Europe Chips Act: Boosting Semiconductor Sovereignty

EU to Strengthen Semiconductor Supply Chains Through New Legislation

The European Union intends to utilize legislative measures to enhance the resilience and sovereignty of its regional semiconductor supply networks.

A forthcoming “European Chips Act” was previewed by the bloc’s president during a recent state of the union address. Ursula von der Leyen indicated that achieving greater autonomy in chip manufacturing is now a central element of the EU’s broader digital strategy.

Global Chip Shortage Drives EU Action

The worldwide scarcity of semiconductors, which has resulted in production slowdowns for numerous products reliant on chips for data processing – including automobiles, trains, smartphones, and consumer electronics – is a primary concern for EU legislators regarding European capabilities in this sector.

Von der Leyen emphasized, “Digital progress is inextricably linked to the availability of chips.” She noted that production lines are currently operating at reduced capacity, despite increasing demand, due to the semiconductor shortage.

Acknowledging a decline in Europe’s share of the entire value chain, from chip design to manufacturing capacity, despite surging global demand, von der Leyen stated, “This is not merely a matter of competitiveness; it is fundamentally about technological sovereignty.”

The European Chips Act: A Comprehensive Approach

The Chips Act will focus on integrating the EU’s semiconductor research, design, and testing capabilities. It will also call for “coordination” of EU and national investments to bolster the bloc’s self-sufficiency.

The objective is to collaboratively establish a cutting-edge European chip ecosystem, encompassing production, to ensure supply security and foster the development of innovative European technologies.

Von der Leyen characterized the ambition to strengthen European chip capacity as a “significant undertaking,” drawing a parallel to the bloc’s success with the Galileo satellite navigation system.

“European satellites currently provide the navigation system for over 2 billion smartphones globally, establishing us as a world leader. Let us demonstrate similar boldness with semiconductors,” she asserted.

Details of the Legislative Plan

Thierry Breton, the EU’s internal market commissioner, elaborated on the legislative plan, stating the Commission aims to integrate Member State efforts into a “coherent” pan-EU semiconductor strategy.

He also highlighted the need for a framework “to prevent a competitive scramble for national public subsidies that could fragment the single market.”

The goal is to “establish conditions to safeguard European interests and firmly position Europe within the global geopolitical landscape,” Breton added.

Three Key Components of the Chip Act

According to Breton, the Chip Act will consist of three core elements:

• A Semiconductor Research Strategy: This will build upon the work of institutions like IMEC in Belgium, LETI/CEA in France, and Fraunhofer in Germany.
• Boosting European Chipmaking Capacity: A collective plan to enhance Europe’s chip manufacturing capabilities.
• Supply Chain Monitoring and Resilience: Legislation will support monitoring and strengthening the chip supply chain across design, production, packaging, equipment, and suppliers.

The plan includes supporting the development of European “mega fabs” capable of producing high volumes of advanced, energy-efficient semiconductors (towards 2nm and below).

International Cooperation and Diversification

The EU does not intend to achieve complete self-sufficiency in chip production.

The final component of the European Chip Act will establish a framework for international cooperation and partnerships.

“The intention is not to produce everything independently within Europe. Alongside enhancing our local production resilience, we must devise a strategy to diversify our supply chains, reducing over-reliance on any single country or region,” Breton explained.

He further stated that while the EU welcomes foreign investment to increase production capacity, particularly in high-end technology, the European Chips Act will ensure conditions are in place to protect Europe’s supply security.

Global Context and Competitive Landscape

Breton noted that the US is also pursuing significant investment through the American Chips Act to finance research and establish advanced production facilities, aiming to increase the resilience of US semiconductor supply chains.

“Taiwan is solidifying its position as a leading semiconductor manufacturer, and China is striving to close the technological gap despite export control restrictions. Europe cannot and will not fall behind,” he emphasized.

Integration with Existing Digital Initiatives

The EU stated that the Chips Act will complement other digital initiatives already launched by the von der Leyen Commission.

These include efforts to regulate “gatekeeper” internet giants and increase platform accountability (the Digital Markets Act and Digital Services Act), regulate high-risk AI applications (the Artificial Intelligence Act), combat online disinformation, and invest in regional digital infrastructure and skills.