The European Chips Act is born
The Chips Act’s final approval by the Council marks a pivotal juncture for Europe’s technology sector. With the potential to reshape the landscape of semiconductors, this bold initiative underscores the EU’s commitment to innovation, economic growth, and technological autonomy. By investing in the development of a thriving semiconductor ecosystem, Europe is not only positioning itself as a global player in the tech industry but also solidifying its capacity to adapt, evolve, and thrive in an increasingly interconnected and competitive world. As the Chips Act sets its course for implementation, Europe stands on the precipice of a new era of technological excellence and self-sufficiency.
Brussels, 23 August 2023 – 7 MINUTES READ
In a groundbreaking decision, the European Union has granted its definitive approval for the ‘Chips Act,’ a pivotal regulatory framework designed to fortify the European semiconductor ecosystem. This move could potentially represent a pivotal turning point for profound changes within Europe’s technological landscape.
Historically, Europe has faced technological challenges due to its fragmented market, competition among its 27 member countries, significant alliances, and inadequate and uninviting fiscal regulations. This combination of factors has gradually eroded Europe’s position in the technology field. The ongoing brain drain from the continent and the supply of technologies for microprocessor foundries, in which Europe is a leader, have further contributed to the decline of Europe’s presence in the microchip sector.
It’s interesting to note that Europe currently produces only 10% of the world’s microprocessors, whereas in 1990 it controlled 40% of the global market. However, it’s essential to contextualize these figures. Over the past three decades, the demand from emerging countries has risen, absorbing the majority of global production. This shift underscores the dynamic nature of the industry and the changing global landscape.
The COVID-19 pandemic and the conflict in Ukraine prompted a rethinking of the existing strategies. The value chains associated with microchip supply have been disrupted due to import blockades of microchip materials from foreign nations and strategic considerations arising from the conflict. It’s important to note that the semiconductor industry is known for its cyclical nature, often experiencing periods of oversupply and shortages. However, the pandemic has intensified this issue. The Economist underlined that remote workers rushed to purchase equipment, resulting in an 11% surge in personal computer sales last year, marking the highest growth in a decade. Demand for data centers soared as individuals turned to video calls, streaming, and gaming. The automotive sector initially reduced sales projections during the initial lockdowns but subsequently raised them again as vaccines were developed. Additional factors have compounded the situation. Microsoft and Sony launched new video game consoles, placing substantial orders with major chip manufacturers. Additionally, the escalating prices of cryptocurrencies have motivated “miners” to pay inflated rates to acquire specific chip varieties crucial for generating new digital currencies.
The latest push against Europe’s stagnation, grounded in the convenience of a globalized production, has come from the USA. On one hand, they have requested Europe to cease supplying technologies for microprocessor production to China. On the other hand, they have launched their “Chips for America” Act, a comprehensive plan aimed at revitalizing national microprocessor production on a global scale.
At the end of July this year, the European Union launched its strategic plan, which aims to attract investments on microchips foundries of approximately 40 billion euros.
Empowering Europe’s Semiconductor Industry
The Chips Act is a strategic initiative designed to lay the groundwork for the establishment and growth of a robust European industrial base in the realm of semiconductors. Beyond its economic implications, this act holds the potential to attract substantial investments, foster innovation and research, and ensure that Europe is well-prepared to navigate any potential future chip supply crises.
Under the Chips Act, a comprehensive program is set to be initiated, with an ambitious goal of mobilizing a staggering €43 billion in both public and private investments. A significant portion, €3.3 billion, will be allocated from the EU budget. The ultimate objective is to catapult the European Union’s global market share in semiconductors from its current 10% to a robust 20% or more by the year 2030.
Let’s take a closer look at the details on the Chips Act content, possible investments and reactions from USA and China to the “Chips War”.
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