Chips Act : EU Parliament blows a signal to catch up in chip production

"The course for the European “Chips Act” has been set. This also clears the way for government aid worth billions for new semiconductor factories. The EU Parliament also wants to prevent the export of specialist knowledge to China.

The discussion about the European answer to the American billion dollar program for green technologies is in full swing. In the meantime, a preliminary decision has been made regarding the promotion of the chip industry. On Tuesday in Brussels, the Industry Committee of the European Parliament backed the "EU Chips Act" (proposed by the European Commission a year ago) with a large majority, paving the way for billions in state aid for new semiconductor factories. The US company Intel has tied the construction of a factory in Magdeburg to the EU relaxing its state aid rules, as has the Taiwanese company TSMC, which has announced the construction of a plant in Dresden.

However, the MEPs do not want to limit the aid to such large-scale projects. They are in favor of expanding the scope. 

Contrary to what the Commission has emphasized, state aid should not only flow into the promotion of modern chips with the smallest structure sizes, but also into conventional "industrial chips" of all sizes. That was what German industry had demanded. The prerequisite for this is that at least the production process is innovative - for example because little energy or water is used.

Response to USA and China

"This is a good day for EU industrial policy, because many will benefit from the Chips Act: potentially all innovative companies - large and small - in the semiconductor value chain and also the large-scale projects already planned in some member states," said MEP Henrike Hahn (Greens) . In the trade war over the chip industry between the USA and China, Europe has so far at best stood on the sidelines, said Tiemo Wölken (SPD): “The Chips Act is now the starting signal for the reboot of Europe as a semiconductor location.”

With the Chips Act, the EU wants to increase its share of chip production in the world to 20 percent. In a growing market, this corresponds to four times the current production. 

In doing so, it is reacting not least to the supply bottlenecks after the end of the Corona crisis, which, for example, had a severe impact on car production. However, the European chips law is also a reaction to the programs of the USA and China to promote chip production.

The EU wants to provide 43 billion euros in aid for this. Most of it, however, is “old money” from EU and state programs that were announced long ago. The US, on the other hand, has provided its “Chips Act” with 50 billion dollars in “fresh money”.

The European Parliament is urging that at least the 3.2 billion euros be refinanced from the EU budget and not at the expense of existing programs. It also calls for an export ban for European expertise in order to protect the domestic semiconductor industry from industrial espionage. The transfer to third countries such as China should only be possible under strict conditions, even after the purchase of a European group.

Before the EU Chips Act can come into force, the European Parliament must agree on a common position with the Council of Ministers. That should be done by summer. The member states were also recently against restricting funding to the most modern chips."