- Negotiators resolved last disputes over the use of EU budget
- Governments around the world are investing billions in chips
According to Bloomberg article published on April 18, 2023, European Union negotiators agreed on a final version of a €43 billion ($47.2 billion) plan to make Europe a key player in a global race to ramp up the production of semiconductors.
Countries around the world are investing billions in their domestic semiconductor industries, following supply chain disruptions during the Covid-19 pandemic and amid increasing geopolitical tensions between the US and China.
The industry is facing increasing export restrictions from governments, with the Netherlands announcing this year that it would join the Biden administration in limiting China’s access to critical chip making equipment from Veldhoven, Netherlands-based ASML Holding NV.
“In a geopolitical context of de-risking, Europe is taking its destiny into its own hands,” the EU’s internal market chief, Thierry Breton, wrote on Twitter. “By mastering the most advanced semiconductors, the EU will become an industrial power in the markets of the future.”
While Europe has ASML — one of the most valuable tech companies in the world with a monopoly on equipment needed to produce the most advanced chips — the continent currently produces about 10% of the world’s semiconductors, primarily mature chips for the automotive industry.
The EU has an ambitious goal of manufacturing 20% of the world’s semiconductors by 2030, focusing on the cutting-edge chips. The Chips Act allows EU countries to provide government money for “first-of-a-kind” semiconductors.
Intel Corp., Infineon Technologies AG, GlobalFoundries Inc. and STMicroelectronics NV have announced new projects following the proposal from the European Commission last year.
Politicians and experts, however, have raised concerns that the amount the EU is investing is still not enough to meet the 20% goal, especially as the industry becomes increasingly cautious about expensive investments thanks to decreased demand for chips and higher energy prices in Europe.
“The Chips Act cannot be the only act that would help those investments,” said Eva Maydell, the lead negotiator for the package in the European Parliament. “It will help bring us to 20%, but we need to make sure that we’re doing all the other things that make the EU appealing.”
Pace of Negotiations
European politicians wrapped up negotiations in just 14 months — a fast pace for the EU.
“The strong and broad political support for these objectives shows that the EU is serious about securing its future prosperity,” Hendrik Bourgeois, Intel’s vice president for European government affairs, said in a statement
The last issue negotiators resolved Wednesday was the budget, after EU countries rejected the commission’s plan to take €400 million from research and reallocate it toward semiconductors.
Negotiators were able to piece together the money from a number of other EU budget items, including the bloc’s digital program and unspent funds, according to people familiar with the matter.
The new deal will also allow EU countries to subsidize novel chip equipment and design facilities, opening the door for ASML to get state funds, according to the people. Companies that receive state aid will be required to document their policies on intellectual property protection, they said.
The Chips Act is the first of a series of industrial plans that the commission’s Breton has pushed to let governments increasingly intervene in the supply chain. Companies that receive public funds via the Chips Act will also be required to prioritize EU government orders in an emergency — a provision some industrial players and politicians felt went too far.
The agreement will become law once it is approved by the European Parliament and EU member countries and then published in the Official Journal.
