EU Unveils “European Chip Act” to Tackle the Bloc’s Semiconductor Deficiency

EU Unveils “European Chip Act” to Tackle the Bloc’s Semiconductor Deficiency

As chip shortage continues to hold the tech world in a tight grip, limiting production and spiking product prices, the EU is seeking to use legislation to push for greater resilience and sovereignty in regional semiconductor supply chains.

Compared to other regions, the EU is the most disadvantaged when it comes to semiconductor production, apart from Africa. Now the bloc sees legislation as a way to augment existing plans to increase chip production in Europe.

“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,” the EU president, Ursula von der Leyen said Tuesday during a state of the union speech.

She explained that gaining greater autonomy in chipmaking is now a key component of the EU’s overarching digital strategy. Presenting the “European Chips Act”, she explained that the EU should harp on a strategy backed by legislation to ease production bottlenecks and protect the bloc’s interests.

“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 semiconductors.

“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.”

Ursula called on the bloc to build on existing collaboration that has seen Europe contain covid-19, in tackling the bloc’s chip dependency.

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.

Besides covid, Ursula pointed at the Galileo satellite navigation the EU launched 20 years ago, in a bid to stir the belief that the bloc can attain chip self-sufficiency if it bands together. Though she admitted the task ahead would be daunting.

“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 semiconductors.”

The EU had in March unveiled the Digital Compass plan, designed to help the bloc produce 20% of the world’s cutting-edge and sustainable semiconductors by 2030%. The proposed European Chip Act is meant to elaborate and accelerate the plan.

Per TechCrunch, the EU’s internal market commissioner, Thierry Breton, explained in his that the legislation will help the Commission 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 explained.

According to 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.”

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