As governments and companies focus on the robustness of the semiconductor supply chain, the geography of the industry is shifting. Europe may not yet have settled its priorities, but the continent is certainly looking towards increasing market share in both design and manufacture of semiconductors over the coming decade. For patent strategies, this likely means only one thing: strengthening patent portfolios in Europe.
Some time has passed since the Trump administration first blacklisted Huawei from putting its equipment in the United States’ 5G infrastructure, and subsequently blocked use of United States’ chip technology by the company. Policy towards the company has not really shifted with the incoming Biden administration and Europe has largely followed where the United States has led, albeit more tentatively. It seems inevitable that Western governments will remain wary for some time to come. Watching Huawei, it is notable that the company was the top patent filer at the EPO in 2019, second only to Samsung in 2020 and looks to have adopted a more assertive licensing and litigation strategy. There may be many reasons for this, but the company’s strong patent position in the United States and Europe certainly provides options for it to mitigate against adverse policy decisions and shore up revenue.
Whilst concerns about Huawei may not have shifted much since 2019, the world has certainly changed. The chip shortages currently being experienced in Europe and elsewhere may be primarily caused by the COVID-19 pandemic, logistics issues and underlying demand, rather than overarching geopolitical factors. However, the wider problems caused by the shortages have served to bring focus onto the vulnerabilities of the semiconductor supply chain. A key issue remains over-reliance on semiconductor foundries outside of Europe. TSMC is certainly bouncing back from any pandemic related issues and continues to grow revenues and dominate the industry. China also clearly recognizes the importance of the industry. With huge state support, SMIC continues to increase revenues rapidly (adding 43.2% YoY in Q2 2021) and has announced a new factory to be built in Shanghai. Western governments and businesses will respond, although given the scale of the semiconductor industry, the rate of change might disguise the momentum. The European Commission announced its Alliance on Processors and Semiconductor Technologies during the Summer of 2021, with the dual aims of reinforcing the electronics design ecosystem in Europe and establishing “the necessary manufacturing capacity”. It now looks like this will be followed by a “European Chips Act”. So far, Intel at least seems to have interests aligned with the EU’s vision of increased semiconductor manufacturing capacity in Europe, with announcements of increasing investment commitments in recent months. With Europe already being home to leading expertise in manufacturing processes, not least in the form of Netherlands based ASML, the prospect of Europe becoming more self-sufficient in semiconductor supply, from design through to fabrication, is no fantasy.
So, whilst the semiconductor supply chain remains complex, and the huge barriers to entry will keep changes slow and provide some security for market leaders, there is no doubt that the shape of the supply chain is moving towards increased localisation. Patent portfolios will need to adapt. Put simply, if a chip can be designed, made and sold in a single jurisdiction, then patents need to geographically cover that jurisdiction to have utility. Patent strategies that have focused primarily on the United States and Asia may therefore need to evolve towards Europe. The statistics seem to show that some of the major players recognise this, whilst others are possibly lagging. It will be interesting to see how strategies evolve in 2022 and beyond.
If you would like to know more, please contact Peter Gray or another member of the Kilburn & Strode patents team.