How a European Chips Act will put Europe back in the tech race

The world is short of semiconductors.

The shortage of semiconductors – also known as chips – has very concrete consequences on the EU economy, jobs and even leisure. Carmakers postpone the production of vehicles. Broadband providers run out of Internet routers. Gamers cannot get their hands on next-gen consoles.

The situation might last for a while. Semiconductors are at the core of our world’s digitisation, but global supply is currently struggling to meet the explosion of demand driven by smartphones, Internet of Things and connected cars.

But it is not only about supply and demand.

Semiconductors are at the core of the global technological race

Semiconductors are at the centre of strong geostrategic interests, and at the core of the global technological race.

Superpowers are keen to secure their supply in the most advanced chips as they are well aware that it will condition their capacity to act (militarily, economically, industrially) and drive digital transformation.

Chips are a strategic component of any industrial chain. The race for the most advanced chips is a race about technological and industrial leadership.

The US are now discussing a massive investment under the American Chips Act designed to finance the creation of an American research centre and to help open up advanced production factories. The objective is clear: to increase the resilience of US semiconductor supply chains.

Taiwan is positioning itself to ensure its primacy on semiconductor manufacturing.

China, too, is trying to close the technological gap as it is constrained by export control rules to avoid technological transfers.

Europe cannot and will not lag behind.

"While global demand has exploded, Europe's share across the entire value chain, from design to manufacturing capacity has shrunk. We depend on state-of-the-art chips manufactured in Asia. So this is not just a matter of our competitiveness. This is also a matter of tech sovereignty. So let's put all of our focus on it."

By announcing a European Chips Act in her State of the European Union address today, President Ursula von der Leyen has sent a strong geopolitical and economic signal.

Member States are currently designing national strategies to develop on their soil industrial and production capacities in order to reduce their dependencies.

A coherent European vision and strategy

With the European Chips Act, these national efforts can be integrated in a coherent European vision and strategy.

It will also provide a framework to avoid a race to national public subsidies fragmenting the single market, set conditions to protect European interests and place Europe firmly in the global geopolitical landscape.

I believe that the European Chips Act should cover three dimensions:

First, a European Semiconductor Research Strategy.

Europe’s main strength in the global semiconductor value chain is its research capacity. Yes, we have first-rate research in Europe, through IMEC in Belgium, LETI/CEA in France, Fraunhofer in Germany. Every industrial player active in semiconductor production uses and depends on European research carried out in these institutes. Building on the existing research partnership (the KDT Joint Undertaking), we need to up our game, and design a strategy to push the research ambitions of Europe to the next level while preserving our strategic interests.

Secondly, a collective plan to enhance European production capacity.

We must regularly monitor our industrial supply chains, anticipate possible future disruptions, and ensure the resilience of our entire supply chain including design, production, packaging, equipment and suppliers such as producers of wafers. We must also support the development of European fabrication plants – “mega fabs” – able to produce in high volume the most advanced (towards 2nm and below) and energy-efficient semiconductors.

Thirdly, a framework for international cooperation and partnership.

The idea is not to produce everything on our own here in Europe. In addition to making our local production more resilient, we need to design a strategy to diversify our supply chains in order to decrease overdependence on a single country or region. And while the EU aims to remain the top global destination of foreign investment and we welcome foreign investment to help increase our production capacity especially in high-end technology, through the European Chips Act we will also put the right conditions in place to preserve Europe’s security of supply.

In order to deliver on these ambitions, we will have to mobilise our entire toolbox, such as the recently launched European Alliance on Semiconductors, as well as sources of financing in a coherent way. In addition to current European, national, regional, and private financing, and the possibilities offered by IPCEIs, I believe that we should explore setting up a dedicated European Semiconductor Fund.

Our tech sovereignty is within reach

The geopolitical reality is compelling, as is the need to create European value and jobs in strategic industrial areas.

With today’s announcement by President von der Leyen, Europe is throwing its hat in the ring.

With the European Chips Act, our tech sovereignty is within reach.

The moment is now.