The big European countries will benefit the most from the EU’s push for chips

the plan of the European Commission (EC) to make the bloc more lucrative for investment in semiconductor factories will likely tilt profits toward larger countries such as Germany, France and Italy, analysts say.

With billions of euros of public and private investment, coupled with coverage of up to 100% of the demonstrated financing gap with public resources, a subsidy race could tip the scales towards countries with greater resources.

“I don’t see how it can be avoided, as it’s the nature of the beast, just like in the United States, where states give different grants for companies to build in a certain state,” said Alan Priestley, a chip analyst at Gartner.

The manufacture of chips in Europe it has gone from 24% of global production capacity in 2000 to 8% today, and chipmaker ASML has warned it could drop to 4% if no action is taken.

According to data from the Semiconductor Industry Association, US companies now have a 47% market share in the chip sector, followed by Asian companies, while Europe ranks a distant third.

The current European legislation on chips contributes to solving this problem, since it offers greater subsidies and public aid to achieve a share of 20% of the world’s capacity in 2030.

Industry sources pointed to more global collaboration with other regions as the chip supply chain stretches across the globe. Otherwise, a fully autonomous chip supply chain would cost at least a trillion euros.

Intel, which has been planning to invest up to $95 billion in Europe over the next decade, said it hopes EU chip legislation will help its plans to expand its presence in the region.

The US chipmaker has been looking for locations in Germany, France and Italy.

And that is precisely the fear of the smaller countries. They suspect that international companies looking to the continent may not consider smaller ones to set up factories that cost more than US$20 billion to build.

Analysts say that while subsidies are an important factor, the availability of talent, land and research institutes would also be taken into account before setting up a factory.

Germany, France and Italy had already granted public aid to create skills around microelectronics through what are known as important projects of common European interest (PIICE), with a financing budget of 2,000 million euros.

The new legislation will also support smaller, more innovative companies to access advanced skills, industry partners and equity financing, and several analysts said such companies could choose smaller countries to set up operations.

“The presence of a next-generation semiconductor manufacturing plant in Europe would have positive spillover effects, boosting investment in European supply chains and acting as a magnet for scarcely abundant talent,” said Jan Frederik Slijkerman, an analyst at ING.

EU Competition Commissioner Margrethe Vestager said investments would also come from a second pan-European chip PIICE, involving more than 100 people from some 20 EU countries and focusing on artificial intelligence processors. and state-of-the-art computing.