News & Articles
October 28, 2024
Semiconductor Supply Chain Event Spotlight: Latvia Making First Steps into a New Era
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On September 6th, 2024, Venture Faculty, in collaboration with the Ministry of Economics, the Investment and Development Agency of the Republic of Latvia, the Latvian Chamber of Commerce and Industry, and Riga Technical University, organized a panel discussion event titled “Start-up of Latvia's Semiconductor Supply Chain Industry.”
The event aimed to clearly highlight the opportunities for Latvia to position itself as a competitive player in the emerging $900 billion supply chain market, which is crucial for the semiconductor industry's existence and is supported by the EU's Chips Act.
There are over 250,000 components, each requiring a dedicated business for manufacturing. This presents an opportunity for the creation of new businesses or the refocusing of existing ones in Latvia, establishing a new vertical in Latvia’s industrial landscape. Therefore, the primary goal of the event was to explore how Latvia could capitalize on its historical strengths in electronics and its academic prowess to build a robust semiconductor supply chain ecosystem. By fostering cooperation between the public and private sectors, the event sought ways to unlock new business opportunities and attract global investment.
Minister of Economics: A Keynote Address on Industry Growth
Victors Valainis, Latvia's Minister of Economics, opened the event with a powerful keynote speech, emphasizing the vital role the semiconductor industry plays in the economy and its strategic importance on the global stage. Highlighting the government's commitment to supporting this high-tech sector, the minister assured the audience that the Ministry of Economics is willing to provide the necessary framework and resources to foster growth, attract foreign investments, and establish Latvia as a key player in the European semiconductor supply chain.
Why the Semiconductor Supply Chain Industry Is Critical for Latvia?
The first panel, titled “Semiconductor Supply Chain Industry – Why is it so important for Latvia?” delved into the strategic importance of the semiconductor industry for Latvia and the global market. Moderated by Venture Faculty Semiconductor industry development coordinator Edgars Poga and leading industry figures, the panelists included:
The discussion centered on Latvia's potential to position itself within the global semiconductor value chain, focusing on key areas such as infrastructure development, government policies, and industry alignment with global trends. Panelists highlighted that Latvia’s historical background in electronics and its educated workforce offer a strong foundation. However, challenges such as underrepresentation of key supply chain sectors (e.g., materials and component manufacturing), along with high energy pricing, were noted as hurdles to overcome. Additionally, noting market entry barriers due to the fact that electronics manufacturers are conservative in selecting vendors, making it difficult for new entrants to secure clients and penetrate the market.
Key Recommendations:
1. Diversify Production: Contribute through manufacturing smaller components, specialized materials, and gases essential for semiconductor fabrication. For instance, Latvian companies can produce process gases like argon, which are in high demand in chip fabrication, as well as cleanroom clothing and metal components like nuts, bolts, and washers.
2. Leverage Existing Strengths: Utilize Latvia's expertise in photonics and quantum computing, where there is existing know-how in research and academic institutions, to add high value to the semiconductor supply chain. For example, focusing on materials science, specifically on substances like Perfluoroalkyl and Polyfluoroalkyl Substances (PFAS), where Latvia is one of the strongest countries in the region.
3. Support for Investments in Infrastructure: For the semiconductor supply chain industry to thrive in Latvia there is a requirement to upgrade existing facilities and provide financial support for the refurbishment of critical manufacturing infrastructure, especially in the areas of component production and materials science.
4. Utilize the opportunities provided by the European Chips Act: Capitalize on opportunities provided by the European Chips Act to develop a resilient local supply chain and reduce dependency on external sources, thereby utilizing the challenge of supply chain interruptions as an opportunity.
5. Government Support: Introduce favorable taxation policies and reduce administrative burdens to attract international industry players and investors.
Investment and Cooperation to Drive Industry Growth
The second panel, “Investment and Cooperation within the Development of the Semiconductor Supply Chain Industry,” focused on the financial and collaborative frameworks necessary to build Latvia’s semiconductor ecosystem. The panel moderated by Deniss Čamovs, Senior Investment Advisor at the Investment and Development Agency of Latvia, featured a lineup of influential voices:
This panel explored how international collaboration, venture capital, and public-private partnerships can serve as catalysts for growth. The speakers emphasized that while Latvia has the potential to attract significant foreign investments, the country needs a clear roadmap and enhanced funding mechanisms, particularly for early-stage startups in the semiconductor supply chain industry. Additionally, the panel highlighted that administrative burdens and a lack of streamlined processes for starting a business make Latvia less competitive compared to neighboring countries.
