European Union Finalises €43bn Chips Act

Further development this week for the European Union ambition to ramp semiconductor production capabilities in the bloc.

The European Commission in a statement announced that it and the European Parliament have “reached today a provisional political agreement on the regulation to strengthen Europe’s semiconductor ecosystem, better known as the ‘Chips Act’.”

Last November EU countries had agreed to a 43-billion-euro plan to fund the production of chips in the economic bloc.

EU Chips Act

The move is part of the EU plan to lessen its dependence on chips made in Asia and the United States, and comes after the implications of chip shortages were driven home to many European governments during the Covid-19 pandemic of 2020 and 2021.

To solve the chip crisis, the European Commission in February 2022 unveiled its multi-billion euro Chips Act to bolster the continent’s competitiveness in the sector.

The EC plan had first been announced by Ursula von der Leyen back in 2021, when in March of that year the European Union under its 2030 Digital Compass plan announced it wanted to produce at least 20 percent of the world’s cutting-edge semiconductors by the end of the decade.

At the time Europe’s share of chip production stood at 8 percent – down from 24 percent in 2000.

The ‘European Chips Act’ had been touted as a way to bolster Europe’s self sufficiency in the semiconductor sector, by easing state aid rules, improving tools to anticipate shortages and crisis, and strengthen research capacity in the bloc.

Part of the European Chips Act was a 43-billion-euro fund “to prevent, prepare, anticipate and swiftly respond to any future supply chains disruption, together with Member States and our international partners. It will enable the EU to reach its ambition to double its current market share to 20 percent in 2030.”

In November 2022 EU envoys unanimously backed an amended version of the European Commission’s proposal, but EU lawmakers still faced the task of thrashing out funding for the project.

Agreement reached

Now it has been announced that the Council and the European Parliament reached a provisional political agreement on the Chips Act.

“This agreement is of utmost importance for the green and digital transition while securing the EU’s resilience in turbulent times,” noted Ebba Busch, Swedish minister for energy, business and industry and Deputy Prime Minister.

“The new rules represent a real revolution for Europe in the key sector of semiconductors,” said Busch. “A swift implementation of today’s agreement will transform; our dependency into market leadership; our vulnerability into sovereignty; our expenditure into investment. The Chips act puts Europe in the first line of cutting-edge technologies which are essential for our green and digital transitions.”

The European Commission said it proposed three main lines of action, or pillars, to achieve the Chips’ Act objectives.

The “Chips for Europe Initiative”, to support large-scale technological capacity building
A framework to ensure security of supply and resilience by attracting investment
A Monitoring and Crisis Response system to anticipate supply shortages and provide responses in case of crisis.

It said the Chips for Europe Initiative is expected to mobilise €43 billion in public and private investments, with €3.3 billion coming from the EU budget.

These actions will be primarily implemented through a Chips Joint Undertaking, a public-private partnership involving the Union, the member states and the private sector.