Chips Act to protect EU against semiconductor shortages

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The European Commission has set out measures to ensure the EU's security of supply, resilience and technological leadership in semiconductor technologies and applications.

Chips Act
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The proposed EU Chips Act is expected to mobilise over €43bn of public and private investments and set measures to prevent, prepare, anticipate and respond quickly to any future supply chain disruptions.

Recent global semiconductors shortages have shown how the global semiconductor value chain depends on a limited number of suppliers, some of whom operate in a complex geopolitical context.

Margrethe Vestager, executive vice-president for a Europe Fit for the Digital Age, said: “We should not rely on one country or one company to ensure safety of supply. We must do more together - in research, innovation, design, production facilities - to ensure that Europe will be stronger as a key actor in the global value chain. It will also benefit our international partners. We will work with them to avoid future supply issues.”

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The European Chips Act aims to ensure that the EU has the necessary components to become a semiconductor leader beyond research and technology in design - plus the manufacturing and packaging of advanced chips - to secure its semiconductor supply and to reduce its dependencies.

In total, €11bn will be made available to strengthen existing research, development and innovation; ensure the deployment of advanced semiconductor tools, pilot lines for prototyping, testing and experimentation of new devices for innovative real-life applications; and to develop an in-depth understanding of the semiconductor ecosystem and value chain.

A Chips Fund will be established so that start-ups can access finance to help them mature their innovations and attract investors. The fund will also include a dedicated semiconductor equity investment facility under InvestEU to support scale-ups and SMEs to ease their market expansion. A third component of the Act will establish a coordination mechanism between the Member States and the Commission to monitor the supply of semiconductors, which will estimate demand and anticipate shortages.

Commenting on the announcement, Seiko Hidaka, a legal director at Gowling WLG, said: “There is no doubt that the Commission is right that we must shore up chip manufacturing in the Europe, given that chips form the foundation of today's economy that is so dependent on technology. Granted, it would take a good few years to set up a foundry until it is fully operational, but having access to chips is vital in a climate where supply chain disruptions - owing to the pandemic, strange weather or geopolitics - aren't showing any signs of abating.”

Alexandra Brodie, co-chair of technology at Gowling WLG, added: “This is a welcome development for the tech sector, but it will be intriguing to see which projects the EU diverts funds from.”