06-04-2022 | By Robin Mitchell
As the world continues to cope with the ongoing semiconductor shortage, Spain has now announced that it will be spending $12.1 billion to try and encourage semiconductor manufacturers to set up foundries. Why are countries aiming for semiconductor sovereignty, what will Spain do, and is it possible for every country to have its own supply of semiconductors?
Why are countries aiming for semiconductor sovereignty?
The COVID pandemic of 2020 demonstrated to the world how fragile the global economy is and how poor judgement can result in devastation. But one industry that before had never been given a second look by the general public, semiconductors, became one of the most talked about. The resulting lockdowns and disruption to supply chains caused a major semiconductor supply shortage whose effects are still being felt. It is expected that supplies will only start to return to normal by 2024 at the earliest.
This shortage demonstrated to the world how dependent modern society is on semiconductors. Almost all aspects of modern life are controlled with ICs, whether for internet access, controlling a car’s engine, monitoring a plane’s altitude, making a bank transaction, or even making a cup of coffee. Thus, it became clear that a society that doesn’t have ICs simply cannot function.
But the need for semiconductors is not what has driven countries worldwide to rush towards semiconductor sovereignty (the ability to manufacture their own ICs). Instead, it is the realisation that the most important semiconductors (CPUs, Memory, MCUs etc.) are manufactured in just a few places around the world, and one of those could be under threat.
Taiwan historically has had excellent relations with the west and has arguably become the world’s most important site for semiconductors. However, China does not recognise Taiwan’s independence and has made it clear that it intends to take Taiwan for Chinese control in the future. If this happens, one of the world’s biggest suppliers of high-end semiconductor technology would be under the control of China, and this would see large numbers of countries dependent on China for cutting-edge technology. This would give China an unreliably large amount of power and could threaten access to technologies if its demands are not met.
Spain is the latest country to strive for semiconductor sovereignty
Recently, Spain announced that it now wants to have a degree of semiconductor sovereignty and will do so by investing over €11bn into the semiconductor industry. It is hoped that the investment will attract manufacturers to Spain to open foundries and other semiconductor-related technologies. However, whether the funds are specifically for those looking to manufacture or those supplying IP is unclear, but it would make sense for the funds to be for physical construction only as IP does not help a country become independent for semiconductor products. The funds are being packaged with the Projects for Economic Recovery and Transformations (PERTES), which was announced by Spain prior, and the funds are being secured via the EU.
The new fund makes sense when considering that the automotive industry makes up 10% of the country’s GDP and that the semiconductor shortage saw automotive manufacturing grind to a halt. Thus, the ability of Spain to manufacture automotive-grade semiconductors will help to secure its supply chain when manufacturing automotive vehicles. Spain pushing for semiconductor manufacture also works in tandem with the EU’s goal of being responsible for 20% of world semiconductor manufacturing by 2030.
Is it possible for every country to manufacture their own semiconductors?
While many countries aim for semiconductor sovereignty, it may not be entirely important to achieve. The biggest threat faced by the west is not so much supply but where that supply comes from. Of course, suppose China was responsible for all the semiconductors. In that case, it could use that to its economic advantage, but exercising this power would devolve into a trade war that would hurt both sides.
The real cause for concern is the integrity of the supply chain and what China could do to semiconductors before they are sent to customers. This has already happened whereby electronic boards sent to the US were found to contain backdoor chips that allowed foreign entities unrestricted access to servers. If China had control of the semiconductor supply chain, it could very easily integrate backdoor circuitry to allow for remote access.
Such devices would not threaten everyday devices (such as kettles, computers, and phones) but could be devastating to infrastructure such as cellular networks. The use of such backdoors would allow foreign agents to interfere with communication, potentially monitor encrypted traffic, and even be used to disable communication in the event of an invasion.
It may be possible for every country to produce its own semiconductors for the sake of security, but in reality, it is more important that the supply chain responsible for a nation’s semiconductors can be trusted.