The semiconductor market - Italy

1.2 The global market

The global semiconductor market recorded a value of $***.* billion in ****, maintaining almost the same level as in **** (***), a deterioration is expected, with a loss of **.*%. According to Richard Gordon, Practice Vice President at Gartner, weak demand for electronics is spreading from consumers to businesses, creating an uncertain investment environment. However, according to the Fortune Business Insight report, the market is expected to grow to $*.*** trillion by ****, with a CAGR of **.*% from **** to ****. There may be several reasons for future growth. It is likely to be driven by dynamic markets such asautomotive, industrial, aerospace, and civil, as opposed to more saturated markets such as PCs, tablets, and smartphones.

Semiconductor market World, ****-****, billion euros digitalworlditalia.co.uk globenewswire

about one in two of the chips produced will end up in a smartphone, pc or server. Industry and automotive also account for an important share of the market. Each car contains **** semiconductors that enable the operation of almost every component from the engine, power steering and safety devices. The centrality of such chips to the industry was highlighted in ****, when shortages in the market contributed to a ** percent drop in global auomobile production.

Global demand share by product type/buyer World, ****, % lab**. ...

1.3 The Italian market

The Italian semiconductor industry, which contributes about *.*% of the European market, generated *.* billion euros in ****. The prominent segment concerns the automotive market, which absorbs **% of semiconductor sales. The value of industrial production is around * billion euros in ****, and Italy ranks as the third largest producer of electronic components in the European Union, emphasizing the strategic importance of the sector.

In an era driven by technological advances and the importance of secure apporvigation chains, Europe is taking bold steps to establish itself in the global semiconductor market. Inspired by the European Commission's "Chips Act," unveiled in February ****, which aims to double Europe's semiconductor market share by ****, Italy has also taken its own direction towardtechnological self-sufficiency and cybersecurity, opening a new phase d innovation in microelectronics.

(***)

**** is definitely one of the most positive years for the Italian semiconductor and microelectronics industry. From sttore biggies to smaller companies, revenues have increased thanks to strong demand for products and services coming especially from the industrial and automotive sectors. Forecasts are forfurther growth in the coming years thanks to plans to expand the production capacity of many companies, starting with the most important, namely the French-Italian multinational STMicroelectronics. (***)

Overall, the industry in Italy has ...

1.4 Import-Export

Italy's import-export ratio for semiconductors (***) appears to remain fairly stable through ****, with imports always exceeding exports, but with coverage ratios of just under a point. From **** , the value of imports clearly exceeds that of exports, reaching a coverage ratio of *.**. There may be many causes, however, it is reasonable to assume that the demand for semiconductors has a growing trend, and therefore, Italy is in the condition of having to import semiconductors.

Import-Export Semiconductors Italy, ****-****, millions of dollars comtradeplus.un.org

As for exports, the main countries to which they are destined are mainly China and the US, which together account for ** percent of export value. In particular, with regard to exports to China, although the figure in **** may seem singular, it is worth mentioning that China constitutes one of the world's largest producers of electronic devices, and this sector has required the increase in the number of imports of integrated circuits to the point of surpassing oil imports. In addition, despite tensions at the political level between China and other Western states, it still maintains a fairly stable relationship in terms of trade and is still part of the New Silk Road project, which involves the creation of new ...

1.5 The impact of the Russian-Ukrainian conflict

The crisis in semiconductor materials, which had already begun in the period related to the covid-** pandemic, worsened with the outbreak of the Russian-Ukrainian conflict. The pandemic period unleashed a strong demand for electronic devices and devices, with increasingly heavy demands for appreciables. Demand for semiconductors in **** exceeded market expectations, triggering a crisis in production. The shortage of these materials has persisted, worsening further with the Ukrainian crisis and spilling over into the entire tech and automotive sectors.

With the Russian-Ukrainian conflict, the problem affects some resources needed for semiconductor processing.

Neon, for example, is an essential gas for laser drive that penetrates semiconductor materials. With respect to this gas,Ukraine boasts ** percent of global production; the main companies that produced it, Ingas and Cryon, have been forced to close because they are located in the cities most affected by the war, Odessa and Mariupol.

Of equal importance in chip production is palladium, of which Russia holds ** percent of the world's supplies. Despite the fact that many companies were predicting a more optimistic scenario, there has been a prolongation of the war, an energy crisis, and an increase in raw materials.

