However, Europe’s semiconductor industry has encountered various complications in recent years, with the likes of the COVID-19 pandemic and geopolitical instability bringing about unforeseen challenges and turbulence. And with the technology market already grappling with multiple critical factors – including inflation, reduced consumer spending, increased labour strikes in Europe, escalating energy prices, and more – the impact has been particularly poignant.Add this to Europe’s heavy reliance on Asia for semiconductors making it all the more vulnerable during recent periods of supply chain instability, and it’s clear resilient changes are needed. But in the midst of these challenges, a relatively new player entered the scene capable of fortifying Europe's semiconductor sector: Turkey.
Turkey’s expanding role in the semiconductor industryAs the traditional trade routes from Asia have faced mounting pressure in recent years, European companies are actively focusing on strengthening intra-European connections through . Semiconductors and their availability remain critical for several core European industries, but near-sourcing opportunities have typically been sparse given that Europe consumes twice as many chips as it produces. However, the European Union is taking action and is set to invest over €43 billion in bolstering its own semiconductor production by 2030.
Supply chain impact in EuropeThe tech market's growing emphasis on intra-European connections is inevitably reshaping supply chains. While connections to and from Asia and North America continue to dominate, regionalisation means the industry has become more flexible and increasingly capable of offering European alternatives.
A recent Reuters whitepaper on technology supply chains suggests that many European tech companies are factoring in two crucial aspects when re-evaluating their supply chains. Firstly, they are decentralising away from low-cost production centres to reduce the risk of disruptions or shutdowns from unforeseen events. Secondly, there is a heightened focus on shifting production closer to end markets for higher-margin products. This means that countries in close proximity to consumer centres, like Turkey, have assumed greater importance for European markets.Therefore, Turkey's growing role in the European semiconductor industry represents a significant step toward strengthening supply chains and promoting technological self-sufficiency. Nevertheless, it is imperative to analyse this development critically and consider the associated risks. On one hand, Turkey presents Europe with the opportunity to diversify semiconductor sources and reduce reliance on external suppliers. It also contributes to the growth of the Turkish technology sector, thereby fostering economic development. On the other hand, Europe must ensure the reliability, quality, and security of semiconductor supply chains from Turkey and continuously adapt its strategies to the evolving dynamics of the industry and global landscape.
Government incentives are indeed nice to have because they can influence investment decisions. But the greatest value that the government brings is creating the right framework for the success of long-term projects through political and economic stability. Thus, policy continuity and trade condition stability are the crucial components to develop a mature ecosystem with qualified workforces. This focus trumps a short-term government incentive.