EU eyes technology sovereignty with its European Chips Act

• For the EU, gaining greater autonomy in chipmaking is now a key component of its digital strategy, to fight the semiconductor shortage blooming in 2021
• The EU worries how its market share across the entire chip value chain has shrunk
• The law would basically help to link research, design and testing capacities; coordinate EU and national investments; and create a favorable climate for advanced chip manufacturing in Europe

During a state of the union speech mid last month, European Commission President Ursula von der Leyen highlighted how Europe’s share across the entire global semiconductor value chain, from design to manufacturing capacity has shrunk, amidst soaring demand and lingering shortage. She then announced a European Chips Act, aimed at gaining greater autonomy in chipmaking for the region.

“We depend on state-of-the-art chips manufactured in Asia. So this is not just a matter of our competitiveness. This is also a matter of tech sovereignty. So let’s put all of our focus on it,” she said in her speech. Therefore, von der Leyen pitched the legislation as a key component of the EU’s overarching digital strategy.

From smartphones to trains or entire smart factories, semi-conductors make everything work.

But we depend on state-of-the-art chips manufactured in Asia.

We will present a new European Chips Act.

This is a matter of tech sovereignty. #SOTEU pic.twitter.com/76abBuLCyw

— Ursula von der Leyen (@vonderleyen) September 15, 2021

The act has not been formally presented yet, but the head of the European Commission made her intentions clear: the EU must create a “state-of-the-art European chip ecosystem”, which would include production, to guarantee secure and stable semiconductor supply chains.

Rctifying the 2021 semiconductor shortage on a global scale

It hasn’t been only about supply and demand for the EU. In fact, von der Leyen claims the ongoing shortage of chips “has very concrete consequences on the EU economy, jobs and even leisure. Carmakers postpone the production of vehicles. Broadband providers run out of Internet routers. Gamers cannot get their hands on next-gen consoles,” she added.

The way she perceived it is that semiconductors are at the center of strong geostrategic interests, and at the core of the global technological race. “Chips are a strategic component of any industrial chain. The race for the most advanced chips is a race about technological and industrial leadership,” she said.

True enough, the US has been discussing a massive investment under the American Chips Act designed to finance the creation of an American research center and to help open up advanced production factories. The aim is basically the same: to increase the resilience of US semiconductor supply chains.

Meanwhile, chipmaking leader Taiwan is also positioning itself to ensure its primacy on semiconductor manufacturing and China, too, is trying to close the technological gap as it is constrained by export control rules to avoid technological transfers.

The EU’s semiconductor strategy

In Europe, EU member states are currently designing national strategies to develop industrial and production capacities on their soil, in order to reduce their dependencies on foreign exports. Under the upcoming legislation, there would be three dimensions, von der Leyen said.

First would be a European Semiconductor Research Strategy, given how Europe’s main strength in the global semiconductor value chain is its research capacity. “Yes, we have first-rate research in Europe, through IMEC in Belgium, LETI/CEA in France, Fraunhofer in Germany. Every industrial player active in semiconductor production uses and depends on European research carried out in these institutes,” the President said.

Now she wants Europe to up its game, and design a strategy to push the research ambitions of Europe to the next level while preserving our strategic interests. Secondly, a collective plan to enhance European production capacity by regularly monitoring their industrial supply chains, anticipate possible future disruptions, and ensure the resilience of the entire supply chain including design, production, packaging, equipment, and suppliers such as wafer producers. 

Finally, a framework for international cooperation and partnership. “The idea is not to produce everything on our own here in Europe. In addition to making our local production more resilient, we need to design a strategy to diversify our supply chains in order to decrease overdependence on a single country or region,” she noted.