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?
Both Sokda and Seat are wholly owned subsidiaries of the Volkswagen Group. The VW group also owns Bentley in Britain, Bugatti in France, and Scania in Sweden. It is truly a Pan-European company now with mixture of mid-range and high-end offering.
Re. your second paragraph, I do not see the point you are trying to make about finished products vs. unfinished ones. Yes, European car firms outsource "some" steps/parts of the value chain but a lot of it is done in Europe. Anyway, analogies do not have to be perfect to be useful :-)
Europe cannot afford to skip chip fabrication, and if the US is managing to compete with the Far East, Europe certainly can. The pertinent point is economies of scale. The US is great at capitalising on it, Europe has not always done so because its edifice is still work in progress. The time has come to accelerate European economic integration in my opinion.
Sorry, but Skoda and Seat build cars under license. It's not an Airbus-like conglom. Seat used to build Fiat copies, just like Lada did in Russia. Then they went to VW some years ago. I don't have the figures, but I'll bet a lot of money that Seat lost a big chunk of their market share to the Japanese manufacturers.
I'm not disputing the generalities about management and labor cost retraints. I'm simply saying, they are not always enough. Chips are not finished end products that consumers focus on. A better comparison might be, who builds the generators, the window mechanisms, or the transmissions, the OEM tires, for these cars? Do some of those components not get outsourced? (They do.)
Bert22306, the world's second largest vehicle manufacturer is the Volkswagen Group, which owns Skoda and Seat among other Pan-European brands, with production sites all over Europe and the world. This answers your point about German car firms not being trans-Euro conglom.
Moreover, cars such as Skoda and Seat can hardly be described as high-end cars with premium prices. I reiterate what I said above, Germany proved that it is possible to compete with the Far East with a combination of labour reforms (e.g. wage restraints), strategic and stable management (e.g. employee co-determination), diversification of risk (e.g. pan-European acquisitions and worldwide manufacturing), and constant improvements/innovation (e.g. international R&D centres).
The exact same principles could equally apply to the semiconductor industry.
I don't know if we can use arguments from both sides of the fense.
German cars are finished products. And they are not built by a trans-Euro conglom. So the comparison is tenuous at best. German cars sell because they can demand a premium price. It's an image thing, much like Gucci handbags are for women. Careful engineering, priced quite high compared with the competition, will sell.
On the other hand, chip manufacturing MAY have become commoditized. Companies won't use high priced chips in their products just because it adds a certain cachet. It doesn't. Chips have to compete on price and performance only.
So I'm not buying that all this needs is government action. Government action can also spend a lot of taxpayers' money without much success.
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.
I am not sure this is true. Germany proved that it is possible to compete and win in the car industry through a mixture of labour reforms, strategic and stable management, diversification of risk, and constant improvements/innovation. I believe the same principles could be applied to the semiconductor industry despite ferocious competition from the far east. Europe has to use its economies of scale to ensure a large market for its indigenous industries.
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.