25 October 2023 · 3 min read
Author: Matilde Castleberry
In the wake of our recent exploration into the Current State of Semiconductor Production in Europe, we will now continue our journey analysing a groundbreaking development that promises to reshape the landscape of semiconductor manufacturing in the European Union: The EU Chips Act (ECA).
On July 25, 2023, the Council of the European Union gave its final approval for ‘The EU Chips Act’ that had been proposed by the European Commission on February 8, 2022. Based on a demand-side analysis to avoid fragmentation and uncontrolled national public subsidies, the resolution aims at limiting dependence on third countries, fostering competitiveness, resilience, and support for the digital and green transition. The legislation is built upon three main pillars that we will be uncovering today.
Pillar 1 - Chips for Europe Initiative
The "Chips for Europe" initiative, or first pillar, aims to bridge the gap between semiconductor manufacturing and research. Its operational objectives include advancing design capabilities, enhancing existing pilot lines and enhancing new ones for cutting-edge chip technologies, promoting quantum chip development, establishing competence centres across the EU, and providing financial support through the "Chips Fund." These actions will be overseen by a new "Chips Joint Undertaking," with the potential for European Chips Infrastructure Consortia (ECICs) to implement initiatives.
Pillar 2 - Security and resilience
The second pillar introduces two EU statuses providing them with a range of benefits, namely: 'integrated production facilities' (IPF) and 'open EU foundries' (OEF). To qualify as one of the two, the facility has to also qualify as a 'first-of-a-kind facility' (FOAK facility). A FOAK facility must either be a new or upgraded chip manufacturing facility or it must produce equipment or key components for such equipment, used in manufacturing. These IPFs and OEFs enjoy preferential access to pilot lines due to their essential contribution to resilience and the security of supply. Moreover, Member States may offer support and the Commission may prioritise chip orders during crises. The regulation also introduces a 'design centres of excellence' label for EU design centres enhancing chip design capabilities, eligible for Member State support.
Pillar 3 - Monitoring and Crisis Response
The third pillar focuses on strategic mapping and monitoring of the EU's chip sector to ensure supply security and address crises. The Commission, in collaboration with the European Society of Biomaterials (ESB), will conduct a comprehensive assessment of the EU's chip sector, identifying strengths, weaknesses, key products, dependencies, and potential crisis points. Early warning indicators are developed based on this mapping, allowing for voluntary information requests to EU chip value chain actors.
Regular monitoring will also be carried out through the surveillance of early warning indicators, of the integrity of activities by Member States, and the identification of best practices. Finally, it will establish an 'emergency toolbox' for chip shortages during crises, focusing on critical sectors. Measures include information gathering, priority-rated orders for chip manufacturers, and common purchasing for critical sectors. The Commission has the authority to levy fines on companies that provide inaccurate, insufficient, or deceptive information when responding to information requests during a crisis.
Expected results in the short, medium, and long term
Shortly, the tools outlined in the Recommendation will facilitate immediate collaboration between Member States and the Commission, enabling discussions and decisions regarding crisis response measures, should they be deemed necessary.
Looking ahead to the intermediate future, the Chips Act will bolster manufacturing within the Union, fostering growth and innovation throughout the entire value chain. This will enhance supply security and build a more robust ecosystem.
Over the long term, the Chips Act will uphold Europe's technological dominance and pave the way for essential technological capabilities that will facilitate the transfer of knowledge from research to production, positioning Europe as a leader in cutting-edge downstream markets.
Building upon the three main pillars we just explored, in our next article we'll be unveiling the financial fuel and the beneficiaries driving the European Chips Act's impact. Stay tuned for an in-depth exploration of the funding and the beneficiaries of the semiconductor revolution. Don't miss out – the future of chips awaits!