European Chips Act: A Move To Boost Europe’s Share Of Global Production

As the global demand for chips, which are used from smartphone to automobile industries, continues to grow, in Europe, the College of Commissioners have adopted the “European Chips Act” on 8 February with an aim to significantly increase semiconductor production in the bloc and become a global leader in the industry.

The Commission's decision comes amid a global chip scarcity and supply chain issues that wreaked havoc on automakers, healthcare providers, telecommunications companies and others. According to industry experts, this issue would last until early 2023.

In a statement, Commission President Ursula von der Leyen, said: “We have set ourselves the goal to have, in 2030, 20 per cent of the global market share of chips production, here in Europe. Right now, we are at 9 per cent, we want to go to 20 per cent in 2030. But knowing that the demand in the global market will double during that time, it basically means quadrupling our efforts.”

According to the statement, the Chips Act is expected to enable $17 billion in additional public and private investment until 2030.

While referring to ongoing EU projects, Von der Leyen said: “This comes on top of EURO 30 billion ($34 billion) of public investments that we have already planned, for example in NextGenerationEU, in Horizon Europe or in the national budgets. And then, these funds are to be matched by further long-term private investments.”

The president noted that Europe needs advanced production facilities which come with a huge up-front cost. As a result, she said that “we are adapting our state aid rules, of course under strict conditions.”

“This will allow – for the first time – public support for European ‘first of a kind' production facilities. And as they are ‘first of a kind', they benefit all of Europe,” Von der Leyen added.

According to Margrethe Vestager, Executive Vice-President of the European Commission for a Europe fit for the Digital Age, these facilities may be allowed to receive more state funding, as the EU aims to double its global market share to 20 per cent by 2030.

In a statement, she said: “Such facilities would not exist in Europe if we do not do something. It is important for long-term European security of supply and competitiveness. And this means that it may be justified to cover up to 100 per cent of a proven funding gap with public resources.”

This does not necessitate the creation of new rules, changes to existing rules, or the modification of existing rules. This requires that we evaluate projects directly on the basis of the Treaty, added Vestager.

She also said: “To check that all conditions are met to avoid any competition distortions. Also because we want to avoid a subsidy race in Europe and beyond.”

“First, it needs to be ‘first of its kind’. Second, the aid needs to be targeted and proportionate. Only what is needed, and nothing more and third, the projects will need to benefit Europe as a whole, because this a European Chips strategy, it is for Europe as a whole, without discrimination,” she added.

However, Vestager also pointed out the fact that “Europe cannot solve this alone”. She believes that the EU must collaborate with trusted partners to build diverse and resilient supply chains, avoid single points of failure, and assist one another in times of need.

In terms of respective efforts, she said Europe is already discussing chips with the American American partners through the Trade & Technology Council and will continue to do so in collaboration with other like-minded partners such as Japan, South Korea and Singapore.

Intel applauded the EU chip push, urging governments on both sides of the Atlantic to work together. The company, which has been manufacturing chips in the EU for more than 30 years and have invested over $ 20 billion in European production, said: “We are currently considering a significant increase in our European footprint, and we expect that the EU Chips Act will facilitate these plans.”