Asia.…”

“…Yet, in reality, each European semiconductor cluster is too small to compete at the global scale, and if they are to compete globally they need to be even better connected (Huggins et al, 2022). While European clusters are already cooperating and working together at some level, such as in the context of sharing information and intelligence, there is a lack of large-scale pan-European cooperation that will allow them to compete with existing industry groups in the US and Asia.…”

“…While European clusters are already cooperating and working together at some level, such as in the context of sharing information and intelligence, there is a lack of large-scale pan-European cooperation that will allow them to compete with existing industry groups in the US and Asia. Finally, costs represent a major barrier to reforming the European semiconductor sector, with a new fabrication facility requiring an investment of US$13-20 billion (Huggins et al, 2022).…”

“…The existence of these clusters provides a clear potential advantage for European chip production: (1) these clusters are all characterised by significant levels of inter-firm cooperation, (2) within each cluster connecting knowledge producers such as universities and laboratories and (3) these clusters are not atomistic entities as inter-cluster cooperation has been observed across the sector (European Commission, 2013; Huggins et al, 2022; Silicon Europe, 2022).…”