The European Commission has unveiled the European Chips Act. The proposal aims to double Europe’s chip production by 2030.

From 2030, Europe should be responsible for 20 percent of all chips worldwide. The road to that goal has been mapped out over the past two years. The European Chips Act clarifies what needs to be done, how much money is needed and who should receive that money.

Today, the European Commission presented the European Chips Act. The European Commission wants to invest 43 billion euros in solving and preventing supply chain problems. 11 billion euros will be made available by the European Union. The rest is yet to be raised.

Where’s the money going?

The money has several destinations. First, the European Commission wants to establish a platform with free technology for chip designers, relevant software developers and researchers. Furthermore, the Commission hopes to invest in pilot projects, including parties that test and further develop chip designs.

Additionally, the money is destined for the construction of physical locations for quantum chip development, accessible to governments and organizations alike. Think laboratories and factories.

The European Chips Act also discusses ‘competence centres’, which are purposed to make existing chip infrastructure available and train specialists on advanced topics. It is not clear whether these will be physical or digital platforms. We expect a combination of both.

The European Commission adds that existing initiatives will be merged with the European Chips Act. For example, the Chips Joint Undertaking, which stimulates electrical engineering research, technological development and innovation.

Funds and grants in member states

At the moment, it is difficult for a chip manufacturer to qualify for national grants and funding. Although member states are permitted to offer money for chip research and chip pilots, state funding is not allowed for full-scale chip production. That’s what the Chips Act hopes to change. A new rule allows member states to offer funds for chip production.

Small and large manufacturers will have the option to apply for state aid. A government can forward the request to the European Commission. There, the importance of the funding or subsidy is considered. If the European Commission approves a request, the government can sponsor the chip manufacturer.

Europe as a chip magnet

The construction of new plants is a priority for the world’s largest chip manufacturers. Most organizations hope to offset the global chip shortage with additional production capacity. Though plants are traditionally built in the country of a manufacturer’s origin, the world is changing. Chip giant TSMC (Taiwan) has concrete plans for new factories in the US and Japan. Intel has been trying to get a foothold in China for years. In contrast, hardly anyone is knocking on Europe’s door. That’s what the European Chips Act hopes to change.

The European Commission proposes two privileges to attract new plants. First, plants can qualify for accelerated construction permits in European member states. Second, a chip manufacturer can be given priority for the pilot projects mentioned before (section ‘Where does the money go?’).

Not every plant is eligible. The European Chips Act describes two applicable categories: ‘Open EU foundries’ and ‘Integrated Production Facilities’. An Open EU foundry is a plant for components used by other chip manufacturers, such as silicon wafers. An Integrated Production Facility is a plant for sector-specific products, such as processors.

To qualify for accelerated construction permits and pilot projects, an organization’s factory must fall into one of the two categories. The final requirement is that a plant is “the first of its kind in Europe”.

Monitoring exports

The European Union is lagging behind worldwide chip production. The advent of a Chips Act is welcome, but somewhat late. Although several chip research and cooperation initiatives were introduced in recent years, EU efforts proved insufficient to catch up with the market position of the US, Japan, South Korea and Taiwan.

To combat its disadvantage, the European Commission wants to act as quickly as possible. As part of the European Chips Act, the Commission wrote a ‘Recommendation’ to all member states. Think of the document as an urgent letter for member states, containing immediate instructions on dealing with the chip shortage.

The letter reveals that the European Commission has established a ‘Semiconductor Expert Group’. The organization will monitor the demand and supply of chips in European member states. Member states can call on the organization to acquire chips on behalf of the European Commission. This way, the European Commission can attempt to arrange and advance the supply of chips for member states facing a shortage.

Interestingly, the European Commission calls on member states to consider the impact of European surveillance of chip export. Currently, chip export is barely surveilled or controlled by the EU. The European Commission hints at concrete plans to introduce regulations. There’s a good chance that Brussels is assessing measures to limit the export of chips and components to non-EU regions.

What’s next?

Currently, the European Chips Act is a proposal. The topics summarized above have been submitted to the European Council and the European Parliament. They will discuss whether the Chips Act requires adjustments — and if so, what should be different. In the coming period, there will be a vote. The action plan will likely be changed repeatedly until the majority is satisfied.

Tip: EU should pay Intel 8 billion euros for two chip factories