Europe Chemical Supply Chain – Impact of Fab Expansions

Risk of Supply Interruption Grows With an Increase in Imports

San Diego, CA, May 17, 2022:  TECHCET—the electronic materials advisory firm providing business and technology information— examined critical materials dependencies of Europe’s expanding chip-making industry. Six high purity chemicals were identified as having the highest risk of supply interruption by major Europe chip fabricators: liquid and gas hydrochloric acid (HCl), sulfuric acid (H2SO4), hydrofluoric acid (HF), ammonia hydroxide (NH4OH), and isopropyl alcohol (IPA). Demand for these materials is expected to grow 40+% over the next 5 years, as shown in TECHCET’s study titled “The Impact Of Chip Expansions On The Europe Wet Chemical Supply Chain Report.” By 2027, more than 50% of total demand will have to be supplied by imports should there be no additional expansion in local chemical production.

As indicated by the above Figure, TECHCET’s study shows that about 50% of the NH4OH is currently imported; other chemicals have a 20% to 30% dependency, with exception of HCl at < 10%. This picture will change in coming years as new fabs and new chip making capacity come online in Europe.

TECHCET anticipates a 5% CAGR (Compound Annual Growth Rate) growth in wafer starts from Europe-based semiconductor makers through 2027, with the ≤20 nm fabrication node capacity having the strongest growth. (This is nearly double the CAGR experienced over the past 5-10 years.) Europe demand of higher purity material is expected to climb as many of the fab expansions will include more leading-edge capacity. Consequently, the dependence on imported chemicals will rise unless investments are made for manufacturing ultra-high purity chemicals in Europe.

TECHCET sees the local chemical supply-chain as currently strained and challenged to try and supply the upcoming demand. Over the years, many chemical producers have shifted their focus on growing their production in Asia due to lower cost conditions and larger potential demand. This is causing a shrinking availability of locally produced chemicals.

Suppliers are open to investing in capacity and adding capabilities in Europe but find it difficult to meet corporate ROI expectations. Support is needed through co-investments, capital support (including government), and guidance and assistance with regulatory compliance. A return on investment needs to be realized as suppliers will not expand without margins or longer-term business to justify the investment. Multiyear supply commitment, predictable volumes, and reasonable expectations on pricing to spread/share risks are just a few criteria suppliers seek to address in deciding on an investment plan.

Given the supply chain constraints and chip industry growth expected in the next 3-5 years, the semiconductor makers in Europe should put in place strategies to support their demand for these key chemicals. Two key strategies should be considered: 1) look for alternative sources of supply, and 2) work with the government and/or investment community to bring more local chemical production back into Europe.

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ABOUT TECHCET:  TECHCET CA LLC is an advisory services firm focused on process materials supply-chains, electronic materials business, and materials market analysis for the semiconductor, display, solar/PV, and LED industries. Since 2000, the company has been responsible for producing the Critical Material Reports™, covering silicon wafers, semiconductor gases, wet chemicals, CMP consumables, Photoresists, and ALD/CVD Precursors. The Critical Materials Council (CMC) of semiconductor fabricators is a business service offered by TECHCET, and includes materials supplier Associate Members. For additional information about reports, market briefings, CMC membership, or custom consulting please contact, +1-480-332-8336, or go to