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The Semiconductor Industry in Latvia: An Opportunity Too Big to Miss

Latvia is on the brink of a significant transformation within the European Union’s growing semiconductor industry. This could be the industry Latvia has been searching for, enabling the country to carve out a significant role as the EU bolsters its technological autonomy, on the basis of Latvia's strong roots in the semiconductor industry.

This opens the possibility for Latvia to pursue a new vertical by establishing the semiconductor industry as a new priority, replacing current industrial focuses such as transit, banking, and tourism.

Components of the SemiconductorValue Chain in Latvia

The semiconductor industry is accessible to Latvia due to its detailed value chain and the existing know-how of local businesses, as well as academic and research institutions.

The development of the semiconductor industry is based on what is known as the semiconductor value chain (hereinafter – value chain). The value chain in essence is a series of nine steps involved in the design, production, and distribution of semiconductor devices, like microchips and integrated circuits, which are essential components of modern electronics.

Given the industry's value chain is set to exceed 900 billion US dollars in 2024, and with it encompassing over 250'000 hardware components, a vast network of businesses will be necessary to manufacture these components, thereby opening up significant opportunities for Latvian enterprises.

This means the value chain offers varying levels of entry for investment. For example, investment can be smaller for businesses that support the production process of semiconductor devices such as clean room clothing, or larger such as the development of new variations of semiconductor devices themselves. Opening possibilities for established enterprises, for example, AS “RD ALFA Microelectronics”AS “Alfa RPAR”, AS “KEPP EU”, and newcomers SIA “Wiseberg Technology” and SIA “OG Sense”.

For Latvia to become a part of the European or global value chain, it must also focus on exporting. This is the reason why Latvia needs to utilize its geographical positioning by doubling down on its long-standing tradition of export production. Examples of this are AS“HansaMatrix” and SIA “SMD Baltic” which export a significant portion of their production of high technology equipment to other European countries and beyond.

Additionally, Latvia must leverage its skilled workforce to become an integral part of the ever-evolving value chain. Riga Technical University and the University of Latvia offer robust programs in engineering, physics, and computer science, producing graduates suited for the semiconductor industry.

The establishment of the chip design and testing laboratory under the supervision of Riga Technical University can aid in the development of new services in the value chain. With the development of a Competence Centre in Semiconductors, Latvia is in its first steps of establishing the required research and development facilities for the support of local and international semiconductor industry players.

Therefore, Latvia presents opportunities for a variety of businesses to enter the value chain, benefiting from strong transport links that support exports. The development of specialized educational and research facilities further strengthens Latvia’s potential in this evolving industry.

The Role of the EU Chips Act and Private Funding Opportunities

Latvia has the tools available to pursue the development of the semiconductor industry based on initiatives established by the European Union’s Chips Act (hereinafter – Chips Act). The Chips Act outlines activities aimed at supporting research and development, incentivizing public and private investments in manufacturing, and coordinating among EU institutions.

Crucially the EU Chips Fund, which is part of the Chips Act, provides possibilities for the development of the semiconductor industry in Latvia. The Chips Fund includes funding from the EU budget for 4.2 billion euros, matching funding from the EU member states, and aims to mobilize another 43 billion euros of private investments.

Latvia has also to consider private investments in infrastructure and the development of the semiconductor industry. Larger market players such as Samsung Electronics Co. Ltd. and SK Hynix Inc. are spending 471 billion US dollars, to establish a new chip hub in South Korea. Intel is set to invest over 100 billion US dollars into its sites in the US and receive funding in the amount of 8.5 billion US dollars from the US government.

Under the Chips Act, Latvia can access significant funding aimed at boosting its local semiconductor industry activities. This includes a blend of EU budget funds, member state contributions, and private investments, mirroring global trends like Intel's and Samsung's investments in their respective countries.

Latvia's Opportunity in the Growth of theSemiconductor Industry: Learning from Neighbours

Latvia has to seize the opportunity and start the development and promotion of the semiconductor industry. Considering that Intel has plans to invest up to 4.6 billion dollars to build an assembly and test facility in Poland, the opportunities with each passing month are utilized by similarly situated countries. An additional example is Lithuania’s BROLIS which develops a wide range of electro-optical systems and components that in quality rival those produced by Silicon Valley industry giants.

Latvia is in an advantageous position for the development of the semiconductor industry, but it has to capitalize on the already existing infrastructure and its development. Therefore, achieving a swift inclusion in the EU and the global value chain of the semiconductor industry. Moreover, it will be of crucial importance in the coming years for the public and private players in Latvia to cooperate and facilitate a legal framework as well as the necessary funding to aid businesses in the pursuit of carving out a place in the semiconductor industry.

If you are interested in the semiconductor industry or have ideas for the sector's development, please contact us. We would be happy to discuss your interests and ideas.