German Chancellor Olaf Scholz asserted that Germany could become the EU’s largest producer of semiconductors at a recent summit. He attributed his statement to the significant investments made in the industry as of late.

Scholz, who emphasized that Germany is working hard to increase semiconductor production, said that investments create “an ecosystem that helps the serenity of the European Union, that we are not dependent on other regions”.

Countries and companies are committing vast sums of money to semiconductor production and research. Investments are expected to amount to more than half a trillion dollars over the next ten years.

Where the investments are headed

The main aim of investments is to guarantee the chip supply and expertise required to support increasingly data-driven industries. By building out supply chains, companies and governments attempt to ensure that essential electronics are always available.

Some concerns have come up as of late. There is a need to fill the talent gap, prevent inefficiencies and deal with an almost inevitable glut that could lead to inventory write-downs and price wars down the line.

Europe is concerned with multiple critical issues in the short term: being careful when dealing with China, building out semiconductor production capacity and promoting technological sovereignty.

Germany treads carefully

Back in November, we reported on a column wherein Chancellor Scholz advocated for a change in how Germany deals with China, which is increasingly leaning towards a Marxist-Leninist political ideology. Although Scholz expressed concerns about China, the chancellor emphasized that Germany would not abandon its relatively friendly relationship with the country.

The EU as a whole has thrown its weight behind the US, citing security risks as grounds for preventing China from buying key supplies and participating in the deployment of 5G infrastructure across critical regions. Germany will continue to do what it can to bolster its economy, and if that brings semiconductor manufacturing to Europe at scale, the bloc will be better for it.