EU Chief Confirms Chip Law Proposal For Early February

European Commission president Ursula von der Leyen has once again addressed the need for Europe to ramp up its production of semiconductors.

Speaking virtually during the ‘State of the World’ Special Address at the World Economic Forum, von der Leyen said draft legislation for the regulation of microchips will be proposed in early February.

It was back in September 2021, with the global chip shortage showing no sign of easing any time soon, the EC plan was announced by Ursula von der Leyen.

Chip dependance

The proposal, known as the ‘European Chips Act’, is being touted as a way to bolster Europe’s self sufficiency in the semiconductor sector, by adapting state aid rules, improving tools to anticipate shortages and crisis, and strengthen research capacity in the bloc.

The move has been some time coming.

In March 2021 the European Union under its 2030 Digital Compass plan announced it wanted to produce at least 20 percent of the world’s cutting-edge semiconductors by the end of the decade.

And now Ursula von der Leyen on Thursday during her speech to the World Economic Forum, has placed a start date of its chip self sufficiency efforts.

“Demand for them (semiconductors) is skyrocketing,” said von der Leyen. “Today, we have microchips, not only in our PCs and smartphones, but also in our cars, in the heating system of our homes, in our hospitals, in life-saving ventilators.”

“There is no digital without chips,” said von der Leyen. “And the European need for chips will double in the next decade. This is why we need to radically raise Europe’s game on the development, production and use of this key technology.”

“Europe is strong in some specific areas, such as the design of components for power electronics, or chips for the automotive and manufacturing industries,” she noted. “Europe is the world’s centre for semiconductor research. And Europe is also very well positioned in terms of the materials and equipment that are needed to run large chip manufacturing plants.”

“But Europe’s global semiconductors market share is only 10 percent and today most of our supplies come from a handful of producers outside Europe,” said von der Leyen. “This is a dependency and uncertainty we simply cannot afford.”

“By 2030, 20 percent of the world’s microchips production should be in Europe,” said von der Leyen. “Keep in mind that the world’s production itself will double. This means quadrupling today’s European production. We have no time to loose.”

European Chips Act

“This is why I can announce that we will propose our European Chips Act in early February,” said von der Leyen “It will help us to make progress across five areas.”

“First, we will strengthen our world-class research and innovation capacity in Europe,” she said. “Secondly, we will focus on ensuring European leadership in design and manufacturing. Thirdly, we will further adapt our state aid rules under a set of strict conditions. This will allow public support for European ‘first of a kind’ production facilities that benefit all of Europe.”

“Fourthly, we will improve our toolbox to anticipate and respond to shortages and crises in this sector to shore up our security of supply,” said von der Leyen. “And fifth, we will support smaller, innovative companies, in accessing advanced skills, industrial partners and equity finance.”

“I want to be clear; Europe will always work to keep global markets open and connected,” said von der Leyen. “It is in the world’s interest, and in our own. But we do need to tackle the bottlenecks that slow down our own growth. This will help us become a strong player, not just in some niches, but throughout the whole value chain.”

“To conclude, we will promote diversification among like-minded partners,” she said. “We will create more balanced interdependencies. And we will build supply chains we can trust by avoiding single points of failure.”

Challenges ahead

But Europe may face some challenges with its semiconductor ambitions.

For starters the world’s most important chip designer, ARM, is based in the United Kingdom, which has exited the European Union.

And chip companies typically require substantial cash incentives or tax breaks, in return for building an expensive chip factory in a particular location.

Intel CEO Pat Gelsinger in March 2021 said the chip giant was looking for 8 billion euros (£7bn) in public subsidies toward its planned semiconductor fabrication plant in Europe.

Then in September Gelsinger said Intel could potentially invest as much as 80 billion euros ($95bn or £69bn) to expand chip production in Europe.

France and Germany are currently vying for Intel’s chip manufacturing ‘megafab’ plant (although Germany is said to be the leading contender).

Italy meanwhile is said to be competing with Poland for a new Intel advanced packaging factory.

The advanced packaging plant will reportedly utilise innovative technologies to weave full chips.

Chip packaging plants typically integrate different types of semiconductors onto wafers, and are a key part of the chip manufacturing process.

Meanwhile the world’s largest contract chip maker, Taiwan Semiconductor Manufacturing Co. (TSMC) has previously warned that plans by US, EU and others to bring semiconductor production into their own countries could result in a costly, unworkable system.

In July 2021 TSMC also dampened down speculation that it was considering building its first European semiconductor plant in Germany.