Europe plans a Chips Act to boost semiconductor sovereignty

·4-min read

The EU will use legislation to push for greater resilience and sovereignty in regional semiconductor supply chains.

The bloc's president trailed a forthcoming "European Chips Act" in a state of the union speech today. Ursula von der Leyen suggested that gaining greater autonomy in chipmaking is now a key component of the EU's overarching digital strategy.

She flagged the global shortage of semiconductors, which has led to slowdowns in production for a range of products that rely on chips to drive data processing -- from cars and trains to smartphones and other consumer electronics -- as driving EU lawmakers' concern about European capacity in this area.

"There is no digital without chips," said von der Leyen. "While we speak, whole production lines are already working at reduced speed -- despite growing demand -- because of a shortage of semi-conductors.

"But while global demand has exploded, Europe's share across the entire value chain, from design to manufacturing capacity has shrunk. We depend on state-of-the-art chips manufactured in Asia. So this is not just a matter of our competitiveness. This is also a matter of tech sovereignty. So let's put all of our focus on it."

The Chips Act will aim to link together the EU's semiconductor research, design and testing capacities, she said, calling for "coordination" between EU and national investments in this area to help boost the bloc's self-sufficiency.

"The aim is to jointly create a state-of-the-art European chip ecosystem, including production. That ensures our security of supply and will develop new markets for ground-breaking European tech," she added.

The EU president couched the ambition for bolstering European chip capacity as a "daunting task" but likened the mission to what the bloc did with its Galileo satellite navigation system two decades ago.

"Today European satellites provide the navigation system for more than 2 billion smartphones worldwide. We are world leaders. So let's be bold again, this time with semi-conductors."

In follow-up remarks, the EU's internal market commissioner, Thierry Breton, put a little more meat on the bones of the legislative plan -- saying the Commission wants to integrate Member State efforts into a "coherent" pan-EU semiconductor strategy and also create a framework "to avoid a race to national public subsidies fragmenting the single market".

The aim will be to "set conditions to protect European interests and place Europe firmly in the global geopolitical landscape", he added.

Per Breton, the Chip Act will comprise three elements: Firstly, a semiconductor research strategy that will aim to build on work being done by institutions such as IMEC in Belgium, LETI/CEA in France and Fraunhofer in Germany.

"Building on the existing research partnership (the KDT Joint Undertaking), we need to up our game, and design a strategy to push the research ambitions of Europe to the next level while preserving our strategic interests," he noted.

The second component will consist of a collective plan to boost European chipmaking capacity.

He said the planned legislation will aim to support chip supply chain monitoring and resilience across design, production, packaging, equipment and suppliers (e.g. producers of wafers).

The goal will be to support the development of European "mega fabs" that are able to produce high volumes of the most advanced (towards 2nm and below) and energy-efficient semiconductors.

However, the EU isn't planning for a future when it can make all the chips it needs itself.

The last plank of the European Chip Act will set out a framework for international co-operation and partnership.

"The idea is not to produce everything on our own here in Europe. In addition to making our local production more resilient, we need to design a strategy to diversify our supply chains in order to decrease over-dependence on a single country or region," Breton went on. "And while the EU aims to remain the top global destination of foreign investment and we welcome foreign investment to help increase our production capacity especially in high-end technology, through the European Chips Act we will also put the right conditions in place to preserve Europe’s security of supply."

"The US are now discussing a massive investment under the American Chips Act designed to finance the creation of an American research centre and to help open up advanced production factories. The objective is clear: to increase the resilience of US semiconductor supply chains," he added.

"Taiwan is positioning itself to ensure its primacy on semiconductor manufacturing. China, too, is trying to close the technological gap as it is constrained by export control rules to avoid technological transfers. Europe cannot and will not lag behind."

In additional documentation released today, the EU said the Chips Act will build on other digital initiatives already presented by the von der Leyen Commission -- such as moves to contain the power of "gatekeeper" internet giants and increase platforms' accountability (the Digital Markets Act and Digital Services Act); regulate high-risk applications of AI (the Artificial Intelligence Act); tackle online disinformation (via a beefed up code of practice); and boost investment in regional digital infrastructure and skills.

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