The EU Chips Act, announced by the European Commission on 8 February, is intended to have far-reaching consequences for Europe’s ability to compete in the global market for semiconductors, and for ensuring that EU industries – including automotive and medical device manufacturing – are better positioned to deal with future semiconductor supply shortages.

The new EU Act envisages the creation of €43 billion ($49 billion) of public and private investment to support both chip making and the inauguration of leading chip fabrication plants – sometimes referred to as “mega fabs”. Public funding will aim to encourage large players to establish new manufacturing facilities. Meanwhile, a Chip Fund will facilitate access to funding for start-ups to help them mature their innovations and attract investment, and a dedicated semiconductor equity investment facility under InvestEU will support scale-ups and market expansion. By 2030 the EU aims to have doubled its current share of global semiconductor chip production to 20%.

EU strengths

The EU has several notable strengths that could benefit this latest effort to boost its global chip making credentials. These include its world leading position in semiconductor R&D and its role in producing equipment essential to chip manufacture. For example, Dutch firm, ASML, is the sole global producer of lithographic technology from which chip production templates are made.

Nevertheless, some of the goals associated with the new EU Chips Act are ambitious and face several hurdles. Among them is the historical lack of success with EU-level interventionist policies to support strategically important industries. Despite a similar plan, unveiled in 2013, to double Europe’s production of semiconductors to 20% of global output by 2020, the EU still accounts for just 10% of the global total.

Funding gap

A second challenge for the EU plan is the considerable funding gap that exists between the support package unveiled by the EU and the much larger sums of money being invested in chip design and manufacture in the U.S., South Korea, and China. The U.S. currently has a $52 billion federal funding package working its way through Congress. However, additional public and private funding is anticipated as individual U.S. states try to encourage chip manufacturers to establish new production facilities. Meanwhile, South Korea will spend $451 billion on semiconductor production over the next decade, with funding coming from a mixture of government support packages, tax incentives, and corporate investment pledges.

Although China relies heavily on imported chips, the country established a National Semiconductor Fund in 2014 and appears to be on track for having invested $150 billion in chip design and manufacture by 2025. Chinese tech firm, Huawei, recently announced that it was stepping up investments in companies committed to strengthening China’s semiconductor supply chain.

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData

A further challenge for the EU will be its ability to lure one of world’s three largest semiconductor manufacturers – TMSC, Samsung and Intel – to establish a “mega fab” chip production facility in the EU. Of these three, only Intel has openly expressed an interest in the potential offered by the EU Chip Act and has said it is considering a significant increase in its European footprint. Much will depend on the success of strategic and organizational changes currently underway at Intel, led by new CEO Pat Gelsinger, which will see a new emphasis on manufacturing on-demand.