Vulcan Insight | Provisional Political Agreement reached on EU Chips Act

Two months ahead of schedule, EU lawmakers have come to an agreement on the EU Chips Act, a deal expected to double the EU’s global market share in semiconductors from 10% to at least 20% by 2030. Negotiators from the European Parliament, Council of the EU and Commission announced this week, on Tuesday, 18 April, that they had reached a provisional political agreement on the EU’s proposed regulation to strengthen Europe’s semiconductor industry.

Commissioner Thierry Breton, the European Commission’s front man on the file, welcomed the agreement, noting how it would help Europe “become an industrial powerhouse in markets of the future.” Roberta Metsola, President of the European Parliament, also welcomed the agreement on Twitter, writing that the Chips Act will “strengthen Europe’s cutting-edge tech, boost investment, and guarantee a steady supply of semiconductors.”

The Commission’s proposed EU Chips Act, which also aims to help the EU catch up on the U.S. and Chinese semiconductor markets, is based upon three pillars. Pillar one includes the establishment of the “Chips for Europe Initiative” to support large-scale capacity building. The second pillar focuses on the creation of a framework to attract investment, and lastly, pillar three outlines a Monitoring and Crisis Response system to counteract and respond to supply chain issues. The Chips for Europe Initiative will mobilise some €43 billion in funding, implemented by the Chips Joint Undertaking, an alliance of the European Union, member states, and private sector stakeholders.

While the inter-institutional negotiations ran quite smoothly and ahead of schedule, the budget and scope of the so-called “first of a kind” facilities caused great debate and discussion with the three institutions bringing differing views to the table.

Notably, in the final compromise, EU lawmakers agreed to widen the scope of “first of a kind” facilities (FOAK), which fall under pillar two, to include those producing equipment used in semiconductor manufacturing. FOAK facilities contribute to the security of supply for the internal market and can benefit from fast tracking of permit granting procedures. It was further agreed that design centres that are deemed to significantly enhance the EU’s capabilities in innovative chip design will be eligible to receive a European label of “design centre of excellence”, to be granted by the Commission.

The main issue of contention for this agreement was how to budget the EU Chips Act. The Act was not originally in the work plan of the Commission, meaning it would have to be funded by established programs. In light of this, a new “semiconductor objective” has been created in the Digital Europe Program as well as €3.3 billion in funding under the Horizon Europe towards the above-mentioned Chips for Europe Initiative.

Following this provisional agreement, the Council and Parliament both need to finalise, endorse, and formally adopt the Act. When the Chips Act is adopted, the Council while consulting Parliament, must amend the Single Basic Act for partnerships under Horizon Europe. This is necessary in order to establish the Chips Joint Undertaking, which reworks the Key Digital Technologies Joint Undertaking.

Compliments of Vulcan Consulting – a member of the EACCNY.