High-end chip production: This is how the EU wants to enter the semiconductor race

"Brussels wants to oppose America and China in microelectronics. Commissioner Breton will present the “EU Chips Act” on Tuesday.

The US, China, Korea and other Asians are investing billions in expanding the semiconductor industry. Now the European Union is following suit. 

EU Internal Market Commissioner Thierry Breton wants to present the "EU Chips Act" on Tuesday, through which around 45 billion euros are to flow into research, pilot projects, start-ups and, above all, the construction of mega-factories that produce state-of-the-art semiconductors by 2030. To this end, the Commission wants to soften its strict rules on state aid and speed up the approval process. In addition, the Commission wants to monitor chip production and, in extreme cases, issue export bans for semiconductors. This is how the Commission reacts to chip delivery bottlenecks, which are slowing down the German car industry, among other things.

The Commission wants to make the EU a heavyweight in chip production again and ensure the supply for future projects such as networked driving, Industry 4.0, artificial intelligence and supercomputers. The EU share of chip production in the world is expected to increase from 10 percent today to 20 percent by 2030. Since the Commission expects the market to double by then, that means production will quadruple. "If we want to be among the leading forces in the markets of the future and not just want to be the subcontractor of whoever, the EU must act now," Breton said in an interview with the Frankfurter Allgemeine Sunday newspaper.

Breton envisages building two, three or four large semiconductor factories in the EU. They are supposed to build very small – with structure sizes below 2 nanometers – and energy-efficient semiconductors. The aim is "a Europe of mega factories that can meet its own needs and conquer the world markets".

Similar to America

Drafts for the "Chips Act" have been circulating since the end of last week. Also the F.A.Z. has a draft. Numbers are not included. They should only be inserted shortly before publication. According to information from this newspaper, Breton is planning three items: first, 30 billion euros, which the states have already reserved for the advancement of the chip industry, according to the Commission's analysis, second, 12 billion euros for a program called "Chips for Europe", with which the EU pilot projects, quantum chips or chip design promotes, and thirdly, a 5 billion program with the European Investment Bank (EIB) to promote start-ups.

The EU would thus provide a comparable amount to what the USA is doing in its "Chips Act". It provides for $52 billion in aid through 2026. Compared to the $450 billion that South Korea plans to provide in tax breaks by 2030, that seems modest.

The changes that Breton plans to make to EU state aid law are more decisive than the numbers alone.

 

So far, state aid has largely been limited to research or "world firsts".

 

Subsidies of 10 to 15 percent of the construction costs are usual.

 

In the future, up to 100 percent should be possible in individual cases, "if there were otherwise no such systems in Europe," as the draft says.

 

The threshold is lowered from world to European novelty.

 

Aid of 40 to 50 percent would no longer be a problem, according to Breton's environment. He justifies this by saying that the settlement of mega factories is a breeding ground for the settlement of other companies and creates thousands of indirect jobs.

However, the Chips Act is controversial within the EU Commission. Competition Commissioner Margrethe Vestager warns of softer rules and a global subsidy race that the EU cannot win. However, it is unlikely that she can weaken the law. Breton has the full backing of Commission President Ursula von der Leyen, according to his and her environment.

Above all, the American Intel group, which announced investments in factories in Europe months ago, could benefit from the state aid. Germany is also hoping. However, Intel linked this to generous subsidies. The speeding up of the approval process provided for by the proposed law could also make the decision easier for Intel. Where possible, states should classify mega-factories as “projects of national importance” and suspend environmental regulations, for example. Breton is now hoping for a quick decision from Intel – in three to four weeks.

In order to avoid delivery bottlenecks, the states should set up a kind of early warning system. In crises, at least two EU countries should be able to instruct the Commission to pool the purchase of chips. In extreme cases, the EU should be able to ban the export of semiconductors. Member States and the European Parliament must en agree to the Chips Act to go into effect."

What about Lithuania? Lithuania is waging hybrid wars. We will cut our fishing boats for scrap metal and sell them so as not to give them to the enemy. We will sail from the island of Taiwan to mainland China in wooden boats, lift the Lithuanian tricolor on the beaches and declare the Communists defeated. Taiwanese (we were not afraid of that word: Taiwanese) will be so happy that it will allow us to steal modern chip-making technology. Then we will build those factories in Lithuania and Vilnius will be New Vasiukai.