Semiconductors (2024)
The hottest commodity in tech
Last updated: 4 Jan 2024
Market 101
Tiny bits of silicon are suddenly very big news. Chips are our most important bit of hardware, essential for the energy transition — they go into electric vehicles and wind turbines — for AI tools and sophisticated military tech. They’re key to the digitalisation of… well, everything.
Advanced chipmaking equipment is a hidden European strength, notwithstanding Silicon Valley-based NVIDIA’s near total lock on specialised chips to power AI products. European success stories include the region’s most valuable technology company, Eindhoven-based ASML, which holds a global monopoly on extreme ultraviolet lithography machines, and Germany’s Carl Zeiss SMT, the only manufacturer of the mirrors and lenses used in the world’s most advanced chipmaking equipment. But there are strategic holes in the region too — and this is worrying leaders.
The market has moved dramatically in favour of companies building graphics processing units (GPUs), the workhorses that underpin what’s likely to be the defining tech advance of the decade: generative AI. This arms race for chips has prompted a host of European startups — Mistral AI, Stability AI and Aleph Alpha among them — to raise monster rounds to pay the tens of millions of pounds needed to train so-called AI language models.
In 2024, expect to see chips fully on the menu, with European governments piling money into factories and frontier research to build domestic capacity. The EU has a lofty goal to manufacture 20% of the world’s chips by 2030 (up from 10%) and the recently agreed EU Chips Act commits €43bn to bolster the bloc’s semiconductor scene. It’s a lot of money, of course, but slightly less than the sum promised in the US CHIPS & Science Act — $52bn for manufacturing and R&D — and a lot less than China’s commitment of $150bn over 10 years to grow its semiconductor industry.
Europe is home to 8.6% of VC-funded semiconductor startups globally, according to EU figures, compared to 18% in the US, where there are far more specialist VC firms. China, meanwhile, is home to 60% of funded startups, having made chips a strategic priority¹.
Early stage market map
Key facts
1,400
chips go into an average car
$97.8k
is the current price of a NVIDIA chip on online hardware store CDW2
€43bn
amount promised by the EU to support chip development3
Trends to watch
Scramble for AI chips
Bespoke AI chipmakers — and there’s only a handful of them — are in their element. This ChatGPT-obsessed market is almost completely dominated by NVIDIA, which develops the high-powered GPUs that have become vital to AI.
Everyone’s desperate for GPUs — Elon Musk has joked that they’re harder to get than drugs — but if startups prefer not to buy them outright, they can rent AI processing capacity from the cloud computing operators — Google, Amazon Web Services and Microsoft — or book space on supercomputers. Helsinki’s Silo AI, for example, has got around the high demand for NVIDIA processors by making use of the European supercomputer LUMI.
UK-based Graphcore, meanwhile, has been touted as a potential AI chip upstart. But the company has faced a tricky period, with accounts showing that the unicorn’s revenues hit just $2.7m in 2022, falling 46% from the previous year “due to lower hardware sales to key strategic customers”. Its losses mounted 11% to $204.6m in the same period. A Sifted analysis points to a combination of “bad luck and bad management”.
Talent’s chipping away
You need brilliant technicians in order to make semiconductors — but Europe has a looming talent shortage. In Germany, 28% of electrical engineering experts and 33% of engineering supervisors producing semiconductors will reach retirement age within the next 10-12 years, according to the Cologne Institute for Economic Research.
EU programmes like the European Chips Skills 2030 Academy — to be established by a group of 18 manufacturers, industry groups, universities and other educational institutions — could help grow the pipeline, with its aim of training up 500k microelectronics experts in the coming decade.
Can Germany boost chip lead?
Every third semiconductor made in Europe comes from Saxony, Germany, earning the state the moniker “Silicon Saxony”. Companies such as Infineon, Bosch and Globalfoundries have made the region a global semiconductor centre.
American chip giant Intel plans to open a factory in Germany and it’s rumoured that Taiwan Semiconductor Manufacturing Company, which has a near monopoly on semiconductors below 10 nanometres, will also build a plant in the country someday.
Startups tracked by Sifted
Sifted take
European politicians are rightly worried about being left in the dust in the global chips race. We’re still waiting to see a European chipmaker that can help develop chatbots and other rapidly evolving AI services. The subsidy splurge in Brussels will help — there’s billions of pounds promised to aid early-stage startups — but the region also needs to get ahead of a skilled worker shortage with strategies focused on education and upskilling and perhaps reforming immigration laws to make it easier for skilled workers to relocate to Europe.
