On April 18th, a historic moment occurred when the European Council and European Parliament unanimously agreed on the final version of “The EU Chips Act,” unlocking an unprecedented €43 billion in subsidies. The EU Chips Act aims to create an enabling environment for the development of Europe’s industrial manufacturing base, with a target of increasing the EU’s share in the global semiconductor manufacturing market to at least 20% by 2030. This ambitious target requires quadrupling Europe’s chip manufacturing output and establishing a robust semiconductor supply chain, capable of meeting the demands of key sectors like the automotive industry. The EU will also need to compete with industry leaders from the US and Asia, making this a critical moment for Europe’s technological advancement.
To achieve this goal, major players in the semiconductor industry such as Intel, Infineon Technologies, GlobalFoundries, and STMicroelectronics have announced new projects. However, as Eva Maydell, the lead negotiator for the EU Chips Act in the European Parliament, pointed out, the Chips Act cannot be the only legislation that attracts such investments. The EU must ensure it is doing everything possible to make itself an attractive destination for investment and innovation. The Chips Act is a crucial first step, but more action is needed to ensure Europe’s technological competitiveness and prosperity.
① The European Chip Goal: Quadrupling Manufacturing Share
The confirmation of the EU Chips Act has been welcomed by industry participants, who see it as a much-needed boost for manufacturing capabilities, skills, and R&D. Margrethe Vestager, the Vice President of the Commission, tweeted, “We need chips to power the digital and green transformation or healthcare systems.”
According to a European Union official, since the announcement of the chip subsidy plan last year, the EU has attracted over €100 billion in public and private investments.
The EU Chips Act, first proposed by the European Commission last year, has now been confirmed by Internal Market Commissioner Thierry Breton with the goal of doubling the EU’s global share of chip production to 20% by 2030. To achieve this production share, it is estimated that Europe needs to quadruple its chip manufacturing output. The EU will relax competition rules to allow spending in centers that produce the component and has committed sufficient funding from existing budgets.
However, Asian companies, particularly those from China and Taiwan, currently dominate the production and export of such chips.
EU President Ursula von der Leyen said the agreement “will make the chip industry competitive and lay the foundations for a global market share. It will drive Europe’s clean tech industry and strengthen our digital resilience and sovereignty.”
China and technology experts such as Paul Triolo at the Washington-based Center for Strategic and International Studies analysts suggest that the EU may struggle to narrow the gap with its competitors. Triolo said, “Like the US, the key question for the EU is how much of the supply chain supporting this industry can be moved to the EU, and what the costs will be.” While the Commission initially proposed funding only cutting-edge chip factories, EU governments and legislators have expanded the scope to cover the entire value chain, including mature process chips and research and design facilities.
② “The European Chip Act”: Five Objectives and Three Action Guidelines.
The “European Chip Act” proposes five main objectives, including strengthening the EU’s leadership position in research and technology; establishing and strengthening the EU’s innovative capabilities in advanced, energy-efficient, and secure chip design, manufacturing, and packaging, and transforming them into finished products; creating an appropriate framework to significantly increase its chip production capacity before 2030 and reduce external dependencies; addressing skills shortages, attracting innovative talent, and supporting the development of skilled labor; and deepening understanding of the global semiconductor supply chain.
⑴ Five Objectives
- The “European Chip Act” proposes five main objectives, including strengthening Europe’s leading position in research and technology in smaller and faster chips;
- Building and enhancing innovation capabilities in advanced chip design, manufacturing, and packaging, and transforming them into commercial products;
- Developing an appropriate framework to significantly increase production capacity by 2030, and increase the share in global semiconductor production to 20%;
- Addressing the critical issue of skill shortages, attracting new talent, and supporting skilled labor;
- Gaining a deeper understanding of the global semiconductor supply chain.
⑵ Three Action Guidelines
On April 18th, the European Commission proposed three main action pillars to achieve the objectives of the European Chip Act:
- “European Chips Program” to support large-scale technological capacity building;
- A framework to ensure supply security and resilience by attracting investment;
- Monitoring and crisis response systems to predict supply shortages and provide response measures in case of crisis.
On the same day’s meeting, members of the European Commission reached a compromise on the details of the first and second major action plans.
