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European Chips Act strengthens hand on microchip production

Hands in gloves hold chip testing microelectronics. Setting operating modes electronic controllers. Use chip tuning to increase power. Repair microprocessor electronics electrical equipment

The European Parliament and EU Member States have reached agreement on the European Chips Act, which seeks to make the market competitive with the US and Asia in the production of microchips.

A statement from the European Commission said the continent’s dependence on chips from Taiwan and South-East Asia had been illustrated by the shortage in the products in recent years. It added the European Chips Act would strengthen manufacturing activities, stimulate the European design ecosystem and support scale-up and innovation across the whole value chain. All of this, it said, supports an aim to double its current global market share to 20% in 2030.

Three pillars

The first pillar of the Act – the Chips for Europe Initiative – is intended to reinforce Europe’s technological leadership, by facilitating the transfer of knowledge ‘from the lab to the fab’ – bridging the gap between research and innovation and industrial activities and by promoting the industrialisation of innovative technologies by European businesses.

The Chips for Europe Initiative will combine investments from the Union, Member States and the private sector. It will be supported by €6.2bn of public funds, of which €3.3bn from the EU budget has been agreed from today for the period until 2027, the end of the current multi-annual financial framework.

This support will come in addition to €2.6bn public funding already set aside for semiconductor technologies. The €6.2bn will support activities, such as the development of a design platform and setting up of pilot lines to accelerate innovation and production. The second pillar of the European Chips Act will create a framework to ensure security of supply by attracting investments and enhancing production capacities in semiconductor manufacturing.

Coordination mechanism

In its third pillar, the European Chips Act will also establish a coordination mechanism between the Member States and the Commission for strengthening collaboration with and across Member States, monitoring the supply of semiconductors, estimating demand, anticipating shortages and, if necessary, triggering the activation of a crisis stage.

Expert Investor has written widely about the issue of semiconductors in the continent. In 2021, for example, we argued the economic recovery following the Covid pandemic could potentially be lost due to the shortage of chips.

The situation at the time was dire. As Time explained: “When the initial lockdowns caused car sales to collapse, automakers cut their orders for parts, including semiconductors. (A typical new car can contain more than a thousand chips.) Chip manufacturers saw the slack and shifted their output to serve the surging demand for consumer electronics, like webcams and laptops.”

It continued: “But when car sales snapped back last fall, a dramatic misstep became apparent: the automakers couldn’t get enough chips. They still can’t. Missing chips are now expected to lower global output by 3.9m vehicles in 2021, or 4.6%.”

Pete Carvill

Pete Carvill is a reporter, writer, and editor based in Berlin who has been writing for the B2B and mainstream media since 2007. He is a contributing writer for Expert Investor and, in addition, has...

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