Provisional Agreement reached on EU Chips Act

The Council of the EU and the European Parliament have reached a provisional political agreement on the regulation to strengthen Europe’s semiconductor ecosystem, better known as the ‘Chips Act’. The deal is expected to create the conditions for the development of an industrial base that can double the European Union’s global market share in semiconductors from 10% to at least 20% by 2030.

Ebba Busch, Swedish Minister for Energy, Business and Industry and Deputy Prime Minister, said the agreement is of “utmost importance” for the green and digital transition while securing the EU’s resilience in turbulent times, adding that the new rules represent a revolution for Europe in the semiconductor sector. “A swift implementation of today’s agreement will transform; our dependency into market leadership; our vulnerability into sovereignty; our expenditure into investment. The Chips Act puts Europe in the first line of cutting-edge technologies which are essential for our green and digital transitions,” Busch said.

The Commission proposed three main lines of action, or pillars, to achieve the Chips Act’s objectives. These include the “Chips for Europe Initiative” to support large-scale technological capacity building; a framework to ensure security of supply and resilience by attracting investment; and a Monitoring and Crisis Response system to anticipate supply shortages and provide responses in case of crisis. The Chips for Europe Initiative is expected to mobilise €43 billion in public and private investments, with €3.3 billion coming from the EU budget. These actions will be implemented through a Chips Joint Undertaking, a public–private partnership involving the Union, the member states and the private sector.

On pillar one, the compromise reinforces the competences of the Chips Joint Undertaking which will be responsible for the selection of the centres of excellence, as part of its work program. On pillar two, the final compromise widens the scope of the so-called ‘first-of-a-kind’ facilities to include those producing equipment used in semiconductor manufacturing. ‘First-of-a-kind’ facilities contribute to the security of supply for the internal market and can benefit from fast-tracking of permit-granting procedures. In addition, design centres that significantly enhance the Union’s capabilities in innovative chip design may receive a European label of ‘design centre of excellence’ which will be granted by the Commission. Member states may apply support measures for design centres that receive this label according to existing legislation. The compromise also underlines the importance of international cooperation and the protection of intellectual property rights as two key elements for the creation of an ecosystem for semiconductors.

Chips are small devices composed of semiconductors that can store large quantities of information or perform mathematical and logical operations. They are essential for a range of daily-use products, from credit cards to smart phones. Demand for chips and semiconductors is expected to grow substantially, with the development of AI 5G networks or the internet of things. Europe is too dependent on chips produced abroad, which became evident during the COVID-19 pandemic. The industry and other sectors such as health, defence or energy have faced supply disruptions and shortages. The Chips Act aims to reduce the EU’s dependencies on foreign actors while reinforcing the EU’s industrial base for chips, exploit future business opportunities and create jobs. This will improve the EU’s security of supply, resilience, and technological sovereignty in the field of chips.

The Commission published its proposal for a regulation on 8 February 2022. On 1 December 2022, the Council adopted a general approach. The European Parliament voted its negotiation position on 15 February 2023.

A new semiconductor objective has also been created within the Digital Europe Programme which will support capacity building in the chips sector and funds are also mobilised within the research framework Horizon Europe, amounting to a total of €3.3 billion for the ‘Chips for Europe Initiative’. The financing solution was found within the limits of the existing inter-institutional agreement of the Multiannual Financial Framework and comes on top of resources already allocated to similar objectives within the MFF and through the digital strand in the Recovery and Resilience Facility.

The provisional agreement between the Council and the European Parliament will now be finalised, endorsed and formally adopted by both institutions. Once the Chips Act is adopted, the Council will pass an amendment of the Single Basic Act (SBA) for institutionalised partnerships under Horizon Europe, to establish the Chips Joint Undertaking, which builds upon and renames the existing Key Digital Technologies Joint Undertaking. The SBA amendment is adopted by the Council following consultation of the Parliament. Both texts will be published at the same time.

SEMI, the industry association serving the global electronics design and manufacturing supply chain, welcomed the provisional agreement reached on 18 April in the European Chips Act Trilogue Negotiations. A strong supporter of Europe’s economic growth, SEMI Europe expects the EU Chips Act to help Europe increase its global semiconductor manufacturing share to 20% in the next decade.

“The European Chips Act is a significant step forward for the semiconductor industry in Europe with robust investments to help strengthen manufacturing and the resiliency of global supply chains. In addition, the act will enable cohesive strategies to grow Europe’s talent base and ensure the region remains at the forefront of innovation,” said Ajit Manocha, SEMI President and CEO.

Laith Altimime, President of SEMI Europe, added that the Chips Act strengthens the continent’s appeal as a destination for semiconductor industry investment and lays the groundwork for the growth of the ecosystem. “The act will help create a more favourable environment for chip industry investments in Europe and promises to spark greater innovation,” Altimime said.

The act will also enable Europe to deepen its understanding of global semiconductor supply chains and address the skills shortage. “SEMI looks forward to the implementation of the European Chips Act, which is crucial to strengthening Europe’s semiconductor competencies across the entire value chain,” said Christopher Frieling, Director of Advocacy and Public Policy at SEMI Europe.

Image credit: iStock.com/sankai