(***)

To get a country-level scenario, below is theindex of ...

2.1 Demand in Italy

The industry is characterized by the presence of STMicroelectronics, the only Italian-French-owned Integrated Device Manufacturer, and a constellation of firms operating in various chip industry supply markets.

As for the others, irrespective of the degree to which their markets are affluent in the chip market, i.e., irrespective of the degree to which the final products of these firms are dependent on the demand of the semiconductor industry, they are mostly afferent to the front-end segment of the value chain, i.e., the series of initial manufacturing processes that follow the design of circuits and precede their actual finalization and conversion into a product.

(***)

The applications of semiconductors are innumerable, affecting almost every device in existence today due to the widespread use of electronics in consumer goods. Microprocessors created with semiconductors can be found in smartphones, photovoltaic systems, computers, home appliances, and manufacturing machinery. (***)

In light of the above, the graph below shows thetrend of average monthly household spending in Italy in relation to the two categories: audiovisual, photographic, and computer equipment and telephone, telefax equipment. The first category is certainly the one that gathers more types of products, so it can also be considered more representative. The related expenditure ...

2.2 Demand drivers

Semiconductor materials have a wide variety of applications, so there are different motivations driving demand in the related market.

Next-generation technologies

The growth of the semiconductor industry is undoubtedly linked to the implementation and development of new technologies that strongly need such materials to be made available to the public. In particular, the innovations that are expected to drive the boom in demand are: the Internet of Things (***)

Growing diffusion of electric vehicles

The transition to electric vehicles and advanced driver assistance systems (***)

Increased investment and funding for the sector

Europe, with its seven-year research plans, has directed resources to move away from a condition of heavy dependence on American research and design and Asian manufacturing and installation capacity. Specifically, the Horizon **-** program provides **.* billion euros in total, ** billion of which are for pure research. Then there are innovation funds providing **.* billion euros for the digital and space industries. In addition, the NRP has digitization as one of its goals, and the semiconductor sector would fall under the second investment area M*C*: digitization, innovation and competitiveness of the production system. In addition, tax benefits are provided for the market that purchases advanced products, a form of support for the ...

2.3 The geographical distribution of demand

Regarding the geographical distribution of Italian households' spending, the highest value is in the North with with **.*€, a value not far from that of the Center (***).

Regarding industries, on the other hand, three main poles are identified:

Etna Valley Monza-Brianza Avezzano (***)

(***)

2.4 New trends in demand

The importance of chips in the Internet of Things (***) industry

In the next decade, IoT will be one of the areas responsible for semiconductor development, with sensors and software included in devices to connect them to the network. The potential applications are many, starting with smart industries, where every factor can be monitored, improving efficiency and reducing costs. Another mode involves smart homes, where it will be possible to adjust lighting, control all appliances,,, improve security. (***)

How *G will affect increased demand for chips

Of course, all the data produced needs to be analyzed and stored, with a growth in the capacity of data centers and Artificial Intelligence. This will be helped by the gradual expansion of the *G network, which is capable of supporting the data transferred by devices. The shift to this technology is also expected to lead to an increase in demand for smartphones, from ** percent in **** to ** percent in ****. All this will imply an increased demand for semiconductors, as a *G smartphone contains ** percent more chip components than a *G smartphone. (***)

Semiconductors in electric cars

Semiconductors are already critical in today's cars, but they will become increasingly important in future mobility, both for electrification and autonomous driving. ...

3.1 The market structure

The semiconductor-related market size analysis is carried out based on data belonging to the category related to ATECO code **** (***). Specifically, three different quantities are considered: number of active enterprises, number of employees, and legal form of enterprises.

Regarding the number of enterprises from **** to ****, a reversal can be seen from ****, where the number of enterprises decreases non-negligibly. Certainly the crisis over the covid-** pandemic plays a role in this decrease, but in addition to this fact, it is well known how the semiconductor market tends toward concentration.

Number of enterprises ATECO code **** Italy, ****-****, in number istat.it

regarding the legal form, half of the active enterprises are configured as s.r.l., while ** percent are made up of inidividual entrepreneurs, freelancers and the self-employed. If the second figure can be read as a custom of the Italian market, especially in very specialized sectors, as far as the incidence of the limited liability company is concerned, this testifies to a probable growth and greater structuring on the part of businesses operating in this area, which requires a more complex legal form. It is no coincidence that many businesses have grown from small enterprises to attract the attention of European and international ...

