Toni Mattila of Business Finland and Joonas Mikkilä from Technology Industries of Finland explain how Finland’s semiconductor and microelectronics value chains position the country well to help transform the European chip industry.
Finland has identified significant growth potential that derives from the global restructuring of semiconductor and microelectronics value chains and the European Chips Act in particular. The industry-driven national growth strategy, Chips from the North, presents a plan for an over 10% annual growth rate of the industry, more than tripling its size in under a decade.
Finland is in a particularly good position to seize this opportunity because of the recent transformation of the industry and the large number of new deep tech companies established over the past decade, combined with the long-term investments in education, research, and development.
2010s: A time of transformation and renewal
Since the 1930s, the Finnish electronics industry has been driven by large, globally operating corporations such as Salora, Vaisala, Kone, Strömberg (today part of ABB) and Nokia. Over the years, Finland developed a wide ecosystem of suppliers and subcontractors that, in the late 1990s, covered almost the entire value chain from production of silicon wafers to manufacturing and assembly of a wide range of end-products, ranging from industrial power generators and weather sensors to consumer radios, personal computers, and mobile phones.
In 2013, Nokia decided to focus on telecom networks and leave the mobile phone business behind and unintentionally initiated a significant transformation of the industry at the national level. In hindsight, timing of this decision could not have been better, given that a few years prior Finland had been taken by the storm of entrepreneurship and was in the height of the startup boom. Because of this, the eyes of many foreign companies happened to be in Finland. For a brief moment there was an window of opportunity for them to hire entire divisions and specialised teams to start their local subsidiaries.
The influx of innovative individuals into the market accelerated Finland’s startup boom. At the same time, VTT Technical Research Center of Finland started to spin out companies from their internal projects. These events together sparked a nationwide transformation of the microelectronics and photonics landscape. Today, there are close to 300 companies in this sector – most of which are still SMEs with vast growth potential.
Key areas of leading-edge expertise today
Finland’s strengths in the microelectronics industry are rooted in several specialised domains, many of which derive from the past investments in the telecom sector. One of the most significant spillover sectors is electronics design, especially chip design. Today, there are well over 20 companies specialising in designing integrated circuits for various purposes.
The leading-edge expertise is not limited to design, however. There are also several suppliers in advanced materials and processing technologies of semiconductors – a particular highlight being the atomic layer deposition (ALD), which is a technology needed in fabrication of the most advanced chip nodes. ALD was originally developed in Finland in the 1970s and there are several companies specialised in developing the technology and its applications today.
Sensors are another key area of leading-edge expertise. The specific skills and expertise are related to Micro-Electro Mechanical Systems (MEMS)-based inertial and environmental sensors, as well as optical sensors. While most of the sensors produced in Finland today are used in healthcare, automotive, and industrial automation sectors, a significant contribution to advancing MEMS technology is attributed to Vaisala – a company known for its work in weather monitoring and pressure sensors based on MEMS.
Photonics is another area where Finland has cumulated world-leading expertise, especially with the contributions to the development of optical light sources (lasers), optoelectronics, optical waveguides, and various systems of imaging and sensing. On the horizon are also optical storage technologies based on nano-photonics and silicon photonics. Finnish expertise in quantum technologies is also noteworthy, with several research institutions and companies working on quantum computing, quantum communication, and quantum sensing. IQM of Finland was one of the first companies in the world to make quantum computers commercially available.
Secret sauce of Finnish innovation: Collaboration
Collaboration between industry, academia, and the public sector is a key driver of innovation in Finland. The country’s strong research and development ecosystem fosters a culture of collaboration, enabling the exchange of knowledge and resources between trusted partners. This collaborative approach has proven to accelerate innovation and new product development to a significant degree. This type of wide and large-scale collaboration was a key factor, for example, in Nokia’s success during its greatest growth years in the 1990s and early 2000s.
Finland’s future potential
The Finnish semiconductor and microelectronics sector uniquely combines significant growth potential, positive economic impacts, and a close connection to EU technology and industrial policies.
Provoked foremost by advancements in artificial intelligence (AI), the global semiconductor market is widely anticipated to reach approximately €1tr by the end of the decade. However, the Finnish chips industry is well-positioned to grow even faster. According to the projections outlined in the 2024 national semiconductor strategy of Finland, the industry is expected to more than triple its revenue, to €5-6bn by 2035, and to double the workforce to 20,000 employees.
The industry strategy pinpoints six growth areas in Finland, all grounded in extensive research and education and world-class products. These areas are: chip design; MEMS and sensor innovations; photonics; quantum technologies; advanced materials; and sustainable process technologies.
Global challenges and Europe’s response
The COVID-19 pandemic and ongoing geopolitical tensions have exposed the fragility of global semiconductor supply chains. Chips are produced in intricate, optimised global networks, with no single country, region, or company dominating every step of the supply chain. In response, governments worldwide, acknowledging the strategic importance of semiconductors for national security and economic success, have committed significant resources to supporting their domestic industries.
The EU has labelled advanced semiconductors as critical technologies within its economic security framework, highlighting the pivotal role chips play in the bloc’s strategic autonomy and competitiveness. However, since the early 2000s, Europe has seen a decline in its chip manufacturing capabilities and an increased reliance on external suppliers. Therefore, the EU’s 2023 Chips Act aims to double Europe’s global semiconductor market share to 20% by 2030.
Finland set to play an outsized role in revitalising the European chip industry
Given its long background in the industry and accumulated knowhow, Finland has the potential to make a considerable contribution to the modernisation of the European semiconductor industry. The country also stands to gain significantly from both private and public investments in this sector.
However, capitalising the growth opportunities demands decisive action to meet the sector’s demands for talent as well as capital investments. The national chip strategy promotes the enhancement of R&D efforts, the improvement of workforce both in terms of quantity and quality, and domestically and internationally, and the attraction of capital investments to design and R&D centres and manufacturing facilities alike.
While companies bear the primary responsibility for these initiatives, the government and universities play a key role in achieving the goals, especially with the aim to shorten the lab-to-fab time. To the Finnish government’s credit, it has made considerable investments into the domain by providing funding for EU-supported pilot line infrastructures and the chips competence centre, about to come online in the next few years.
For the strategy’s successful execution, a closer collaboration between the industry and its stakeholders is crucial, especially in terms of engaging with the EU and navigating an increasingly volatile business environment. Here, Technology Industries of Finland’s Semiconductor Branch Group, Business Finland and local hubs provide vital platforms for public-private engagement.
Please note, this article will also appear in the 21st edition of our quarterly publication.
