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EU effort to scale up Europe’s semiconductor capacity

In February 2022 the Commission presented a proposal for an EU chips act aimed at reinforcing the whole EU chips value chain. Following a survey and many negotiations, the Council adopted its position on the Chips Act on 1 December 2022. The Chips Act aims to reduce the EU’s vulnerabilities and dependencies on foreign actors by improving Europe’s competitiveness and resilience in semiconductor technologies and applications.

On the one hand, with the emergence of new technology markets such as highly automated cars, the Internet of Things and various applications of supercomputers in space research and defence, chips are strategic assets for key industrial value chains. On the other hand, as recent semiconductor shortages have shown, there is an extreme global dependency of the semiconductor value chain on a very limited number of actors in a complex geopolitical context. Due to geostrategic issues and supply chain disruptions, the European industry is currently facing challenges in the supply of semiconductors.

The growing importance of semiconductors for European industry and society is shown in the Chips Survey, which was launched by the European Commission in July 2022. As the industry expects demand for chips to double by 2030, the vision for Europe’s chip strategy is to jointly create a state-of-the-art European chip ecosystem which will not only include production, but also connecting the EU’s world-class research, design and testing capacities.

By mobilizing more than EUR 43 billion of public and private investments and setting measures to prepare, anticipate and swiftly respond to any future supply chain disruptions the EU aims to address semiconductor shortages and strengthen Europe’s technological leadership. Currently, the EU’s share of the global microchips market is only around 10%. By putting in place a framework to increase production capacity, the EU wishes to reach a 20% share of the global market by 2030.

To understand the current status of the semiconductor value chain across the EU, to anticipate potential disturbances and to take corresponding corrective measures to overcome the current shortage until the Regulation is adopted, Member States have started coordination efforts in line with the recommendation. Additionally, the European Commission has launched a consultation on the semiconductor supply chain. Now, the European Parliament and Member States will need to discuss the Commission’s proposals on the European Chips Act according to the ordinary legislative procedure. If adopted, the regulation will be directly applicable across the EU.