Vulcan Insight | EU Commission proposes Chips Act to tackle semiconductor shortages

The European Commission proposed a comprehensive set of measures on Tuesday to ensure the EU’s security of supply, resilience, and technological leadership in semiconductor technology. The European Chips Act is hoped to increase Europe’s competitiveness and resilience, while also driving the digital and green transition. If successful, it will help the EU achieve its goal of doubling its existing market share to 20% by 2030.

Recent global semiconductor shortages forced the closure of factories in a wide range of industries, from automobiles to medical equipment. In the car sector, for example, some Member States’ production fell by a third in 2021. This highlighted the semiconductor value chain’s excessive global reliance on a small number of actors in a complex geopolitical situation. However, it also demonstrated the significance of semiconductors to the broader European economy and society.

The EU Chips Act will capitalise on Europe’s strengths while also addressing current flaws. Together with Member States and international partners, the Commission will mobilise more than €43 billion in public and private investments and put in place mechanisms to prevent, prepare for, predict, and quickly respond to any future supply chain disruptions.

The European Chips Act will ensure that the EU has the tools, skills, and technological capacities to become a leader beyond research and technology in terms of advanced chip design, production, and packaging, as well as to secure its semiconductor supply and lessen its reliance.

The following are the main components:

• Through the enhanced “Chips Joint Undertaking,” a new Chips for Europe Initiative will pool resources to make available €11 billion to strengthen existing research, development, and innovation, as well as to ensure the deployment of advanced semi-conductor tools, pilot lines for prototyping, testing, and experimentation of new devices for innovative real-world applications, staff training, and the development of a thorough understanding of the semi-conductor ecosystem and value chain.
• A new framework to assure supply security by attracting investments and increasing manufacturing capacity, which is critical for advanced node innovation, as well as inventive and energy efficient chips, to thrive.
• A new Chips Fund will make it easier for start-ups to get funding, allowing them to develop their ideas and attract investors. There will also be a specialised semiconductor equity investment facility under InvestEU to help scale-ups and SMEs expand their market.
• A method for monitoring semiconductor supply, calculating demand, and anticipating shortages between Member States and the Commission. It will keep an eye on the semiconductor value chain by gathering vital information from enterprises in order to identify major flaws and bottlenecks. It will compile a unified crisis assessment and coordinate measures using a new emergency toolkit.

According to Commission President, Ursula von der Leyen, the Act will be “a game changer for the global competitiveness of Europe’s single market.” Member States are encouraged to immediately begin coordination efforts in accordance with the Recommendation in order to gain a better understanding of the current state of the semiconductor value chain across the EU, anticipate potential disruptions, and take corrective action to address the current shortage until the Regulation is adopted, which is expected to take about a year.

Compliments of Vulcan Consulting – a member of the EACCNY.