The European Commission is investing billions of euros in chip production on European soil. The investment - to consist of both public and private funds - should reduce the European Union's (EU) dependence on foreign chip producers. The billion-euro investment is part of the European Chips Act presented by the commission.
A massive chip shortage has existed worldwide for some time. Several European sectors are affected. A well-known example is the automotive sector, but many other sectors are also experiencing problems. For instance, game consoles have been difficult to obtain for some time, the installation sector previously warned of a shortage of central heating boilers and delivery times of various electronic products are running out.
Increase share in global chip market
The shortfall makes the EU's dependence on foreign chip manufacturers painfully clear. Currently, European chip makers have a market share of about 8 per cent in the global chip market. The European Commission wants to increase this share to over 20 per cent. The billion-dollar investment now announced should contribute to this.
In total, the European Commission envisages a budget of over 43 billion euros to strengthen European chip production. This budget from both public and private investment. A quarter should come from public funds, while the private sector should contribute the remaining three quarters.
Gamechanger
Ursula von der Leyen, President of the European Commission, sees the billion-euro investment as an important step and speaks of a 'gamechanger'. In the short term, the investment should make the EU more resilient to future crises. In the medium term, Von der Leyen hopes the EU will grow into a leader in the semiconductor industry.
The billion-euro investment is part of the European Chips Act. This new European law aims to improve EU competitiveness and resilience. The European Chips Act should also support the EU's digital and green transition.
Building on strengths
Bill hereby builds on the EU's strengths. By this, the European Commission is referring to world-leading research and technology organisations and networks. And the presence of a large number of innovative device manufacturers.
In time, the European Commission hopes the billion-euro investment will lead to a thriving semiconductor sector. This should turn around the entire chain, from research to production. The billion-dollar investment should also lead to a resilient supplier chain around chip technology.
Three main components
The European Chips Act consists of three main components:
- The Chips for Europe Initiative: an initiative that will pool resources from the EU, EU member states, third countries associated with existing EU programmes and the private sector through the 'Chips Joint Undertaking'. US$11 billion will be made available to strengthen existing research, developments and innovation. This should include the availability of advanced semiconductor tools, pilot production lines for prototypes, testing and experimentation with new devices for innovative applications. However, also consider staff training and gathering more knowledge about the semiconductor ecosystem and its value chain.
- A new framework for ensuring security of supply: Attracting investment and advanced manufacturing capabilities should ensure more innovation in advanced nodes, and allow innovative and energy-efficient chips to flourish. A Chips Fund will give startups access to funding that will allow them to mature their innovations and attract investors. The initiative also includes an investment vehicle, which is part of InvestEU.
- A coordinated mechanism between EU member states and European Commission: This mechanism is designed to monitor semiconductor stocks. It monitors the semiconductor value chain by collecting information from companies. This identifies weaknesses and bottlenecks in the chain. The mechanism should help to jointly assess crises and coordinate actions available from a new emergency toolbox. The mechanism should allow the EU to respond more quickly and decisively to shortages, with national and European instruments fully deployed.
Further information on the European Chips Act is available here.
Author: Wouter Hoeffnagel
