Euroviews. For the EU, microchips and geopolitics are two sides of the same coin | View

EU Commission President Ursula von der Leyen wants the bloc to capture 20% of the microchip global market by 2030.
EU Commission President Ursula von der Leyen wants the bloc to capture 20% of the microchip global market by 2030. Copyright Mindaugas Kulbis/Copyright 2021 The Associated Press. All rights reserved.
By Raluca Csernatoni
Share this articleComments
Share this articleClose Button
The opinions expressed in this article are those of the author and do not represent in any way the editorial position of Euronews.

With the EU Chips Act, the bloc intends to capture 20% of the semiconductor global market and achieve tech sovereignty, writes Raluca Csernatoni.

ADVERTISEMENT

Semiconductors – chips that process digital information – are embedded in all types of modern devices, from cars and everyday home appliances to smartphones and medical equipment. They are essential parts of industrial supply chains and, as the past two years have showed, of national security.

The quantity and quality demanded of semiconductors has surged over the last decade. Yet only a few countries – such as the United States, Taiwan, South Korea, Japan, some EU countries, and increasingly, China – have the specialised knowledge and complex, capital-intensive manufacturing needed to produce cutting-edge chips. Notably, Taiwan holds an almost monopolistic position, taking up over 63% of total manufacturing revenue in 2020.

Because semiconductor manufacturing is concentrated in a handful of countries, supply chains are subject to high levels of interdependencies and exposed to security risks and trade wars. This extreme global dependency, in a geopolitical context that grows more challenging by the day, is why the current global semiconductors shortage is a major concern.

To address these issues and the manufacturing lags exacerbated in the last few years by the US-China rivalry, and more recently by the COVID-19 pandemic, governments have moved to boost their autonomy in this strategic sector and devise policies to shore up the security of their supply chains. The concentrated push shows how crucial access to high-end semiconductors has become to national security.

The US has been discussing massive investments and incentives – in the region of $52 billion (€45.5 billion) – under the bipartisan CHIPS for America Act to support home-grown manufacturing, research and development, and supply chain resilience. The European Union also aims to regain global leadership and make similar investments: during the 1990s, the bloc had over 40% of the chips market, but by the early 2000s, this figure had fallen to 24% and barely reaches 10% today.

This brings us to the newly launched EU Chips Act, which is yet to be fully approved. With the Act, the European Commission is delivering on its promises to strengthen the resilience of supply chains in this strategic sector. The package is a future-oriented and ambitious plan that will finance innovation, industrialise processes "to bring the lab to the fab", and create new applications, including connected and automated vehicles (CAVs), telecommunications, the health sector and, importantly, security and defence. This view highlights the fact that semiconductors, as foundational technologies, are not only the backbone of economic performance in the digital age, but also of geopolitical power.

With an investment package of €11 billion pooled from existing EU instruments, such as the research programme Horizon Europe, the coronavirus recovery fund and national government budgets, the bloc aims to mobilise more than €43 billion of public and private investments, thereby doubling the EU’s market share of the semiconductor market by 2030.

Semiconductors, as foundational technologies, are not only the backbone of economic performance in the digital age, but also of geopolitical power.
Raluca Csernatoni

The Chips Act is not meant to mitigate existing shortages, but rather to avoid future ones, by offering very clear opportunities for technological excellence and avoiding dependencies in the technologies of tomorrow. The package targets semiconductors of less than 2 nanometres (nm) and more energy-efficient technologies – the smaller the chips, the faster its performance –, and has a dedicated focus on access to finance for start-ups and small- and medium-sized companies.

The latest move from Brussels comes on the heels of the European Alliance for Processors and Semiconductors, launched in mid 2021 to advance industrial progress in the sector, address bottlenecks and define technological roadmaps to ensure that Europe has the capacity to produce the most advanced chips. The alliance's ultimate goals is to establish the design and manufacturing capacity required to bring consumers and companies the next generation of trusted processors and electronic components. This will mean moving Europe towards a production capacity of 16 nm to 10 nm nodes for supporting current market needs, as well as below 5nm to 2nm and beyond for anticipating future technology trends.

Overall, the Chips Act is an important building block for the Commission’s broader technological sovereignty agenda. It is also a signal of the executive's willingness to relax some parts of its strict anti-subsidy regime to encourage national aid for semiconductor manufacturing.

This is not to say there aren’t significant hurdles. Bridging the gap between semiconductor research and market is one of the biggest expectations of this proposal. Yet, naysayers question whether the EU will be able to fund the multi-billion Chips Act, given that the investment depends on contributions from member states with already over-stretched budgets and private investors who might not think of Europe as an attractive place to pour money into. (In 2020, the bloc attracted only 3% of global investment for chip factories.)

Furthermore, some smaller EU countries fear that bigger states, such as France and Germany, will outbid them for chip investment. This fear is exacerbated by the new EU-US tech alliance, the Trade and Technology Council, in which France is expected to take control over the negotiations on semiconductors. Moreover, to avoid a subsidy race, the EU will also need to monitor state aid use to ensure it does not adversely affect trading conditions in this sector.

One of the reasons behind this drive for semiconductor sovereignty is to avoid dependencies. But the challenge is to balance strategic autonomy in this sector with cooperation with like-minded partners. Strictly European solutions to secure semiconductor supplies risk reinforcing autarkic tendencies and creating additional inefficiencies and duplications in value chains.

Raluca Csernatoni is a visiting scholar at Carnegie Europe, where she works on European security and defence with a specific focus on disruptive technologies.

Share this articleComments

You might also like

Middle East Forum Israel: 'Gutteres wants Israel to lose, but he will fail'

Local elections in Turkey are about to deliver yet another political thriller

Europe needs to embrace pragmatism to remain relevant in the Global South