Brussels, 16 February 2022 (TDI): Brussels announced that it wants to invest billions of dollars in the European Union. This money will be used for making more microchips in the EU.
Brussels’ Investment in EU
This investment is to help the EU to compete in the global tech race. Through this investment, a massive subsidy program for semiconductors will be launched.
This will help to raise the capacity of chips that are used in all devices. This program may help to control the conductors’ industry and also be helpful for the distribution of supply chains in the world.
Brussels New EU Chips Act
European Commission (EC) passed a new rule for investment and the power of authority to release funds for this industry. The new rule is known as EU Chips Act. EC is now planning to invest almost 11 billion Euros in this industry.
These funds will be used for designing, manufacturing, and research for semiconductors. EC also set a goal to invest almost 43 billion Euros until 2030. It will be released for both the public and private sectors.
The €11 billion will come from existing EU instruments. This program will work like the research program, Horizon Europe, and the recovery fund (Next-Generation EU).
Also, the financial plans that member states plan to roll out at the domestic level. Reaching the €43 billion mark will depend on how attractive the EU becomes for private investors.
Global Investment in 2020
In 2020, the bloc attracted only 3% of global investment for chip factories. But last year, Intel Corp said it was willing to invest over €80 billion in Europe’s semiconductor industry over the coming years.
The European Commission’s objective is to expand the EU’s global market share from the current 9% all the way to 20% by 2030. There is an ambitious target that will become harder to achieve as worldwide demand intensifies and governments become more generous in injecting direct support.
“Securing the supply of the most advanced chips has become an economic and geopolitical priority,” said Thierry Breton, EU Commissioner for the Internal Market.
State Aid Exemption
The quest for microchips has become an existential question for advanced economies since the coronavirus pandemic disrupted supply chains. It exposed their vulnerabilities to production shortages and delivery delays.
Multinational companies like Toyota, Sony, Ford, and Volkswagen have been directly affected by the chips scarcity, which has an international dimension and continues until now.
The crisis has also shed light on Taiwan’s almost monopolistic position as it took up over 63% of total foundry revenue in 2020. It’s Taiwan Semiconductor Manufacturing Company (TSMC) enjoyed a 54% share of the global market, serving clients like Apple, Qualcomm, and Nvidia.
South Korea’s Samsung came at a distant second, with over 17% market share. During the 1990s, the EU commanded over 40% of the chips market. By the early 2000s, the figure had fallen to 24% and barely reaches 10% today.
The decline has fuelled calls for strategic autonomy and more assertive state intervention; a vision embraced by France but opposed by liberal countries like the Netherlands, Sweden, and Denmark.
From the lab to the market
The main objective of the EU Chips Act is to facilitate semiconductor research where Europe is considered a world leader, and the market, where the continent’s modest products are not eclipsed by Asian imports.
The European Commission will invest public money along with leveraging private investment into manufacturing capacities. This will help produce EU-made chips in EU-based factories.
Special emphasis will be on the next generation of semiconductors, engraved at 3 and 2 nanometers, and even below because as the chips get smaller, they get faster and consume less electricity.
This push for domestic production will come with a hefty price tag: building a new semiconductor fabrication plant from the ground up can have a cost between €3 and €20 billion.
According to the size and technology used, these expenses act as barriers that reinforce the leading position of Asian countries and prevent other regions from making inroads into the market.