Europe asks if it is time for an 'Airbus of chips'

6/18/2012 8:36 AM EDT

This makes perfect sense and it should have been the case already if it were not for short term "nationalistic" tendencies within the European community. Let's hope that the current crisis will push for a European chip super company (among other consolidations). I say this more in hope than expectation though....

6/18/2012 3:20 PM EDT

These strategic, often government-sponsored decisions are a difficult proposition. Sometimes they can succeed, e.g. when the playing field is more or less level, as is the case of Airbus vs Boeing. Sometimes, like this instance, it might be more of a risk. You're going up against super low cost manufacturing in China.

I don't think this is a slam dunk. The worst case scenario being, even with governments going further in debt than they already are, the costs might still favor the Chinese sources.

6/18/2012 11:19 PM EDT

I agree with Bert22306, and besides China I would also add USA (Intel) and Korea (Samsung) as real world-wide competition that both perpetually stay in the "paranoid competition" mode for silicon. The Airbus vs. Boeing analogy is looking backwards...good historical info but not "shooting ahead of the year 20xx silicon puck". Intel and Samsung do not compete like Boeing.

6/19/2012 1:43 AM EDT

some commercial success - producing half the world's airlines! Understatement indeed. The debt crisis has politicians focusing on the next vote, which means numbers. There are more dumb people than smart people, so why would the majority vote for jobs for a few smart people? Nokia is shedding 40,000 jobs since 2010. The people smart enough for a smart chip don't rely on handouts or welfare, so if Europe cannot deliver, they go elsewhere. The unemployed remain. Funding is unlikely.

6/19/2012 2:40 AM EDT

I can't imagine a Euro conglomerate born of ailing national companies being a market-driven successful semiconductor company. But then I know next to nothing about Airbus.

6/19/2012 3:51 AM EDT

Folks, national European companies are failing partly because they are relatively small and scattered. If they pool their market potential, they would be a major international force. I find the EADS analogy pertinent. On their own, defence and aerospace companies in Europe were no match for their US counterparts. When a political decision was made to pool them together, things changed quickly. If BAE Systems were to join forces with EADS (not a realistic proposition these days I know) they would be the biggest defence and aerospace company in the world.

I have always believed in one super European chip company. As it is, ST/Infineon/NXP etc. are too small on their own and often compete with each other. If Eurocrats get their act together to facilitate a conglomerate of these companies, I believe it would result in a major viable international player. Do not forget that the Europe is the largest common market in the world. Not capitalising on the ensuing economies of scale is madness in my opinion, and I firmly believe that narrow nationalistic concerns are the stumbling block here.

6/19/2012 7:29 AM EDT

@KB3001

The other take on this and one I am hearing from the Eurocrats is the penalty for NOT driving consolidation.

If Europe falls out of chip manufacturing (and manufacturing more generally) it will have reduced opportunities to take part in the coming nanotechnology wave. This wave is likely to be more significant than microelectronics.

We have the academic and innovative capacity to take part, but we seem to lack the will to invest in the manufacturing part, which is where much of the value is likely to be contained and paid for.

A final thought: the lesson is not lost in Europe that the one country that has maintained an emphasis on innovation AND manufacturing is leading the continent economically and is the country that all other service-oriented European countries must go to for a bail out.

6/19/2012 8:56 AM EDT

This move makes perfect sense, Europe can't afford to get out of the chip business! Kris

6/20/2012 7:06 AM EDT

@Bert22306 @iniewski

I agree with both of you -- in part.

I agree Europe can't afford to get out of the chip business. I am not sure it makes PERFECT sense.

And I agree you can waste a lot of taxpayers' money trying to beat the tidal forces of the free-market system.


Airbus was a success so why not try something. And collaborative R&D at Crolles without full corporate integration worked -- for a while -- before company interest in semiconductor manufacture slipped down the agenda and diverged.

But if the likes of ST and Infineon, with their public shareholders, don't want to be conglomerated, what's to be done?

