In April, the European Chips Act was finally approved. An investment of 43 billion euros should make the continent more competitive in its chip production. As of Sept. 21, the legislation is officially in force. What does it entail?
The Chips Act should double the EU’s market share regarding chip production, from 10 to 20 percent of the global industry. This seems like a tough ask, as the bloc is investing much less than other areas with its €43 billion until 2030, €3.3 billion of which will come directly from the EU purse. In America, President Biden signed the US Chips and Science Act in August 2022, with a total of $52.7 billion in subsidies going to semiconductor manufacturing and research. Investments in China are also huge, with 30 billion converted to boost Huawei’s chip production.
Three focal points
The European Chips Act has seen many changes since it was first drafted in February 2022. At the time, there was a major chip shortage during the Covid-19 pandemic, which forced the EU to seek to guarantee its own supply. Currently, that is not a hugely time-intensive problem, resulting in a different framing for the “Chips for Europe” initiative. Europe is also still a major player when it comes to innovation around chip manufacturing. American and Asian chip giants, for example, rely mostly on the machines of the Dutch company ASML. Belgium’s imec is also a major player in chip research. This means the EU has some leverage to guarantee chip supplies from elsewhere.
3.3 billion in EU investment should help construct regional centers for innovation, design and development of quantum chips. While Europe currently specializes in older manufacturing processes for chips meant for cars and industrial equipment, among others, this initiative should change that.
Second, with this Chips Act, the EU hopes to attract investment from external partners. Intel and TSMC already have plans in place for chip factories on the continent. Such projects are in many cases dependent on government subsidies, which, thanks to the European Chips Act, can get the green light from Brussels faster.
Third, the EU wants to be able to keep an overview of any potential shortages, disruptions and other problems. If, for whatever reason, chip production does not keep up, a crisis phase can be activated, allowing measures not specifically mentioned to be taken.
Criticism and ambiguity
Late last year, we reported that far from everyone is reassured by the European chip plans. First, the CEO of NXP claimed that 500 billion was needed to guarantee the goal of 20 percent market share in global chip production by 2030. Since then, more competitors have emerged worldwide with large investments, including South Korea. The market will continue to move, which may require additional European subsidies to keep up.
It is also still unclear who can count on investment. Currently, the plans of major powers like Intel and TSMC are mostly in the news, while there have long been voices advocating for greater support of start-ups and newcomers to the industry.