The global chip shortage continues to disrupt industries worldwide, but according to ASML CEO Christophe Fouquet, the answer might lie in a seemingly unexpected place: China’s production of “legacy chips.” While not the cutting-edge processors powering high-end devices, these older-generation chips are crucial for everyday electronics and automotive components.
Fouquet’s comments, reported in a Handelsblatt interview, come as the European Commission seeks industry insight on China’s growing dominance in legacy chip production. This dominance is undeniable – industry group SEMI estimates Chinese chipmakers will expand capacity by 14% in 2025, more than double the global average. China is expected to account for a third of global production by then.
So why the focus on legacy chips? Because they’re the backbone of modern technology. From dishwashers to refrigerators, cars to medical devices, these chips perform essential tasks, ensuring smooth operation. The current shortage of these chips is causing production slowdowns and price hikes for everyday goods.
Fouquet argues that hindering China’s legacy chip production wouldn’t solve the problem; it would exacerbate it. “If someone wants to slow it down, for whatever reason, then alternatives are needed,” he says. “There is no point in stopping someone from producing something you need.”
His point highlights the complex reality of the global chip market. While tensions between the US and China simmer, particularly regarding advanced chip technology, there’s an undeniable interdependence regarding legacy chips. Disrupting Chinese production could have severe consequences for consumers worldwide.
This situation raises several questions. Can the West ramp up its legacy chip production capacity? The answer is complex. Setting up chip fabrication plants requires immense investment and expertise. While some Western companies consider reshoring production, it’s a long-term solution.
Another factor to consider is the economic viability of legacy chip production. Advanced chips offer higher profit margins, which incentivizes manufacturers. Governments should create policies that make legacy chip production more attractive.
The current situation also underscores the need for international collaboration. While competition in the high-end chip market is likely to persist, there might be opportunities for cooperation regarding legacy chips.
A consortium of countries could invest in joint production facilities, ensuring a stable supply chain for everyone. This would require a shift in geopolitical mindsets, but the potential benefits for global economic stability are significant.
Ultimately, ASML CEO Fouquet’s comments offer a pragmatic perspective on the global chip shortage. While the race for the most advanced chips continues, the world still needs a steady supply of “old-fashioned” chips to keep everyday devices functioning. Finding solutions that leverage China’s production capacity, encourage Western investment, and foster international cooperation might be the key to overcoming the current challenges and ensuring a secure future for the global chip market.
