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Infineon and STMicro: Are Euro chipmakers IFX and STM looking to expand in 2023?

By Jenal Mehta

12:40, 28 December 2022

semiconductor factory
The European semiconductor industry is likely to grow in the coming year. Photo – Getty Images

Chip makers Infineon (IFX) and STMicroelectronics (STMm) are to expand in the coming year, as the European semiconductor industry joins the race with Chinese and American counterparts.

Switzerland-based STMicro is to build an extension to its existing plant in France following revenue growth of 25% in the past year.

Germany's Infineon also sets out plans for expansion after a record year of revenue growth.

This comes a year after the proposal of the EU Chip act, which is designed to help promote Europe-based chip manufacturing.

The current global market leader, Taiwan's TSMC (TSM) has also decided to get a slice of the expected growth by making a number of deals with companies in the region.

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European Semiconductor industry to get a boost

Much like the CHIPS act passed in the United states last year, the EU chips act, was proposed in the parliament in early 2022, and is designed to promote local production of semiconductors. Moreover, it is aimded at reducing dependency on outside manufacturing for a component which is becoming increasingly important in modern life. The act will set aside almost €45bn to inject the production of semiconductors.

Europe has one of the largest appetites for semiconductors and yet has one of the lowest production rates, making the region highly dependent on imports. An article by ING points out the need to reduce this supply-demand mismatch.

“It would be good if local production capacity of semiconductors matched the demand from European end-markets by the end of the decade. This way, the economy is less exposed to supply chain disruptions, but can also fully take part in future developments in the field of artificial intelligence (AI) and autonomous, industrial systems, where leading-edge chip innovations will play a crucial role.”

“Basically, every sector that will use AI systems needs advanced semiconductors. Europe, therefore, needs to be a part of these developments to remain relevant.”

The report continues to state that “the EU Chips Act will promote economic growth in the coming decade”.

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The reports states the following reasons for the lack of production capacity so far :

“Their chips are mainly made for the automotive and industrial sectors. Other chips for these industries may be designed by EU companies, but are made in foundries outside of Europe (in Asia). The absence of a large (consumer) electronics industry means there is no large-scale demand for advanced, leading-edge, logic chips, today. Hence the absence of production capacity.”

The current market leader, TSMC (TSM), currently owns more than 55% of global semiconductor foundries. This has placed an enormous dependency on the company which mainly operated out of Asia.

This dependency was further highlighted during the supply chain disruptions in 2020.

Regions outside of Asia have realised the importance of developing their own production.

The proposed act does not discourage non-regional firms from establishing production in Europe, a loophole which TSMC may have already begun to exploit, as it reportedly starts new production partnerships in Europe.

Infineon (IFX) Price Chart

Are these European chip makers ready for the competition?

The CEO of Infineon Jochen Hanebeck said in an interview recently that the company is ready for expansion. He said the company is “on the lookout” for suitable acquisitors and is ready to spend “in the range of up to a few billion.”

The German chip maker reported revenue growth of 30% for the year ending in September 2022.

Some of the leading companies in Europe are Infineon (IFX), NXP (NV) and STMicroelectronics (STMm) all of which currently hold a consensus buy rating on Tiptanks.

Markets in this article

IFX
Infineon
33.050 USD
-1.51 -4.380%
NXPI
NXP
269.59 USD
-9.87 -3.540%
STMMI
Stmicroelectronics - EUR
36.85 USD
-1.24 -3.270%
STMPA
STMicroelectronics
36.85 USD
-1.25 -3.290%

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