Why the EU is planning a semiconductor law

31 January 2022

The European Union will set into law a target to double its share of global semiconductor production to reduce dependency on other countries.

Ursula von der Leyen, president of the European Commission (EC), said chip making would rise from 10% of global production currently to 20% under a new European Chip Act. 

Speaking at the World Economic Forum, Von der Leyen said: “Demand for semiconductors is skyrocketing... There is no digital without chips. And the European need for chips will double in the next decade. This is why we need to radically raise Europe's game on the development, production and use of this key technology.

“We have no time to lose,” she said.

She said Europe's “dependency” on manufacturers outside of the bloc created a “dependency and uncertainty we simply cannot afford”.

The European Chip Act will look to boost Europe’s research into chip design, strengthen manufacturing capacities, support production facilities, improve tools to anticipate and respond to shortages and "shore up our security of supply". 

Global demand for the chips will double by 2030. Von der Leyn said this means Europe will in practice have to quadruple current production to meet targets. 

She continued: “I want to be clear; Europe will always work to keep global markets open and connected. It is in the world's interest, and in our own. But we do need to tackle the bottlenecks that slow down our own growth. This will help us become a strong player, not just in some niches, but throughout the whole value chain. 

“To conclude, we will promote diversification among like-minded partners. We will create more balanced interdependencies. And we will build supply chains we can trust by avoiding single points of failure.”

Global semiconductor shortages have hit industries from cars to video games, leading western countries to invest in domestic production. 

The US’s CHIPS for America Act committed $52bn for domestic semiconductor manufacturing.

While the EC hasn’t confirmed how much it plans to invest, European industry commissioner Thierry Breton said: “I do not want to give you today the level of investment, but it will be commensurate to what the US wants to put in.”

Breton described the EC’s plans as “a major initiative for our industry, our economy and our geostrategic interest”. 

Global chipmakers pocketed an additional $117bn in 2021 due to rising prices following the increased demand throughout the pandemic. Worldwide semiconductor revenue increased 25.1% in 2021 to $583.5bn, crossing the $500bn threshold for the first time.

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