European Chips Act

Why do we need a European Chips Act?

Chips — also known as semiconductors — are the building block of all electronic products. They play a central role in our modern economies and our daily lives. Chips underpin the digital transformation and are essential to all industries, such as the car industry, communications, data processing, space, defence, smart devices and gaming, to name a few.

The recent global chips shortage has disrupted supply chains, caused product shortages ranging from cars to medical devices, and in some cases even forced factories to close.

The European Chips Act, adopted by the Commission on 8 February 2022, seeks to strengthen the semiconductor ecosystem. It is composed of a Communication, which spells out the European Strategy and rationale behind the Chips Act, a proposal for a Regulation, and a Recommendation to Member States.

What is the European Chips Act?

The European Chips Act will reinforce the semiconductor ecosystem in the EU, ensure the resilience of supply chains and reduce external dependencies. It is a key step for the EU’s technological sovereignty. And, it will ensure Europe meets its digital decade target of doubling its global market share in semiconductors to 20%.

It will do so by focusing on 5 strategic objectives:

1. strengthening research and technological leadership;
2. building and reinforcing Europe’s capacity to innovate in the design, manufacturing and packaging of advanced chips;
3. putting in place an adequate framework to increase production by 2030;
4. addressing the skills shortage and attracting new talent;
5. developing an in-depth understanding of global semiconductor supply chains.

The European Chips Act has 3 main components:

1. a Chips for Europe Initiative to support large-scale technological capacity building and innovation in cutting-edge chips;
2. a new framework to attract large-scale investments in production capacities and ensure the security of supply;
3. a coordination mechanism between the Member States and the Commission to monitor market developments and anticipate crises.

Chips for Europe Initiative

The Chips for Europe Initiative will reinforce semiconductor technologies and innovation capabilities, ensuring EU leadership in this field in the mid to long term. It will mainly be implemented through the Chips Joint Undertaking — previously known as the Key Digital Technologies Joint Undertaking.

The Chips for Europe Initiative will:

• reinforce Europe’s leadership in research;
• enable access across Europe to chips design tools, and pilot lines for prototyping and testing innovative chips technologies;
• establish a certification procedure for energy-efficient and trusted chips to guarantee their quality and security for critical applications;
• foster education, skills and talent in microelectronics;
• support a network of competence centres across Europe for promoting innovative design and use of semiconductors systems.

A new framework to ensure security of supply

The Chips Act proposes a new framework to ensure the security of supply of chips by attracting investments and supporting the establishment of large-scale production capacities.

The framework allows for public support for two new types of innovative production facilities that are the first of their kind. These new facilities are:

• ‘Open EU Foundries’, which would dedicate a significant amount of their manufacturing capacity to production for other industrial players;
• ‘Integrated Production Facilities’, which would design and produce chips for their own markets (for example for just their sector).

Recommendation to Member States

In view of the ongoing chips shortage crisis, the Commission also puts forward a Recommendation to Member States encouraging immediate coordination actions between the Member States and the Commission to address the crisis.

The Recommendation sets out mechanisms for monitoring and mitigating disruptions in the supply chains and making Europe more resilient in the face of current and future disruptions.

Other EU initiatives in the field of semiconductors

The European Chips Act complements EU initiatives already underway in the area of semiconductors, such as:

• the Alliance on Processors and Semiconductor Technologies;
• programmes and actions in research and development such as Joint Undertakings, Horizon Europe and the Digital Europe Programme;
• the important project of common European interest (IPCEI) on microelectronics and communication technologies.

What next?

The Commission’s proposal for a Regulation on the European Chips Act will be sent for the approval of the European Parliament and Member States, who will discuss it in the ordinary legislative procedure.

Meanwhile, Member States can start applying the measures outlined in the Recommendation to overcome the current chip shortage until the Regulation is adopted.