CHIP SHORTAGE NEWS Chips Act: Council and European Parliament strike provisional deal
On April 18, 2023, the Council and the European Parliament have reached a provisional political agreement on the regulation to strengthen Europe's semiconductor ecosystem, better known as the 'Chips Act'. The deal is expected to create the conditions for the development of an industrial base that can double the EU’s global market share in semiconductors from 10 % to at least 20 % by 2030.
"This agreement is of utmost importance for the green and digital transition while securing the EU’s resilience in turbulent times. The new rules represent a real revolution for Europe in the key sector of semiconductors. A swift implementation of today’s agreement will transform; our dependency into market leadership; our vulnerability into sovereignty; our expenditure into investment. The Chips act puts Europe in the first line of cutting-edge technologies which are essential for our green and digital transitions," says Ebba Busch, Swedish Minister for Energy, Business and Industry and Deputy Prime Minister.
The three pillars
The Commission proposed three main lines of action, or pillars, to achieve the Chips’ Act objectives
- 1. The “Chips for Europe Initiative”, to support large-scale technological capacity building
- 2. A framework to ensure security of supply and resilience by attracting investment
- 3. A Monitoring and Crisis Response system to anticipate supply shortages and provide responses in case of crisis
The Chips for Europe Initiative is expected to mobilise €43 billion in public and private investments, with €3,3 billion coming from the EU budget. These actions will be primarily implemented through a Chips Joint Undertaking, a public-private partnership involving the Union, the member states and the private sector.
Main elements of the compromise
On pillar one, the compromise reached today reinforces the competences of the Chips Joint Undertaking which will be responsible for the selection of the centres of excellence, as part of its work programme.
On pillar two, the final compromise widens the scope of the so called ‘First-of-a-kind’ facilities to include those producing equipment used in semiconductor manufacturing. ’First-of-a-kind’ facilities contribute to the security of supply for the internal market and can benefit from fast-tracking of permit granting procedures. In addition, design centres that significantly enhance the Union’s capabilities in innovative chip design may receive a European label of ‘design centre of excellence’ which will be granted by the Commission. Member states may apply support measures for design centres that receive this label according to existing legislation.
The compromise also underlines, the importance of international cooperation and the protection of intellectual property rights as two key elements for the creation of an ecosystem for semiconductors.
A new semiconductor objective is created within the Digital Europe Programme which will support capacity building in the Chips-sector and funds are also mobilised within the research framework Horizon Europe, amounting to a total of €3.3 billion for the ‘Chips for Europe Initiative’. The financing solution was found within the limits of the existing interinstitutional agreement on the Multiannual Financial Framework and comes on top of resources already allocated to similar objectives within the MFF and through the digital strand in the Recovery and Resilience Facility.
Chips are small devices composed of semiconductors (materials capable of allowing or blocking the pass of electricity) that can store large quantities of information or perform mathematical and logical operations. They are essential for a wide range of daily-use products, from a credit card to cars or smart phones. With the development of artificial intelligence, 5G networks or the internet of things, demand and market opportunities for chips and semiconductors are expected to grow substantially.
Currently, Europe is too dependent on chips produced abroad, which became even more evident during the COVID crisis. The industry and other strategic sectors such as health, defence or energy have faced supply disruptions and shortages. The Chips Act aims to reduce the EU’s vulnerabilities and dependencies on foreign actors while reinforcing the EU’s industrial base for chips, exploit future business opportunities and create good quality jobs. This will improve the EU’s security of supply, resilience, and technological sovereignty in the field of chips.
The Commission published its proposal for a regulation on 8 February 2022. On 1 December 2022, the Council adopted a general approach. The European Parliament voted its negotiation position on 15 February 2023.
The provisional agreement reached today between the Council and the European Parliament needs to be finalised, endorsed, and formally adopted by both institutions.
Once the Chips Act is adopted, the Council will pass an amendment of the Single Basic Act (SBA) for institutionalised partnerships under Horizon Europe, to allow the establishment of the Chips Joint Undertaking, which builds upon and renames the existing Key Digital Technologies Joint Undertaking. The SBA amendment is adopted by the Council following consultation of the Parliament.