3.2 The value chain

The semiconductor value chain is extremely complex and consists of three main stages:

Research and design: accounts for between ** and ** percent of total R&D activity, and is carried out not only by companies but also through contributions from governments and universities and research centers; Design: highly knowledge- and skill-intensive, it accounts for ** percent of total R&D activity and contributes ** percent of total value added; Manufacturing: is divided into the subphases of wafer fabrication and assembly, packaging and testing (***). Wafer fabrication consists of the lithography of circuits on silicon tablets; a process that is complex in technical terms, takes quite some time, contributes **% of the total value added and absorbs **% to **% of the total manufacturing expenditure. The APT subphase consists of the installation of chips into electronic devices and final testing.

Given the complexity of the processes within the various manufacturing stages, the materials used, and the type of R&D, there are no companies that integrate all the manufacturing processes in-house; rather, there is a strong regionalization of manufacturing, with companies specializing in one or some of the manufacturing stages. Specifically, the design and production of manufacturing machinery is concentrated in Europe, Japan and the United States, manufacturing in ...

3.3 Distribution

The following are the main companies dedicated to semiconductor distribution service in Italy.

Comelec S.r.l: specializes in the distribution of high quality components in both semiconductors and passive components. It offers a wide range of services such as connector assembly, cabling, as well as design and codesign of custom poroducts for both industrial and automotive sectors.

Teradyne Italia S.r.l: This is a wholesaler operating in semiconductors and measuring equipment for non-scientific use; it is also present in the active electronic components sectors. It is based at Cernusco sul Naviglio (***).

Lattice Semiconductor S.r.l: created in ****, operates in the wholesale trade of semiconductors and is present in the Communication High Tech and telecommunications equipment sectors. It is based at Assago, Italy.

Green Power Solution S.r.l: serves customers worldwide with the semiconductor branch, responsible for a complea line of power diodes and thyristors, and with the solution-oriented branch, focused on a broad line of power modules for a variety of end-use applications, is based in Turin, Italy.

3.4 The main manufacturers

The main companies active in the semiconductor industry in Italy are listed below.

STMicroelectronics S.r.l: is an Italian-French manufacturer of semiconductor electronic components. It was formed in **** by the merger of Italy's SGS Microelectronica and France's Thomson Semiconducteurs. It is listed on Euronext Paris, the NYSE and the Milan Stock Exchange. In Italy it has concentrated its R&D programs at its Agrate and Catania sites. ST is among the founding members of several Technology Districts activated in Italy in agreement with the MUR. An important role is sallo development of silicon carbide, a material composed of silicon and carbon, the place where it works and studies is the historic Catania plant. ST maintains in-house manufacturing processes, placing the company among the few integrated device manufacturers (***).

mEMC Electronics Materials S.p.a: a company part of the GlobalWafers Co.Ltd (***) Group, specializes in the production of crystals and silicon wafers. It has two sites in Italy: in Novara and Merano. The Novara site has *** employees and is the Group's largest producer of ***mm silicon wafers; it is also the largest ***mm production plant in the entire EU. The Merano plant has *** employees and develops crystals of diveros diameters that ...

4.1 Supply analysis

At the root of the evolution of electronics are semiconductors, materials of a crystalline nature that have the characteristic of conducting electricity at intermediate levels with respect to a conducting or insulating material. Unlike metals, in fact, semiconductors maintain their ability to resist current flowing through them at ordinary temperatures and behaving as conductors as these temperatures increase. Several types of materials are used to make semiconductors in electronics. Some of these require "doping" in order for them to behave as semiconductors. Semiconductor doping is used to give resistivity to the material through which the current flows.

Semiconductor materials exhibit conductivity characteristics intermediate between the two extremes, represented on the one hand by "good conductors," such as copper, and on the other by "good insulators," such as quartz. So, they can be traversed by current, but in a way that allows them to manage the flow of electrical charges through them.

Among the materials whose conductivity we can control we have:

Silicon; Germanium; Gallium arsenide; Antimony.

These are the most widely used semiconductor materials in electronics technology, but the use of alloys, such as those of antimony and lead or the use of copper oxide, silicon carbide, and lead sulfide, is ...

4.2 The prices

The price of a CPU (***) is related to its most important technical characteristics, starting with the operating frequency and the number of cores and threads. Mid-range options range from €*** to €***.