Rising stars
Cambridge-based semiconductor startup raised its seed round in April 2023 from BGF, Foresight Group and Science Creates Ventures. The company helps simplify the design of smartphones.
Round
Seed
Valuation
Undisclosed
Date
2023
Size
€8m
Eindhoven University of Technology spinoff MantiSpectra, which creates miniaturised spectral sensors, raised its seed round in September 2023 from Innovation Industries, PhotonDelta and PhotonVentures.
Round
Seed
Valuation
Undisclosed
Date
2023
Size
€4.0m
Sheffield-based Phlux Technology raised its seed round from Octopus Ventures and Foresight Williams in December 2022 to build high-performance infrared sensors.
Round
Seed
Valuation
Undisclosed
Date
2022
Size
€4.8m
Backed by investors including High-Tech Gründerfonds, Excellis and Zürcher Kantonalbank, this startup aims to improve AI chip performance.
Round
Seed
Valuation
Undisclosed
Date
2022
Size
€1.5m
Early stage startups to watch
AlixLabs
Manufacturing
Semiconductors
€5.1m
€3.3m
€2.9m
Ceryx Medical Ltd
Chip design
€6m
€4.6m
-
ChipFlow
Chip design
€1.3m
€1.2m
€5.4m
EMC Gems S.r.l.
Chip design
-
-
-
Forefront RF
Chip design
€10m
€8m
-
Innatera Nanosystems
Neuromorphic chips
€7.5m
€2.5m
-
Inphocal
Lasers & imaging and sensors
€4.8m
€2.5m
-
Intrinsic Semiconductor Technologies Ltd
Memory technology
Memory
€9.8m
€8m
-
IPRONICS PROGRAMMABLE PHOTONICS S.L.
Photonics
€8.9m
€3.7m
-
Kubos Semiconductors
Photonics
€1.5m
€810k
-
MantiSpectra
Lasers & imaging and sensors
€4.7m
€4m
-
MintNeuro
Neuromorphic chips
€650k
-
-
ONiO
Lasers & imaging and sensors
€6.8m
€2m
-
Phlux Technology
Lasers & imaging and sensors
€5.2m
€4.8m
-
Q5D Technologies
Manufacturing
€5
€3.5m
-
Salience Labs
AI chips and tools
AI chips
€16.4m
€2.4m
-
Siloton
Lasers & imaging and sensors
€904k
€566k
-
Sorex Sensors
Lasers & imaging and sensors
€2.5m
€1.1m
€5.1m
SPHERICAL
Chip design
€1.1m
€635k
-
Synthara AG
AI chips and tools
€8.5m
€1.5m
-
TherMap Solutions
Data
€180k
€540k
-
Tropic Square
Cyber security, Fabless chip design
€4m
€4m
-
Vaire Computing
Chip design
-
-
-
VoxelSensors
Lasers & imaging and sensors
€9.3m
€8m
-
VSORA
AI chips and tools
AI chips
€5.4m
€13m
-
Zero Point Motion
Lasers & imaging and sensors
€3.1m
€3.1m
-
ZeroPoint Technologies
Memory technology
Memory
€9.5m
€3.2m
€12.5m
Europe’s success stories
Who early stage startups are up against
(Pre-)Seed
Series A
Series B
Series C
Series D+
IPO/Exit
Investors including M&G Investments, Latitude and British Patient Capital pumped £162m into the Cambridge-based company in December 2023, as it ramps up manufacturing of “ultra-thin” microcircuits.
(Pre-)Seed
Series A
Series B
Series C
Series D+
IPO/Exit
Bristol-based Graphcore is developing a microprocessor for AI and machine learning applications for various use cases in industries such as finance and biotech.
(Pre-)Seed
Series A
Series B
Series C
Series D+
IPO/Exit
French company Aledia develops micro-LED technology and counts Intel Capital and Sofinnova Partners as investors in its cap table.
(Pre-)Seed
Series A
Series B
Series C
Series D+
IPO/Exit
Developer of high-speed, energy-efficient chips that raised a $100m Series E round in December 2023.
Sources
News articles
1 EU launches chips partnership with €1.7B for pilot lines | December 2023 | Science|Business
An assessment of the European microchip industry and its expansion strategy | January 2023 | Beyond the Horizon International Strategic Studies Group (BtH)
3 European Chips Act | 2023 | European Commission
13 semiconductor startups to watch, according to investors | December 2023 | Sifted
Europe’s semiconductor startups, in data | June 2023 | Sifted
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