We hope to bring two chip factories to Spain in the next five years”. This was stated by Jaime Martorell Suárez, commissioner of the Part of Microchips and Processors -or Perte Chip-, in a meeting organized by elEconomista.es and Hill+Knowlton, where Martorell met with the top executives of companies such as Qualcomm, Cisco and Deloitte in Spain to analyze the scope of this project, endowed with 12,250 million.
More than 80% of the world’s processors or chips are made in China. Only 9% are produced in Europe and another 9% in the United States. The West has realized -perhaps a little late- that it cannot depend on this single country to dispose -or not- of an asset that in these moments of increasing digitization is more than strategic. In addition, its demand does not stop growing. It is not a trivial matter or one that only affects technology companies. We find chips everywhere and they are already essential for the automotive industry, for biotechnology, for security, logistics, transport, aeronautics, space…
All these sectors are totally affected if Chinese factories decide to close due to a new health alert, as has been happening in the last two and a half years of the pandemic. Things could also be further complicated if the unpredictable Chinese rulers chose to support Russia in its criminal strategy of reconquering outdated empires… China has the upper hand and both the pandemic and the new geopolitical situation have tightened the rope and provoked different initiatives in the governments of the United States and several European countries. All of them want to host the new plants that will be built by the only companies that have the capacity to manufacture chips.
Within this framework, on May 24 of this year, the Council of Ministers approved a Perte (Strategic Project for Economic Recovery and Transformation) on Chips and semiconductors. Endowed with 12,250 million euros, its objective is “to reinforce the design and production capacities of the microelectronics and semiconductor industry in Spain from a comprehensive perspective and favor national and European Union strategic autonomy in this sector”, explains Jaime Martorell, commissioner of the Perte Chip.
“We support Perte and the diversification of production, which is why we also support projects in the US and Europe.” (Douglas Vaz Benítez, General Director of Qualcomm for Spain and Portugal)
To contextualize a bit, we will say that in the world you can count on the fingers of one hand the companies with the capacity to manufacture this type of component. Among them, the American Intel, the South Korean Samsung and the Taiwanese TSMC stand out. As we said before, the vast majority of its plants are located in China. Apple and Sony, for example, want to reduce their dependence on third parties with their own plants. To get an idea of the complexity of these operations, the factory that Sony wants to build in Japan is budgeted at more than 6,000 million euros. This Japanese company suffered a lot when it launched the Playstation 5 console, which it was only able to produce in small drops as its suppliers provided them with the damn chips. More recently, we have seen how automotive plants slow down their production or partially close due to the impossibility of finishing the vehicles with the processors…
The chip market has also evolved with the moore’s law exponentially: the first Intel microprocessor that came out in 1971 included 2,300 transistors and today we have chips with 50,000 million transistors, capable of performing 20 times 10 raised to 12 operations per second. Serve as an example to show that complexity in its manufacture.
“We hope to bring two chip factories to Spain in the next five years, the time the Perte is valid,” Martorell repeats several times in this debate. “We arrived on time, we are going at the same pace as the United States and other initiatives launched in the European Union. We seek to have the capacity to manufacture advanced circuits in Spain and, furthermore, through these factories, make it easier for the entire ecosystem to develop and work together. Our task is not only that these factories come, but that we prepare for it, that we develop clients, applications…”, he adds.
The contacts to achieve that goal are taking place at the highest level. On August 31, Pedro Sánchez met for more than an hour in La Moncloa with Jong-Hee Han, Vice President and CEO of Samsung Electronics. “The Government is committed to achieving it and is doing it well. The Perte is very well designed and, if the factories come, we have already stated that we will be customers,” explains Douglas Vaz Benítez, general director of Qualcomm for Spain and Portugal. “We support relocation and geographic diversification in chip manufacturing and that is why we also support the plans of the United States and other European countries,” he adds. He refers to the Chips and Science Act, recently approved by the United States Congress and which will allocate 52,000 million euros to the same objective as the Spanish Perte.
“Thanks to Perte, we are going to get as much aid as possible. We are more competitive there than other countries.” (Carlos Bofill, partner at Deloitte Legal)
The Qualcomm manager recalls that the EU’s goal is to reach 20% of global production by 2030, compared to the current 9%. “However, as demand is expected to double between now and then – growing at a rate of 7-9% a year – that will mean Europe will quadruple its production capacity,” he explains. Vaz agrees with the Perte commissioner that “we arrived on time because there is a lot of market to cover.”
