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Czechia: The Semiconductor Heart of Europe?

What is happening?

As Europe seeks to urgently bolster its competitiveness and resilience in semiconductors amid its quest for strategic autonomy, American chip maker ON Semiconductor Corporation (onsemi) announced a major investment to expand its output in Czechia. The injection of 2 billion dollars (46.3 billion CZK) will facilitate the development of vertically integrated silicon carbide production in the Czech town of Rožnov pod Radhoštěm and create up to 1,300 new high-tech jobs.  

As a development of major economic and strategic expansion, onsemi’s plant expansion constitutes the largest investment in the Czech Republic’s modern history. In addition to American capital, Taiwan, a global semiconductor superpower, is also active in the country. Czechia could thus carve out an essential role in European semiconductor supply chains, particularly as the Taiwan Semiconductor Manufacturing Corporation (TSMC), Taiwan’s leading microchip manufacturer, is scheduled to open its fab in Dresden, Germany, in 2027. If the current trends can be maintained, the Czech Republic could become not only the geographical but also the semiconductor heart of Europe. 

 

What is the broader picture?

Onsemi has been operating in the Czech Republic since 2003 and currently produces 10 million chips daily. However, this number is expected to increase multifold thanks to the planned investment. This will have important implications for Europe’s ability to manufacture strategic technologies at home, including those necessary for the green transition. Onsemi’s chips can be used in electric cars, which is crucial for the Czech Republic, given the importance of its automotive industry. This is also why the Czech government will support this project with an investment incentive, the final shape of which is still under discussion. This will create new regional jobs, strengthen the resilience of supply chains, and increase the Czech Republic’s strategic self-sufficiency in semiconductors. According to Minister of Industry and Trade Josef Sikela, who is also currently one of the candidates for the next Czech European Commissioner, this investment allows the Czech Republic to become a “European chip power.” Rožnov and its surroundings could become the “Silicon Valley of Central Europe,” as this major investment is likely to attract other technology companies from related high-tech fields. 

Cooperation with Taiwan, a global leader in semiconductor production, is also promising. In November last year, Charles University and National Chengchi University launched the joint Supply Chain Resilience Center focused on semiconductors. The Center is funded by the Taiwanese government as part of the “megaproject to support the development of the semiconductor environment in the Czech Republic. Czechia, thanks to its advantageous geographical location in the heart of Europe, its advanced industry, and, among other things, strong informal albeit substantial relations with Taiwan, may serve as a supply base for TSMC’s chip factory in Dresden. June marked the launch of the Advanced Chip Design Research Center, located in Czechia’s second-largest city of Brno, which will be based on a collaboration between the Cybersecurity Hub of the Czech Republic and Taiwan’s NARLabs (the National Applied Research Laboratories). In addition, the first-ever international chip design training center of the Taiwan Semiconductor Research Institute (TSRI) in Prague will complement the already existing centers. Regular exchanges of talent and know-how are buttressed by other developments in Czechia-Taiwan relations, including the direct flight between Prague and Taipei, which was introduced last July.

 

Why does it matter?

In today’s technology-driven world, chips are the new gold. The US and Taiwan are at the forefront of global semiconductor production, complemented by Japan and South Korea, and partially China. Europe is, therefore, relatively behind in this critical strategic area. Geopolitical volatility, which includes growing concerns about potential Chinese aggression against Taiwan and the subsequent strategic destruction of its chip production capacity, incentivizes the EU to boost its technological prowess. Therefore, in the interest of diversification and strategic autonomy, there is a rapidly growing interest in developing and manufacturing chips in the old continent. That is also why a TSMC chip factory is under construction in Dresden – a development in which the Czech Republic wants to be involved. The fruits of its friendship with Taiwan and investments like the Onsemi one in Rožnov can facilitate this.

Rožnov is one of the smaller Czech towns. One of its main tourist attractions is Central Europe’s largest open-air museum. In recent years, however, there has been growing concern in the Czech Republic that without the necessary innovations and diversification of the economy, which is currently based mainly on the automotive industry, the whole country could one day become an open-air museum. But if the Czechs stay on the path they have taken, they could become the semiconductor heart of Europe instead.