"Europe is taking its destiny into its own hands. By mastering the most advanced semiconductors, the EU will become an industrial power in the markets of the future," said European Commissioner for the Internal Market Thierry Breton, welcoming the text known as the "Chips Act".

The idea is to "rebalance and secure our supply chains," he insisted.

The stated objective is to reach 20% of the world market in 2030, twice as much as today: the EU will have to quadruple its production.

To achieve this, the text plans to mobilise €43 billion of public and private investment in the development of production centres. Existing EU funds will be used, while EU state aid rules will be relaxed.

Europe has seen its market share fall in recent decades to less than 10% of global production, while its dependence on Asian producers that dominate the world market has worsened: Taiwan (where 90% of the world's most advanced chips are produced), South Korea, and increasingly China.

Internal Market Commissioner Thierry Breton in Brussels on March 16, 2023 © Kenzo TRIBOUILLARD / AFP/Archives

However, the Covid-19 pandemic, by paralyzing supply chains in Asia, has led to significant chip shortages to the point of putting the European automotive industry in difficulty – an electroshock for the continent.

The pandemic and geopolitical tensions around China have raised awareness of the need to produce these essential components in Europe, and convinced Brussels to assume an interventionist industrial policy in a continent traditionally very open to global competition.

The EU will also mobilise €3.3 billion for research and development, the agreement says.

A shortage monitoring system will be established to enable the Commission to act in times of crisis, prioritising available supplies or making possible joint purchases.

-'Solid manufacturing base'-

Semiconductors are essential in many everyday objects (smartphones, household appliances, cars...) but also in data storage centers, at the heart of the booming digital economy, and they are essential to green technologies crucial to decarbonizing the economy.

Tuesday's agreement "paves the way for a competitive chip industry (in Europe), fuel a European-made cleantech industry, and strengthen our resilience and digital sovereignty," Commission President Ursula von der Leyen said.

European Commission President Ursula von der Leyen during a plenary session of the European Parliament, in Strasbourg, April 18, 2023 © Frederick FLORIN / AFP

"There will be no green or digital transition without a solid manufacturing base," Breton added.

Already, the Franco-Italian STMicroelectronics as well as the American GlobalFoundries and Intel have unveiled plans for mega-semiconductor factories in France and Germany: they will now be able to apply for public subsidies.

Europe lags behind Asia, where most chip production takes place, in Taiwan with global giant TSMC, but also in South Korea, with leaders such as Samsung and SK Hynix.

But also vis-à-vis the United States, masters in chip design with players like Intel, Micron, Nvydia and AMD.

The EU was also under strong pressure in the face of the acceleration of other countries: the United States adopted in August 2022 a plan to 52 billion dollars (47 billion euros) to relocate the manufacture of electronic chips on its soil, while Japan, South Korea and China announce colossal investments, and Taiwan intends to maintain its lead.

The text is part of Europe's desire to reduce its vulnerability to geopolitical shocks, following the war in Ukraine, which cruelly highlighted the dependence of the Twenty-Seven on Russian gas.

In mid-March, Brussels proposed another text aimed at securing supplies of critical raw materials essential to European industry and in particular green technologies (batteries, wind turbines, solar...), from lithium to cobalt, nickel or rare earths - components for which Europe remains heavily dependent on China.

© 2023 AFP