Europe proposes €43 billion Chips Act to tackle semiconductor shortage

The European Commission (EC) has proposed a European Chips Act today to bolster the bloc’s chip industry through billions of euros of investment and reduce its reliance on foreign supply chains of these components.

The EC said the new act is set to build a thriving semiconductor sector from research to production, and a resilient supply chain. This will be done by mobilising €43 billion euros of public and private investments, although it didn’t reveal how much of this was direct investment.

The act contains three main components. The first is the Chips for Europe Initiative, which is set to pool resources from the Union, member states, and third countries associated with the existing Union programmes, as well as the private sector. €11 billion will be made available to strengthen research, development, and innovation, to ensure the deployment of advanced semiconductor tools, train staff, and develop an understanding of the semiconductor ecosystem.

The EC will also create a new framework to ensure security of supply by attracting investments and enhanced production capacities. A new Chips Fund will facilitate access to finance for startups and help them mature their innovations and attract investors. This will include a dedicated semiconductor equity investment facility under InvestEU to support scaleups and SMEs to ease their market expansion.

The proposed act will also include a coordination mechanism between member states and the commission for monitoring the supply of semiconductors, estimating demand, and anticipating shortages. This will monitor the value chain by gathering intelligence from companies to map primary weaknesses and bottlenecks.

“Chips are necessary for the green and digital transition - and for the competitiveness of European industry,” said Margrethe Vestager, executive vice-president for a Europe Fit for the Digital Age. “We should not rely on one country or one company to ensure safety of supply. We must do more together - in research, innovation, design, production facilities - to ensure that Europe will be stronger as a key actor in the global value chain.”

The EC has proposed an accompanying recommendation to member states, which is a tool that enables the coordination mechanism between member states and the EC to commence straight away. The EC said this will allow them to discuss and decide on timely and proportionate crisis response measures from now on.

The EC is encouraging member states to start these coordination efforts to understand the current status of the semiconductor value chain across the EU and take corrective measures to overcome the current shortage until the new act is adopted. The European Parliament and member states will need to discuss the EC’s proposal of the European Chips Act in the ordinary legislative procedure.