EU outlines €43 billion plan to solve Europe’s chip shortage

Tech

The European Union has set out an ambitious new industrial policy that aims to make the bloc a major player in the global semiconductor industry.

The European Chips Act, passed this week by the European Commission, pools €43 billion ($49 billion) in public and private funding for the sector, with the ultimate goal of doubling the EU’s share of global chip production from 9 percent to 20 percent. percent by 2030.

For years the EU wanted to increase its leadership in semiconductor chip development and manufacturing (it unveiled a similar financing package in 2013), but the global supply chain crisis caused by the pandemic has heightened the urgency of these plans.

“You all know that the global shortage of chips has really slowed down our recovery,” said European Commission President Ursula von der Leyen, announcing the Chips Act. “We have seen entire production lines come to a standstill, for example with cars. As demand increased, we were unable to deliver as needed due to the lack of chips. This European Chips Act is therefore definitely at the right time.”

The EU is not the only major economic power realizing the central role of chips for future economic growth. Countries around the world have outlined investment plans for the industry, and last week the United States House of Representatives approved $52 billion in federal funding for the United States’ own semiconductor industry, of which $39 billion was earmarked for the development of new manufacturing plants or factories. .

Compared to the US, EU funding looks significantly weaker. While the top-line figures are similar, the €43 billion EU budget includes €30 billion in previously announced investment, while direct funding from the bloc makes up less than 15 percent of the total. Most of the money is expected to come from member states, whose lawmakers have yet to pass the law. Political wrangling and national concerns could then slow down how the proposed funding reaches the projects that need it.

Another difficulty is simply attracting manufacturers. Currently, Taiwanese company TSMC dominates the semiconductor industry and generates more than half of global sales. And while there are reports that TSMC is considering setting up a fab in Germany, it has not yet announced any final European investments. Meanwhile, the company has confirmed that it will build new factories in the United States and Japan.

Any plans to boost EU chip output will also slowly take root and will not mitigate the current industry disruptions, which are expected to continue through the end of the year. But the issue of “digital sovereignty” – maintaining technological independence of global supply chains – will be paramount in the coming decades.

As von der Leyen said, “It must be clear that no country – not even a continent – ​​can be completely self-sufficient. This is impossible. Europe will always work to keep global markets open and connected. This is for the sake of the world; it is also in our own interest. But what we need to address are the bottlenecks that are holding back our growth, as we are experiencing them now.”

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