6/20/2012 4:12 PM EDT

An airbus of chips? Late for delivery, plagued by subcontractor problems, not always tested adequately, and delayed by parts shortages, in addition to being single sourced? I suppose that if the larger substrate could be made much larger, that there may possibly be some benefit if the yield wound up being adequate. But the cost of a bad substrate would be MUCH larger, it appears.

6/21/2012 8:16 AM EDT

@peter.clarke

"We have the academic and innovative capacity to take part, but we seem to lack the will to invest in the manufacturing part" - this is called the European paradox, a phenomenon that eurocrats have tried to believe for ten years but that has been identified as largely a myth in more recent studies (http://en.wikipedia.org/wiki/European_paradox).

The facts are that the combined public and private R&D investments in Europe are much lower than in the US, that the market is still very fragmented in national countries and taking risks is not rewarded.

A key difference with the Airbus case is that the aerospace sector was and is much more dependent on the government and so much more amenable to large-scale 'forced' consolidation by these governments - which was probably a very good idea, as Airbus shows.

Ms. Kroes usually knows what she's talking about, and a European chip technology company might make sense, but a central problem remains: most companies creating fundamentally new markets over the past decades are not European ones (Apple, Google, Microsoft,...) and that's not likely to change any time soon.

6/21/2012 9:24 AM EDT

Before they do so they better consider the arrogance of the systems engineers at Airbus. their attitude is that they know how to handle emergency situations better than the pilot, therefore when an unusual situation comes up the autopilot kicks in regardless of whether the flight crew wants it to or not.

This is was brought Air France 447 in 2009. The pilot could not control the aircraft because the autopilot kept kicking in and taking control based on faulty readings from the pitot tubes (airspeed indicators), which had iced up. Whenever the cockpit crew turned the auto pilot off and tried to correct the aircraft's flight, the flight computer assumed that they were incompetent and therefore re-asserted control of the aircraft from them. With the pitot tubes iced up, the computers thought the plane was flying too slow so it put the aircraft into a dive to pick up speed. The pilot would turn the autopilot off, pull the plane back up, only to have the damned thing re-assert itself and put the plane into a dive again. Without a master override, he couldn't keep the plane from destroying itself. Eventually it crashed into the ocean. This is also the reason the Airbus 380 which lost an engine to a fire almost crashed; the autopilot assumed the situation was different and kept taking control from the pilot when it felt the pilot was acting foolishly.

Boeing aircraft don't do this.

6/21/2012 9:29 AM EDT

@SimonV

Thanks for pointing out that the "European Paradox" was first formalized more than a decade ago although i was certainly aware of it on a national UK basis in the 1980s.

6/21/2012 10:13 AM EDT

The same here, I had a similar feeling about European R&D for years but was never aware of the "European paradox" concept...Kris

6/22/2012 2:38 PM EDT

Does anybody else remember European Silicon Structures? Any lessons to be learned from that experience? I think it can hardly be claimed as a success, but maybe that was a case of too many innovations at once rather than too many Euro-cooks spoiling the broth.

I fear that the big, lumbering bureaucracy of Airbus, riddled with political compromise, fits in perfectly with the aerospace industry but would not last long in semiconductors

6/25/2012 2:43 PM EDT

I often wonder why European Engineers do not want to come to the US for the many job opportunities in this country. There are lots of jobs for qualified engineers here. I have the sense that they prefer to remain within Europe and want the jobs to be created in the continent. Is there any over-riding reason. The jobs pay much better in the USA and the work is largely the same or better.

11/25/2012 12:05 AM EST

ST, Infineon, et al certainly got lots of taxpayer help in Europe and yet are "too small in themselves" in spite of all that help. Merging them and giving wider European support may be only thing that will keep them alive.
But nanoelectronics will not come out of the legacy microelectronics companies, in my opinion, just a diode makers failed to become transistor makers who then failed to become IC makers. I vote to the IMEC R/D approach.

11/25/2012 12:52 AM EST

Germany seems to be always winning with mechanical engineering technology.This i am watching from my child hood till now nearly for about 40 years. I suggest that they go into further doing research, development and manufacturing involving machines.What about humanoid robots?