Products such as Intel Core i*-***** can be purchased for less than €***, while a CPU such as AMD Ryzen * ****X*D can be purchased for about €***, as can multiple Intel Core i* alternatives. For higher performance you can find products above €*** such as Intel Core i* and AMD Ryzen *.

(***)

Generally speaking, it is very difficult to have an average semiconductor price for the wide variety of goods: it should be noted that a market price for a semiconductor family good, derived from information from a third-party source to the company, is difficult to construct; in addition, prices are subject to continuous fluctuations due to supply and demand imbalances.

The price of chips and multichips has seen significant increases in recent years. Specifically, at the end of **** chips were registering trend increases of +**%, while at the end of Q* **** the change increased to +**%. Same trend also for multichips, which at the end of **** recorded +**% year-on-year, then reached +**% at the end of Q* ****.

DRAM memory chip is a volatile memory capable ...

4.3 Trends in supply

Silicon photonics competition

At the Taiwan Semicon ****, one of the most important semiconductor events globally, the most talked about topic is the new silicon photonics technology that integrates optical components such as lasers with silicon-based integrated circuits to enable high-speed data transmission with longer transmission distance and low power consumption, using light instead of electrical signals. This innovation could make artificial intelligence applications, such as ChatGPT, even more powerful. Tech giants are investing heavily in the development of this technology, including Intel, Cisco, IBM and Huawei. The event also had sections dedicated to host countries, includingItaly, where Taiwanese companies can find opportunities for scientific and industrial collaborations as well as manufacturing investments. Trade between Italy and Taiwan is reported to be increasing. The role of the Italian ecosystem with regard to the adoption of silicon carbide semiconductors in the electric car industry, made possible by CNR-Imm, the University of Ctania and the company STMicroelectronics, which has been developing the use of this material in electronic circuits since ****, is recognized. (***)

Climate change

As part of the Taiwan Semicon ****, the Climate Equity Collaborative, a partnership oc-founded by the U.S.-based National Wildlife Federation, organized a session on the topic of climate change. ...

5.1 The legislation

In recent years, Italy has become increasingly aware of the need to address the growing demand for semiconductors, planning to allocate specific resources to support the sector, particularly in the research and production phase (***).

Among the most notable interventions appear to be the approximately *** million allocated in September **** by the then Ministry of Economic Development (***) activated at the European level on microelectronics. The resources allocated by the Ministry are aimed at "realizing and developing innovative microelectronic technologies and components in the areas of energy efficient chips, power semiconductors, smart sensors, advanced optical equipment and composite materials". This investment line was envisaged as a result of the increase in demand for semiconductors that has occurred since ****, linked -also- to the growing importance of semiconductors in the digitalization of the country and the increased diffusion of electric vehicles .

Italy's initiatives in this regard, in addition to the PNRR investments analyzed in the next section, included the allocation in March **** of more than * billion (***) to "promote research, development of microprocessor technology and investment in new industrial applications of innovative technologies, including through the reconversion of existing industrial sites and the establishment of new plants in the national territory."

Lastly, the Budget Law **** provided for ...

5.2 The incentives

NRP's support for high-tech investments

The Plan, specifically Mission *-Component * "Digitalization, Innovation and Competitiveness in the Production System," provides for the allocation of €*** million in grants (***) to support microelectronics innovation and technology projects, including semiconductor manufacturing, under "Investment * - High-tech investments." The intervention provides support for investment in civil works, facilities and advanced equipment that enable volume production of innovative materials and components in the field of microelectronics . The ambitious goal of the investment is to increase production capacity by at least ***,*** units, mainly for export, with an impact on employment of at least *** new jobs by June ****.

Transition *.*

Specifically regarding the latter initiative, the measure was planned as a structural intervention starting in September ****, under the name Industry *.*. Initially, it was aimed at supporting companies in the process of technological modernization of their assets and in research, development and innovation activities, the Plan has undergone several updates over time, in order to also introduce tax breaks for companies that invest in intangible assets and training *.* functional to technological transformation. In December ****, in view of the PNRR (***) intervention to support the digital transformation and transition of Italian companies, focusing on the modernization of tangible and intangible assets, but above all - ...

6.1 Segmentation

• STMicroelectronics S.r.l
• MEMC Electronics Materials S.p.a
• Technoprobe S.p.a
• LFoundry S.r.l
• SPEA S.p.a