The European Union is setting itself up as a producer of semiconductors, or chips. In new legislation contained in the EU Chip Act, Brussels plans to raise tens of billions of euros to enable production in Europe and end the bloc's digital dependence on Asia.
The production of semiconductors has become a strategic priority in Europe as well as the United States after the pandemic resulted in supply shortages, brought factories to a standstill, and emptied stores of products.
Producers of the world's most sophisticated chips are located in Taiwan, China, South Korea and the US, and they outperform products made by companies in the EU. Brussels wants this to change.
On Tuesday, the EU launches its own "Chip Act," following the "Chips for America Act," a 52 billion dollars (46 billion euros) stimulus program approved by the US Congress in November 2020.
Touring the IMEC chip research facility in Belgium on Monday, EU Industry Commissioner Thierry Breton predicted that the plan "will position Europe as an industry leader [and] also give us complete control of our semiconductor supply chains."
He added in a separate briefing to reporters that "the EU will equip itself with the means to guarantee its security of supply, as the United States does for example," .
IMEC's CEO Luc van den Hove regards a centralized EU Chip Act as "the fastest route out of the current microchip shortage," which he attributes to the production and supply failures caused by the Covid-19 pandemic.
"Everyone is looking at the semiconductor industry to sort things out and to prevent such a crunch from ever happening again. It will undoubtedly be chipmakers’ biggest challenge of 2022," he writes in his blog.
Imec CEO Luc Van den hove talks about Europe’s digital strategy, the future of Moore’s law, and the start-up landscape.
— imec (@imec_int) January 27, 2022
Read more 👉 https://t.co/tyl0DTu6gX pic.twitter.com/OVqPK9RILj
'No time to lose'
Meanwhile, Europe can't be dependent on other countries, according to Brussels. "Europe will remain an open continent, but on its own terms," Thierry Breton said, referring to a "paradigm shift" in the European approach to highly strategic supplies such as semiconductors.
If approved, the EU Chips Act could generate a total of 42 billion euros via existing EU budget money as well as by loosening existing rules on public subsidy from member states.
During the Davos Forum in January, EU President von der Leyen stressed the urgent need to invest in semiconductors:
“By 2030, 20% of the world´s microchips production should be in Europe. We have no time to lose."
Europe is the world's centre for semiconductor research.
— Ursula von der Leyen (@vonderleyen) February 6, 2022
And we are strong in specific sectors, such as chips for cars and for Industry 4.0.
But I want us to become a strong player all across the value chain. And for that, next week we will present the first-ever #EUChipsAct. pic.twitter.com/QskGZCljql
The proposal will need the approval of the EU member states and European Parliament, where opinions will vary between the ambitions of industrial heavyweights such as Germany, France and Italy and those of smaller states that are worried about closing off valuable supply chains with Asia.
Subsidy race
Some member states, led by Nordic nations and The Netherlands - home to ASML, the world's sole producer of photolithography machines essential for printing chips - will also resist any plan to widen the scope for state aid.
"We don't want to end up in a position where a huge US company is getting a bunch of EU money to open a factory in one big member state," an EU diplomat said.
But the pressure on Europe to move quickly is acute, with South Korea also promising huge subsidies to ramp up its chip business.
These payouts will likely dwarf whatever Europe has on offer. In Taiwan, the chip juggernaut TSMC plans to spend between $40 billion and $44 billionover the coming 12 months alone on new plants.
With the new priority, indications are that manufacturers are shopping around for the best deal as they seek locations for new factories.
Intel, the US-based chip-maker, is on the verge of announcing a major investment in Europe, with big players in Germany, France and Italy possible beneficiaries.
CEO Pat Gelsinger told German media that his decision not only on questions of suitable locations and staffing "but also on the available subsidies to build the factories."
"We have also obtained considerable subsidies for our factories in Asia," Gelsinger said.
(With wires)
