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The European Chips Act unveiled, what does it entail?

On 8 February, the European Commission presented a comprehensive set of measures to ensure the EU's security of supply in semiconductor technologies and applications. This proposal follows-up from the announcement by the European Commission President Ursula von der Leyen in her State of the Union speech in September 2021. In the latter, she pointed out the needs to coordinate EU and national investment along the value chain in this sector.

Highlighting that the pandemic exposed the vulnerability of chips supply chains, the EU Executive acknowledged that semiconductor chips are the essential building blocks of digital and digitised products. In this context, the EU executive intends to strengthen digital sovereignty by tackling semiconductor shortages.

Taking stock from the semiconductor shortage suffered by the automobile industry in 2021, new policy instruments will be implemented to ensure that the EU has the necessary tools, skills and technological capabilities to become a leader in in chips production. In addition, the EU intends to strengthen its efforts on research and technology in design, manufacturing and packaging of advanced chips. In sum, the newly unveiled strategy recognises the necessity to reduce the EU dependencies.

The main proposals embedded in the Chips Act are the following:

o The ‘Chips for Europe Initiative’, which will pool resources from the Union, Member States and third countries associated with the existing Union programmes and the private sector. It will entail a large-scale investment plan, combining “almost €5 billion” in EU investment with private investments and member countries’ contributions for the purposes of research and innovation funding.

o A new framework, including a Chips Fund, to ensure security of supply by attracting investments and enhanced production capacities. It will also aim to facilitate access to finance for start-ups to help them develop innovations and attract investors.

o A coordination mechanism between the Member States and the European Commission for monitoring the supply of semiconductors, estimating demand and anticipating the shortages.

The European Commission also recommended Member states to set up a “toolbox” to secure chips supplies in case of an emergency.

With the Chips Act, the EU stated that it aims to gain 20 percent of the global market share in the semiconductor industry by 2030. However, it is interesting to note that the European Commission presented a very similar microchips plan in 2013 with the same objectives but failed to reach this goal.

Next steps:

The European Commission published a targeted stakeholder survey in order to gather detailed information on current as well as future chip and wafer demand (here).

The European Parliament and the Member States will now need to discuss the European Commission's proposals. If adopted, the proposed Regulation will be directly applicable across the EU. On the other hand, Member States are encouraged to immediately start coordination efforts in line with the Recommendation to understand the current state of the semiconductor value chain.

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