In April, a new act titled the 'European Chips Act' was introduced, which hopes to strengthen Europe’s semiconductor technology leadership and boost chip manufacturing.
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What Is the European Chips Act?
The European Chips Act was signed on 18 April 2023 by the European Parliament and European Union (EU) member states to boost the EU’s supply of semiconductors. The European Chips Act will also increase resilience and improve technological sovereignty within the EU in the field of semiconductor devices.
Currently, the world produces around 1 trillion microchips every year. The EU, however, only accounts for the production of roughly 10% of these chips. The European Chips Act was implemented with the intention of boosting this market share to 20% by 2030.
In recent years, the EU has faced semiconductor shortages, fueling the move to sign the European Chips Act. Semiconductors are vital for modern technology, and the COVID-19 pandemic highlighted the vulnerability of the EU to supply chain disruptions in this field. The European Chips Act will mobilize €43 billion of public and private investment to future-proof the EU’s semiconductor market.
The main aims of the European Chips Act can be summed up as the following:
- To strengthen research and technology in Europe, focusing on the development of smaller and faster chips.
- To implement a framework to boost Europe’s chip production capacity by 20% by the end of the decade.
- To build Europe’s capacity in the innovation of the design, manufacture, and packaging of advanced semiconductors.
- To advance Europe’s knowledge of global semiconductor supply chains.
- To overcome the current skill shortage in the field by attracting talent to the European semiconductor workforce.
Why Was the European Chips Act Created?
The COVID-19 pandemic had a significant and lasting impact on supply chains across industries. Semiconductors were not immune to this and the pandemic highlighted the vulnerability of the semiconductor value chain.
In addition to this, a recent survey from the European Commission found that the industry expects demand for chips to double by 2030. The European Chips Act was created to respond to this increase in demand and to enhance the stability of the semiconductor value chain.
EU leaders agreed on the European Chips Act to bolster the semiconductor market in Europe to give it strength against future unexpected economic turmoil, such as that created by the pandemic, and prepare for the rapidly rising demand for semiconductors. Europe aims to be more independent from Asian suppliers, and the European Chips Act will help the bloc establish a stronger industry to rely on at home.
The European Chips Act may help Europe to build a strong industry that greatly contributes to its economy.
Who Will Benefit From the European Chips Act?
There are many parties who stand to gain from the European Chips Act. First, the European Chips Act will promote economic growth in the bloc, the benefits of which will be far-reaching. If the European semiconductor market gains strength, it will help boost employment rates by creating jobs, bolster Europe’s wider technology industry by establishing itself as a key player in this important field, and potentially increase its gross domestic product by boosting manufacturing activity.
The European Chips Act will no doubt benefit established semiconductor companies and start-ups based in Europe. Initially, larger companies rather than smaller companies and start-ups will likely feel the greatest benefit. Additionally, the European Chips Act will positively impact closely related industries such as electronics, artificial intelligence, robotics, healthcare, autonomous vehicles, quantum computing and more.
The European Chips Act and the Future of Europe’s Chip Industry
According to the World Economic Forum, Europe’s digital future will be powered by its semiconductor industry. The European Chips Act, therefore, will play a major role in the reigon’s digital future.
To meet its ambitious target of increasing its share of the global semiconductors market from 10% to 20% by 2030, Europe will be looking to focus on collaborative efforts in the coming years, and the European Chips Act will undoubtedly facilitate this.
To drive Europe’s semiconductor manufacturing forward, it will need open ecosystems and close relationships to overcome key industry challenges, such as the high costs associated with manufacturing semiconductors in Europe.
The European Chips Act may help to encourage governments to subsidize manufacturing to ease these costs. Collaboration may also emerge across Europe’s value chain, particularly among small manufacturers who may not have the means to trade globally.
One of Europe’s strengths has long been in its research and development capabilities. With the establishment of the European Chips Act, manufacturing will be encouraged on home soil. This means that manufacturing will be brought closer to research institutions once more, facilitating innovation in the sector.
Finally, Europe can look forward to a boost to its economy. If the aims of the European Chips Act are met, Europe can expect an additional €77 billion and €85 billion injected into its economy thanks to semiconductor investment alone.
In conclusion, the European Chips Act will likely be beneficial not only to Europe’s semiconductor industry but to its economy as a whole.
References and Further Reading
A revitalized semiconductor industry will power Europe's digital future. [Online]. World Economic Forum. Available at: https://www.weforum.org/agenda/2022/09/a-revitalized-semiconductor-industry-will-drive-europes-digital-future/
EU Chips Act to boost Europe’s technological prowess and strengthen economy. [Online]. ING. Available at: https://think.ing.com/articles/eu-chips-act-to-strengthen-europes-economy/
EU Chips Act: Leaders strike €43 billion deal to boost semiconductor production in Europe. [Online]. Euro News. Available at: https://www.euronews.com/next/2023/04/19/eu-strikes-deal-to-boost-semiconductor-chip-production
European Chips Act. [Online]. European Commission. Available at: https://commission.europa.eu/strategy-and-polon icy/priorities-2019-2024/europe-fit-digital-age/european-chips-act_en