The European Commission this week unveiled a new program that it hopes will enable it to overcome supply chain bottlenecks that have seriously hampered economic development during the COVID-19 pandemic.

The aptly named European Chips Act includes a number of measures that aim to "ensure the EU's security of supply, resilience and technological leadership in semiconductor technologies and applications" – all funded by around €43 billion (US$49 billion) in public and private investments.

In other words, Europe wants to build its own chips in order to reduce its reliance on far-flung corners of the world such as China. Indeed, the Commission said recent global semiconductor shortages forced factory closures in a wide range of sectors from cars to healthcare devices.

Figure 1: The chips are down: The new European Chips Acts aims to 'mobilise' €43bn in funding to drive Europe’s digital sovereignty.
(Source: Unsplash)

The aim is to double the EU's current market share to 20% in 2030 – which in turn is part of the EU's ambition to become "digitally sovereign" over the longer term.

"In the car sector, for example, production in some Member States decreased by one third in 2021," the Commission observed.

"This made more evident the extreme global dependency of the semiconductor value chain on a very limited number of actors in a complex geopolitical context. But it also illustrated the importance of semiconductors for the entire European industry and society."

Thierry Breton, Commissioner for Internal Market, made clear what is now at stake: without chips there will be no digital transition, no green transition, no technological leadership, he said.

Securing supply of the most advanced chip technology "has become an economic and geopolitical priority. Our objectives are high: doubling our global market share by 2030 to 20%, and producing the most sophisticated and energy-efficient semiconductors in Europe."

More chips please

A key component of the program is the Chips for Europe Initiative, which aims to pool resources from the EU, Member States and associated third countries as well as the private sector.

Around €11 billion has been allocated here to strengthen research and development activities and foster the semiconductor ecosystem and value chain.

Also proposed is a new framework to "ensure security of supply by attracting investments and enhanced production capacities." In addition, a Chips Fund will facilitate access to finance for startups, including a dedicated semiconductor equity investment facility under InvestEU.

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Furthermore, a coordination mechanism is being introduced between the Member States and the Commission for monitoring the supply of semiconductors, estimating demand and anticipating the shortages.

Ursula von der Leyen, President of the European Commission, hailed the European Chips Act as a "game changer" for the global competitiveness of Europe's single market.

"In the short term, it will increase our resilience to future crises, by enabling us to anticipate and avoid supply chain disruptions. And in the mid-term, it will help make Europe an industrial leader in this strategic branch," von der Leyen said.

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— Anne Morris, contributing editor, special to Light Reading