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The European Union is determined to increase its commitment to chip manufacturing. The EU intends to invest 43 billion euros to make this achievable. This was announced with the unveiling of the European Chips Act. It would help the EU achieve its goal of doubling its existing market share to 20% by 2030. The European Chips Act should improve Europe’s chip market position.
Recent worldwide semiconductor shortages caused the closure of factories in a wide range of industries, from automobiles to medical equipment. In the automobile sector, for example, certain EU Member States’ production fell by a third in 2021. This highlighted the semiconductor value chain’s excessive global reliance on a small number of actors in a complicated geopolitical situation. However, it also demonstrated the significance of semiconductors to the whole European economy and society. The European Chips Act is meant to bolster Europe’s competitiveness and resilience while also assisting in the digital and green revolution.
Chips are vital components in many industrial value chains. New markets for the chip industry are emerging as a result of the digital revolution, including highly autonomous autos, cloud, IoT, connectivity (5G/6G), space/defense, computing capacity, and supercomputers. Semiconductors are also at the center of intense geopolitical competition, influencing countries’ ability to act (militarily, economically, and industrially) and promote digital transformation.
“Chips are necessary for the green and digital transition – and for the competitiveness of European industry,” said Margrethe Vestager, Executive Vice-President for a Europe Fit for the Digital Age. “We should not rely on one country or one company to ensure safety of supply. We must do more together – in research, innovation, design, production facilities – to ensure that Europe will be stronger as a key actor in the global value chain. It will also benefit our international partners. We will work with them to avoid future supply issues.”
Vibrant EU Semiconductor Industry
The EU Chips Act will capitalize on Europe’s strengths – world-class research and technology organizations and networks, as well as a slew of cutting-edge equipment manufacturers – while also addressing major flaws. It would result in a vibrant semiconductor industry, from research to manufacture, as well as a dependable supply chain. Together with EU Member States and foreign partners, it will mobilize more than €43 billion in public and private investments and put in place mechanisms to prevent, prepare for, predict, and quickly respond to any future supply chain disruptions.
“The European Chips Act will be a game changer for the global competitiveness of Europe’s single market,” said EU Commission President Ursula von der Leyen. “In the short term, it will increase our resilience to future crises, by enabling us to anticipate and avoid supply chain disruptions. And in the mid-term, it will help make Europe an industrial leader in this strategic branch. With the European Chips Act, we are putting out the investments and the strategy. But the key to our success lies in Europe’s innovators, our world-class researchers, in the people who have made our continent prosper through the decades.”
Chip Design, Production, Packaging, Supply
The European Chips Act would help ensure that the EU has the tools, skills, and technical capacities to become a leader in this sector beyond research and technology in terms of advanced chip design, production, and packaging, as well as to secure its semiconductor supply and lessen its reliance. The following are the major three components:
- Through the enhanced ‘Chips Joint Undertaking,’ which resulted from the strategic reorientation of the existing Key Digital Technologies Joint Undertaking, the Chips for Europe Initiative will pool resources from the Union, Member States, and third countries associated with existing Union programs, as well as the private sector. €11 billion will be made available to strengthen existing research, development, and innovation, as well as to ensure the deployment of advanced semi-conductor tools, pilot lines for prototyping, testing, and experimentation of new devices for innovative real-world applications, staff training, and the development of a thorough understanding of the semi-conductor ecosystem and value chain.
- A new framework to assure supply security by attracting investments and increasing manufacturing capacity, which is critical for advanced node innovation, as well as inventive and energy efficient chips, to thrive. In addition, a Chips Fund will make it easier for start-ups to get funding, allowing them to develop their ideas and attract investors. There will also be a specialized semiconductor equity investment fund under InvestEU to help scale-ups and SMEs expand their market.
- A method for monitoring semiconductor supply, calculating demand, and anticipating shortages between the Member States and the Commission. It will keep an eye on the semiconductor value chain by gathering vital information from enterprises in order to identify major flaws and bottlenecks. It will compile a unified crisis assessment and coordinate measures using a new emergency toolkit. It will also act quickly and decisively as a group, utilizing all available national and EU tools.
A companion Recommendation to EU Member States is also proposed by the Commission. It’s a tool that goes into action right away, allowing the coordination mechanism between the Member States and the Commission to get started right away.
“Without chips, no digital transition, no green transition, no technological leadership. Securing the supply in the most advanced chips has become an economic and geopolitical priority,” said Thierry Breton, EU Commissioner for Internal Market. “Our objectives are high: doubling our global market share by 2030 to 20%, and producing the most sophisticated and energy-efficient semiconductors in Europe. With the EU Chips Act we will strengthen our research excellence and help it move from lab to fab – from the laboratory to manufacturing. We are mobilising considerable public funding which is already attracting substantial private investment. And we are putting everything in place to secure the entire supply chain and avoid future shocks to our economy like we are seeing with the current supply shortage in chips. By investing in lead markets of the future and rebalancing global supply chains, we will allow European industry to remain competitive, generate quality jobs, and cater for growing global demand.”
Next Steps
Member States are encouraged to immediately begin coordination efforts in accordance with the Recommendation in order to gain a better understanding of the current state of the semiconductor value chain across the EU, anticipate potential disruptions, and take corrective action to address the current shortage until the Regulation is adopted. In the conventional legislative procedure, the European Parliament and Member States will debate the EU Commission’s recommendations for a European Chips Act. The Regulation will be immediately applicable across the EU if it is passed.
EU Commission President Ursula von der Leyen outlined the vision for Europe’s chip strategy in her State of the Union speech in 2021, calling for the creation of a state-of-the-art European chip ecosystem, including production, as well as the integration of the EU’s world-class research, design, and testing capabilities.
The President also paid a visit to ASML, a prominent participant in the worldwide semiconductor value chain situated in Eindhoven.
The European Commission formed the Industrial Alliance on Processors and Semiconductors in July 2021 with the goal of identifying current gaps in microchip manufacturing and the technological advances required for businesses and organizations of all sizes to succeed.
Along with other stakeholders, the Alliance will assist stimulate collaboration across existing and future EU programs, as well as serve as a crucial adviser and provide a strategic roadmap for the Chips for Europe Initiative.