Key Recommendations:
1. Establish a Profit Center: Establishing a profit center for the semiconductor supply chain industry is crucial to support startups and attract relocating businesses. It addresses key challenges such as supply chain management, market entry, and talent acquisition by offering business incubation, logistics support, and R&D collaboration. This center will drive innovation, improve operational efficiency, and foster stronger industry relationships, aligning with Latvia’s strategic goals to enhance its role in the global semiconductor supply chain.
2. Develop a Clear Roadmap: Create and publicize a strategic plan outlining priority areas and government-supported industries to provide certainty for investors. Defining industries supported by the government can create a more stable and predictable environment.
3. Co-Financing Instruments: Introduce funding mechanisms to assist startups in launching their first products, making Latvia more competitive. Address the lack of co-financing instruments for startups, which currently hinders their ability to bring products to market.
4. Support Commercialization: Utilize platforms like the Commercialization Reactor and the European Institute of Innovation and Technology (EIT) community to help transition lab innovations to market-ready products. These avenues offer support for commercialization efforts.
Attracting Talent to Latvia’s Semiconductor Sector
The final panel, “Attraction of Talent to the Latvian Semiconductor Supply Chain Industry,” tackled one of the most pressing issues for Latvia's semiconductor ambitions: the shortage of skilled talent. Moderated by Maija Dobele, Organization Development Consultant at BLEND Consulting Latvia, the panel featured:
The panelists discussed strategies for attracting and retaining top talent, both from within Latvia and from abroad. They noted that Latvia faces a significant shortage of STEM graduates with only 22% of Latvian graduates in STEM fields which will result in the situation that by 2030, Latvia anticipates a shortage of 9,000 STEM professionals and 70,000 individuals in general professional education. Therefore, the panel highlighted the need to develop specialized education programs tailored to the semiconductor industry, similar to what has been done in Taiwan and Netherlands. The discussion also touched on the importance of developing government-issued guidelines outlining best practices for compensation and benefits to assist employers in meeting talent expectations, offering competitive compensation packages and streamlining the immigration process to make Latvia more appealing to foreign experts.
Key Recommendations:
1. Promote STEM Education: Implement programs to encourage school children to pursue STEM fields, addressing the future talent shortage. Existing initiatives like the Latvia Education Accelerator, in cooperation with the Ministry of Economics, aim to promote possibilities to children from the earliest stages of their education.
4. Educational Collaboration: Partner with academic institutions to create specialized semiconductor programs, learning from models in other countries. For example, Lithuania cooperated with market participants to develop a study program at the University of Kaunas tailored to industry needs.
3. Attractive Compensation Packages: Offer competitive benefits, including equity, performance pay (bonuses), and pension schemes, to attract and retain top talent. Considering larger benefit packages can make Latvia more appealing to professionals.
4. Relocation Support: Provide comprehensive relocation assistance, including family support services, to make Latvia an appealing destination for foreign professionals. This aligns with a "family first" approach and includes providing information about children's education and development activities.
5. Establish a "green channel" or similar initiatives to expedite the entry of high-value industry players and talents into the Latvian market. Plans to develop such a green channel are already underway from the government side.
Conclusion: Setting the Stage for Latvia’s Part in the Future of Semiconductor Manufacturing
The event unveiled a wealth of insights, challenges, and strategic recommendations for the development of Latvia’s semiconductor supply chain industry. The panel discussions highlighted the urgent need for infrastructure upgrades, targeted action plan for investments, and the attraction of top talent to ensure Latvia can compete in the global semiconductor supply chain market.
With these recommendations and a roadmap now shared with public institutions, the next steps will be crucial in translating these recommendations into actionable policies and initiatives. As the global semiconductor market continues to grow, Latvia is well-positioned to carve out a significant role within the supply chain. The collaborative spirit fostered at this event is just the beginning of Latvia’s journey to becoming a key player in the high-tech, high-value semiconductor supply chain industry.
The link to the livestream of the panel discussions is available here.
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.
