The European Commission has proposed the Chips Act to overcome semiconductor shortages, bolster Europe’s technological leadership, and double semiconductor market share.
On 8 February 2022, the Commission launched a systematic set of procedures to make sure that the EU’s security of supply, resilience and technological leadership in semiconductor technologies and applications. It is anticipated that the European Chips Act will reinforce Europe’s competitiveness, resilience and assist with the transition to a green and digital future.
Semiconductors necessary for everyday life
Chips are strategic assets for core industrial value chains. With the digital transformation, novel markets for the chip industry are evolving, including highly automated cars, cloud, IoT, connectivity (5G/6G), space and defence, computing abilities and supercomputers. As well as this, semiconductors are also at the core of strong geopolitical interests, conditioning countries capacity to act and drive digital innovation.
The recent global shortage of semiconductors forced factory closures in sectors ranging from healthcare devices to automobiles. In the car industry, manufacture rates in some member states fell by one third in 2021.
This shortage highlighted the global dependency on the semiconductor value chain, which lies in the hands of a small number of actors in a complex geopolitical context. As well as this, it served to demonstrate the necessity of semiconductors in the function of the European industry and society.
The EU Chips Act will bolster Europe’s strengths – world-leading research and technology organisations and networks, as well as a host of innovative equipment manufacturers. On top of this, it will counter current weaknesses.
Enhancing Europe’s semiconductor market share
The Act is expected to give rise to a flourishing semiconductor sector – from research to production – as well as a robust supply chain. Mobilising over €43bn of public and private investments, the act will establish ways to counteract, plan, foresee and rapidly react to any further supply chain disruptions.
It is hoped that these efforts will allow the EU to meet its ambitious target to double its current market share to 20% in 2030. On top of this, it will guarantee that the EU has the tools, skills, and technological capabilities it needs to become a leader in this field beyond research and technology in design, manufacturing and packaging of advanced chips and to protect its supply of semiconductors and to decrease its dependencies.
A competitive Europe
Commission President Ursula von der Leyen commented: “The European Chips Act will be a game changer for the global competitiveness of Europe’s single market. 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.”
Avoiding supply issues
Margrethe Vestager, Executive Vice-President for a Europe Fit for the Digital Age, explained: “Chips are necessary for the green and digital transition – and for the competitiveness of European industry. 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.”
Semiconductor chips for a greener and more digital world
Thierry Breton, Commissioner for Internal Market, added: “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. 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.”
Towards an innovative future
Mariya Gabriel, Commissioner for Innovation, Research, Culture and Youth, concluded: “The Chips for Europe Initiative is closely linked to Horizon Europe and will rely on continuous research and innovation to develop the next generation of smaller and more energy-efficient chips. The future initiative will offer a great opportunity for our researchers, innovators, and start-ups to lead on the new wave of innovation that will develop deep tech solutions based on hardware. Chips development and production in Europe will benefit our economic actors in key value chains and will help us attain our ambitious objectives in construction, transport, energy and digital.”
Going forward
The Commission is encouraging Member States to begin their organisation efforts in line with the proposal in order to comprehend the current status state of the semiconductor value chain across the EU, to foresee possible disturbances and take measures to overcome the current shortage until the Regulation is adopted. The European Parliament and the Member States must discuss the Commission’s proposals on a European Chips Act in the ordinary legislative procedure. If adopted, the Regulation will be directly applicable across the EU.
