21 Aug 2023

European Chips Act: Promoting investments and enhancing security in the semiconductor Industry

The European Chips Act, a new law aimed at promoting chip investments in Europe, has been agreed upon by Parliament and Council. It includes provisions to fast track permitting procedures, recognize the importance of chip investments, and provide support to small and medium-sized businesses. The legislation will also enhance the EU’s security of supply, establish a crisis response mechanism for semiconductors, and strengthen international cooperation. MEPs secured €3.3 billion for chip research and innovation. The Act now awaits endorsement by the Council of ministers. Europe’s share in global semiconductor production is below 10%, and the legislation seeks to increase it to 20%. The Act aligns with proposals from the Conference on the Future of Europe.

The European Chips Act, which has been agreed upon by Parliament and Council, aims to create a favorable environment for chip investments in Europe. The law includes measures to fast-track permitting procedures and recognizes the critical importance of chips through a “highest national significance statute.” It also provides increased support, particularly in chip design, for small and medium-sized businesses to promote innovation.

In addition to promoting investment, the legislation supports projects that enhance the EU’s security of supply by attracting investment and building up production capacity. MEPs have secured €3.3 billion for research and innovation related to chips, and a network of competence centers will be established to address the skills shortage in the industry and attract new talent.

To address supply problems, a crisis response mechanism will be established. The Commission will assess the risks to the EU’s supply of semiconductors using early warning indicators in member states, triggering an EU-wide shortage alert. Emergency measures can be implemented, such as prioritizing the supply of affected products and joint purchasing for member states. MEPs have introduced a mapping tool to identify possible supply bottlenecks.

In order to sustain the EU sector’s competitive advantage, the proposed legislation also includes provisions to improve international collaboration with strategic partners and protect intellectual property rights. The €3.3 billion allotted financing reflects a strong commitment to increasing technological capabilities and resolving weaknesses while prioritizing autonomy, security, and a friendly business environment. Parliament overwhelmingly supported the measure, with 587 votes in favor, 10 votes against, and 38 abstentions. It currently awaits approval from the Council of Ministers before becoming law.

Europe’s share in global semiconductor production capacity is below 10%, and the legislation seeks to increase it to 20%. The pandemic has highlighted vulnerabilities in global supply chains, including the shortage of semiconductors, resulting in increased costs, higher consumer prices, and slower recovery in Europe.

The European Chips Act aligns with the proposals from the Conference on the Future of Europe, promoting European technology as a robust alternative to foreign counterparts, ensuring supply security, and enhancing manufacturing. The legislation also emphasizes the need for strengthened EU supply chains through strategic investments and inter-member state cooperation. With over €43 billion in public and private investments, the Act proactively manages and swiftly responds to future disruptions.

In summary, the European Chips Act is a comprehensive legislative framework aimed at promoting chip investments, enhancing supply security, and positioning Europe as a leader in the global semiconductor industry. The legislation aims to create a resilient and competitive semiconductor sector in the EU by addressing vulnerabilities, fostering innovation, and strengthening cooperation.