⑶ Some Actions to Achieve These Goals Include
- The European Chip Initiative will support technological capability-building and innovation in the development and deployment of advanced and next-generation semiconductors and quantum technologies.
- To implement the initiative, a public-private partnership European Chip Infrastructure Alliance, and a network of semiconductor competence centers will be established.
- A framework to ensure chip supply security by supporting and attracting investments in large-scale production capacity. In particular, public support for open European foundries – factories mainly dedicated to producing chips for other industrial players – and comprehensive production plants dedicated to designing and producing chips for their own markets.
- A coordination mechanism between Member States and the European Commission to monitor and mitigate supply chain disruptions and increase resilience.
- Partnerships with like-minded countries and regions such as the United States, Japan, South Korea, Singapore, and Taiwan to cooperate on joint initiatives and commitments of mutual interest to ensure the continuity of chip supply during times of crisis.
By 2030, it is expected to mobilize over 43 billion euros of public and private investment to support the proposed measures.
Specifically, the “European Chips Act” focuses on three main areas:
First, the “European Chips Initiative” is proposed to support large-scale technology capacity building and advanced chip innovation. It includes establishing an open, non-discriminatory, and transparent virtual design platform to facilitate collaboration between user communities, design companies, and enterprises. It also aims to develop advanced technology and engineering capabilities, promote quantum chip innovation, support the EU in establishing a technology center network to provide professional expertise and promote debt and equity financing activities in the semiconductor value chain.
Second, a new framework is established to attract large-scale investment, increase chip production capacity, and ensure supply security. The framework allows public support for two new types of innovative production facilities: open foundries that mainly produce chips for other companies, and integrated manufacturing facilities that mainly design and produce chips locally.
Third, a coordination mechanism is established between member states and the European Commission to monitor market development and predict crises. The proposal sets out mechanisms to monitor and mitigate supply chain disruptions, making Europe more resilient in the face of current and future supply chain disruptions and using emergency toolkits to respond quickly to crises.
In addition to the above, the Act proposes to finance the implementation of the “European Chips Initiative” through the “Digital Europe Program (DEP)” and the “Horizon Europe Program (HE)” launched earlier. The “Digital Europe Program” supports digital transformation to ensure that the public and businesses, especially small and medium-sized enterprises, have access to high-quality public services. The “Horizon Europe Program” focuses on investing in semiconductor materials and early-stage industry-academia research collaboration, and provides guarantees and startup support for some high-risk startups. The Act also emphasizes support for other major EU policies, such as the Green Deal, as semiconductor technology and general digital technology are powerful drivers of sustainable development.
③ European Chip Investigation
The European Commission’s chip survey emphasizes that the industry expects chip demand to double by 2030.
“No chips, no digital” – “European Chip Act”
The European chip survey was launched in February 2022, aiming to gather preliminary information on current and future chip and wafer demand and serve as a first step in understanding the impact of the chip supply crisis on the European industry.
The main findings include:
- Chip demand is expected to double between 2022 and 2030, with a significant increase in demand for advanced semiconductor technology in the future.
- Companies building new chip manufacturing facilities prioritize qualified labor and government regulations when selecting locations.
- The supply crisis impacts all ecosystems and is expected to persist until at least 2024, forcing companies to take costly mitigation measures.
- Semiconductor research and development funding is primarily associated with supply-side companies, but supportive measures are also related to demand-side factors.
As the European Semiconductor Expert Group begins to study monitoring and mapping frameworks, the findings of the Chip Report can provide insights to help shape future actions.
④ Where Are The World’s Semiconductor Chips Made?
Semiconductors are a vital component of microchips and power nearly every modern electronic device. As the objects around us become “smarter,” the demand for electronic products is growing worldwide, and the need for semiconductors is set to skyrocket. So, which companies are currently producing these chips, and where are they located?
The Largest Semiconductor Companies
Before delving into these companies, it’s important to understand their business background. These semiconductor companies, also known as foundries, specialize in the manufacturing or production of chips. “Fabless” chipmakers, who design chips and supply hardware but do not have foundries, outsource chip production to foundries, primarily in Asia.
Together, China, Taiwan, and South Korea account for approximately 87% of the global foundry market. Here’s a breakdown: