“Chips Act”. The European Union will fight for “chip sovereignty”. Concerns about China

, which a decade ago completely trusted unfettered and free globalization, for several years has been looking for ways to remain among the industrial leaders, also with the help of public money. And also protect against pressure from, for example, no fault of disruptions in strategic supply chains.

For example, Brussels has been promoting the research and production of electric car batteries in Europe since 2017.

“We will do our best to avoid future shocks to the EU economy”

In turn, today (February 8, 2022), the European Commission announced – on a much larger scale –
“Chips Act”, a package of solutions aimed at increasing the development and production of semiconductor chips in the EU.

– We will do our best to secure the entire supply chain and avoid future shocks to the EU economy similar to the current chip shortage. By investing in future pioneering markets and restoring the balance of global supply chains, we will enable the Union industry to remain competitive. It will also create good jobs, said Thierry Breton, EU Industry Commissioner today.

Although the French likes to use – like President Emmanuel Macron – the slogans of EU sovereignty also in relation to strategic industries, in the case of chips this sovereignty does not mean self-sufficiency. Brussels aims to double – to 20 percent. in 2030 – the current EU share in the global market, i.e. a return to the state from a quarter of a century ago, when chips were not so important.

Currently, they are part of all products with digital functions – from smartphones and cars to key solutions and infrastructure elements used in healthcare, in the energy and communication sectors.

Global race for microprocessors. The EU does not want to be left behind

Brussels hopes to mobilize 41 billion public euros to finance the goals of the “Chips Act”. An important point of this initiative is the announcement that the European Commission will agree to – usually combated as a disturbance to the free market – public aid (government subsidies, tax breaks) for the development of chip technologies and their production in the EU.

– We simply cannot miss the global race for Fr. If we want the digital and green transformation to become a reality in the EU, we must do everything we can to keep our industry operating without the disruption of third country dependency and global shortages. That is why we welcome the “Chips Act” – said Czech MEP Martina Dlabajova, who is piloting this topic in the European Parliament, on Tuesday. Part of the “Chips Act” package has yet to be approved by MEPs and by EU governments in the EU Council.

China worries the European Union. Concerns over an export blockade from Taiwan

Currently, about half of all microprocessors in the world and up to 95 percent. the most advanced comes from Taiwan, although – this shows the complexity of supply chains – the market of machines for the production of these chips is also dominated by EU companies. Chip shortages, which hit, among others, last year in the car industry in Germany, were the result of a revival of the popandemic demand in the world much stronger than predicted by the producers. However, Europe’s strong dependence on these strategic products from Asia is judged in Brussels as all the more dangerous as the security situation in the chip-producing part of Asia is also deteriorating.

A possible war threat from China, or even “only” an export blockade from Taiwan, would now be a tragedy for EU industry. Hence the need to increase production capacity in the EU. Except that building one modern large chip factory takes several years and consumes about $ 20 billion. But already today the European Commission has laid down guidelines on the table for tracking the bottlenecks in the supply of chips and for an ad hoc, crisis response to their great shortages, even – as it happened in the case of vaccines last year – by introducing monitoring and limiting exports outside the EU.

“We must be very careful with export controls, but we will have them as a last resort,” said Margrethe Vestager, vice-president of the European Commission today.

Who will benefit from the “Chips Act”? Internal competition in the EU

The announcement of legal market “manipulation” to strengthen the chip industry in Europe has made some smaller EU countries fear they will be outplayed by larger EU members. They fear that the capitals of the EU – although the European Commission should prevent it – will compete with each other in such a way that those with the largest national budgets, i.e. Germany, France and Italy, will outperform others in the fight to build factories that could be built and without EU support.

Currently, EU countries are strongly seeking investments from Intel, which has committed to investing $ 20 billion in the production of chips in Europe, with the factory itself most likely going to Germany.

The Netherlands is also a tough player in the race to participate in investments in chips. Poland, on the other hand, was satisfied with the EU strategy for car batteries, and now counts on winning something in the field of chips.