European Chips Act: A bold step toward semiconductor sovereignty

In an era where semiconductors are the backbone of modern technology, the EU has taken a decisive step to secure its future in the global semiconductor industry. The European Chips Act, proposed in February 2022, is a strategy to strengthen Europe’s semiconductor capabilities, ensure supply chain resilience, and foster innovation. This article explores the key aspects of the European Chips Act, its significance, and how it positions Europe in the global semiconductor race.

Why the European Chips Act matters

Semiconductors, or chips, are essential components in everything from smartphones and cars to medical devices and renewable energy systems. However, the COVID-19 pandemic exposed the fragility of global supply chains, leading to widespread chip shortages that disrupted industries worldwide. Europe, which currently accounts for only 10% of global semiconductor production, relies heavily on imports from Asia and the US, making it vulnerable to geopolitical tensions and supply disruptions.

The European Chips Act is the EU’s response to these challenges. By 2030, the EU aims to double its share of global semiconductor production to 20%, ensuring a stable supply of chips for critical industries and reducing dependence on foreign manufacturers.

Three pillars of the European Chips Act

The European Chips Act is built on three key pillars, each designed to address different aspects of the semiconductor ecosystem.

1. The Chips for Europe Initiative

This pillar focuses on research, development, and innovation. With €11 billion in public funding, the initiative aims to:

• Advance chip design and manufacturing technologies.
• Develop cutting-edge innovations like quantum chips and AI-optimised semiconductors.
• Establish pilot lines for testing and prototyping new technologies.

By fostering collaboration between member states, industry players, and research institutions, this pillar lays the foundation for Europe’s technological leadership.

2. Attracting investment in semiconductor manufacturing

To boost production capacity, the Act provides incentives for building state-of-the-art semiconductor fabrication plants (fabs) in Europe.

Key measures include:

• Financial support for large-scale investments in fabs.
• Relaxation of state aid rules to allow member states to fund semiconductor projects.
• Encouraging the production of next-generation chips, such as those at 2nm and below.

This pillar aims to attract global players like Intel and TSMC while supporting European companies like STMicroelectronics and Infineon.

3. Monitoring and crisis response

To prevent future shortages, the Act establishes:

• An early warning system to monitor supply chains and predict disruptions.
• A coordination mechanism for responding to crises, including prioritising critical industries.
• Emergency measures to ensure the production of essential chips during shortages.

This pillar ensures that Europe is prepared to handle future challenges in the semiconductor industry.

Funding and strategic goals

The European Chips Act mobilises over €43 billion in public and private investments. This includes €11 billion for research and innovation and over €30 billion for manufacturing and infrastructure. The Act also aligns with the EU’s broader goals of technological sovereignty, economic security, and sustainability, emphasising the development of energy-efficient chips to support the green transition.

Challenges ahead

While the European Chips Act is a bold and ambitious initiative, it faces several challenges:

1. High Costs: Building advanced fabs requires massive investments, and Europe must compete with subsidies offered by the US and China.
2. Global competition: Established semiconductor hubs like Taiwan, South Korea, and the US have a significant head start.
3. Coordination: Implementing the Act across 27 member states could lead to delays and inefficiencies.

Despite these challenges, the Act represents a critical step toward securing Europe’s position in the global semiconductor industry.

How ITLawCo can help

At ITLawCo, we understand the complexities of the semiconductor industry and the legal and regulatory challenges that come with it. Our team of experts specialises in:

1. Regulatory compliance: Helping businesses navigate the legal framework of the European Chips Act and other relevant regulations.
2. Intellectual property protection: Safeguarding innovations in semiconductor design and manufacturing.
3. Crisis management: Providing legal guidance on supply chain disruptions and emergency measures.

Whether you’re a semiconductor manufacturer, a research institution, or a tech startup, ITLawCo is here to help you leverage the opportunities created by the European Chips Act and achieve your goals in this dynamic industry. Contact us today.