“If we are able to choose well what we will focus on, we will be invincible. If we want everything, it will be more complicated” (Andreu Vilamitjana, CEO of Cisco Spain)
For his part, Carlos Bofill, a partner in the Subsidies and Incentives area of Deloitte Legal, is “pragmatic.” He emphasizes that “there is a commitment from the Government to explain it well to the players in the market” and that “the incentive or financial aid to be obtained is the maximum that can be obtained thanks to that chosen modality of Perte”. “There we are very competitive compared to other offers from other countries. The board of a company is greatly influenced by this depending on the return they are going to obtain in the coming years,” he adds.
Much life beyond the chip
All the participants in this meeting agree in clarifying that there is a lot of life beyond the manufacture of the chip, that there is a very broad ecosystem. “We can equate the situation to the aerospace industry in the 1970s. People only saw the rocket, but behind and around it there are many related industries,” explains Andreu Vilamitjana, CEO of Cisco Spain. “We already have a hundred companies in Spain that work on aspects related to processors -in Malaga, Valencia, Madrid, Barcelona- and that they are already seeing more value thanks to this initiative”, he adds.
The average price of the construction and start-up of a chip factory is around 6,000 million euros
The chief executive of Qualcomm in Spain insists that the most valuable companies are not those that manufacture the chips, but those that design them and carry out the R&D. Both Cisco and Qualcomm are working on those two previous phases, but are not engaged in actual manufacturing, which they outsource to specialized third-party plants. Hence, both companies support the Perte and apply as clients of this next and long-awaited Spanish production. The Deloitte partner considers that “the implementation of this Perte is a relevant, necessary initiative that comes at a very opportune moment in line with the strategy of the European Commission, and with the European Chip Law”.
“We have all the necessary wickers to get factories to come to Spain, but it is important that we leave no one behind. The road is going to be almost as important as the end. And, above all, we should choose well where we are going to concentrate those efforts”, highlights the Cisco representative. The rest of the participants in this debate agree with him, given the wide variety of chips that are being produced and demanded by the market. In this way, those that need a car have nothing to do with those that feed a data server, a mobile phone or a smart speaker, and they insist that it is convenient to focus the efforts well and choose perfectly where to aim.
We asked them about the challenges and they also agree that there are. Carlos Bofill, from Deloitte, points to hyperregulation as one of the possible handicaps when it comes to strengthening this ecosystem. The commissioner reassures: “We are working to streamline processes and offer different options to finance projects.” And Bofill recalls that “we must put all the actors to work together, without forgetting that some of them are rivals, that each one defends their R&D, with strict confidentiality, we find aspects that make this collaboration very complex, but it is very important to achieve that impact in the value chain”.
Vilamitjana, from Cisco, recalls the importance of public-private collaboration in this type of project and wonders where companies will receive the best tax treatment, something to be considered by these companies. The Perte commissioner acknowledges that “Germany already has factories and here we are going to put the first one.” “Spain has all the optimal conditions to attract companies of this type. We are facing a European challenge of setting up a network and an ecosystem, that distributes this manufacturing and technology capacity, I am sure that we will achieve it,” he adds.
“Within five years we hope to bring two microchip factories to Spain and support the rest of the local industry.” (Jaime Martorell, commissioner of the Perte de Microchips y semiconductores).
When it comes to highlighting the strengths, these experts insist a lot on the need to feed this ecosystem that is already emerging and on the talent that comes out of our engineering schools. They also see the Perte Chip as an opportunity to recover all those engineers who one day decided to leave Spain in search of opportunities. “There is a lot of talk about money, but it is not the most important thing. Of course there will be competition between countries, but the incentives that Spain presents are many. In my case, I can say that half of the Cisco workers in Spain do not they work for the activity here, but for global Cisco”, remembers Andreu Vilamitjana. In this sense, Meta -former Facebook- also asked its workers where they wanted to work and the most requested country was ours.
Bofill, from Deloitte, points out that “the materialization of Perte is a challenge largely due to the idiosyncrasies of the sector and the complex system of execution of the funds”. “It is imperative that we learn from the experience of previous Perte to ensure that the large amount of funds allocated to this strategic project can be distributed effectively,” he adds.
Learn from other Pertes
Douglas Vaz Benítez, from Qualcomm, reiterates his congratulations to the initiative, which he describes as “ambitious, optimistic and in the right direction”. And also remember, perhaps to avoid disappointment, that “having a semiconductor factory in Spain is not going to have a great impact on GDP, nor will it generate hundreds of thousands of jobs, but it will have a transformational power for the country because it will transmit a very important: we can generate relevant technology at a global level. It is a very powerful message that will later be transferred to many levels of society and that promotes talent in universities”. The Perte commissioner insists that “if we didn’t have the Perte Chip, in five or ten years we would be the same.” And he concludes: “We have the opportunity to turn the situation aroundto take advantage of this opportunity to turn Spain into a technological center like any other European country or even more”.