Brussels, Berlin New cars are not delivered, game consoles are out of stock: Missing microchips have caused considerable frustration in recent months and slowed down the economic recovery. The EU Commission now wants to take countermeasures with a multi-billion dollar subsidy program and strengthen semiconductor production in Europe.
The so-called Chips Act, which the EU Commission presented in Brussels on Tuesday, is intended to mobilize 43 billion euros to promote the industry.
The law is an industrial policy offensive with which the EU wants to make up for Europe’s gap to other regions and reduce dependencies on individual Asian suppliers such as TSMC from Taiwan.
In order to achieve this goal, Brussels wants to interpret the previously strict rules for state aid more liberally. In addition, the Commission is proposing regulations with which it could in future force chip manufacturers who have received state aid to supply European customers first. The EU wants to use this to prepare itself for supply crises.
Europe continues to rely on global cooperation, Commission Vice-President Margrethe Vestager made clear at the Europe conference organized by Handelsblatt, Tagesspiegel and Zeit. But “as a last resort, when other options have been exhausted, we can also say: Anyone who has been produced in Europe and supported by Europe also has an obligation to the European ecosystem”.
Vice-President of the Commission, Margrethe Vestager, says: “Anyone who has been produced in Europe and supported by Europe also has an obligation to the European ecosystem”.
(Photo: imago images/ZUMA Wire)
In order to promote the industry, the Commission wants to pool money from different sources. Funds from the EU budget are to be combined with investments from the member states and from the private sector. The federal government supports the project.
The Chips Act “strengthens semiconductor production in Europe so that we can become stronger and more sovereign in this strategically important branch of industry,” said Franziska Brantner, State Secretary in the Ministry of Economic Affairs, the Handelsblatt. This increases the security of the company, avoids production downtime and delivery bottlenecks.
Critics fear a restriction of competition and free trade
Critics are not convinced. The Center for European Politics fears a “paradigm shift”. The Commission’s goal of reducing technological dependencies in times of geopolitical conflicts is fundamentally legitimate, said CEP board member Henning Vöpel. “But by restricting competition and free trade, Brussels is taking a dangerous industrial policy path.”
Stefan Kooths, Co-President of the Kiel Institute for the World Economy (IfW), also warned: “The EU Chips Act is economically highly problematic.” Bureaucrats could judge the market potential of individual industries worse than companies.
In other regions of the world, however, there is little hesitation in dealing with subsidies. This is another reason why Europe’s share of global chip production has fallen sharply in recent years. The Commission has set itself the goal of reversing this trend. By the end of the decade, the European share of global chip production is expected to double from ten to 20 percent.
Chip production in Dresden: Such industrial beacons are still too rare in Europe.
(Photo: Reuters)
“Europe must face the technology race,” warned Internal Market Commissioner Thierry Breton, who was the driving force behind the Chips Act in Brussels. The Commission denies that the Chips Act represents a departure from liberal business beliefs.
Subsidies should only go to production facilities that are technologically ahead of existing factories. The Federation of German Industries (BDI) praises the initiative. “The new semiconductor strategy is an important step towards strengthening Europe as a global player in chip production,” said Iris Plöger, member of the BDI executive board. “Semiconductors are essential for the successful ecological and digital transformation of Europe as a location.”
Breton also wants to use the tax billions to set up semiconductor factories that produce state-of-the-art chips with structure sizes of less than ten nanometers. The German industry association ZVEI considers this focus to be too narrow.
Managing Director Wolfgang Weber said that the Chips Act was not meeting the needs of the European customer industry. “Europe must strengthen its competence in all structural sizes, so power electronics and sensors are also crucial for the success of the green and digital transformation.”
The European chip companies are leaders in these fields. However, the factories required for this do not produce with the most complex nano processes, but with more mature generations of chip technology.
The German electronics industry does not like the planned mechanism for export controls either. It is disproportionate that the EU can oblige individual manufacturers to prioritize specific orders. Weber: “It undermines the fundamental economic order.”
Germany’s largest chip manufacturer, Infineon, is behind the Chips Act. It is “an important step towards establishing a top-level global semiconductor ecosystem in Europe and reducing one-sided dependencies,” said CEO Reinhard Ploss. The production strategy of the Dax group does not depend on subsidies.
Germany’s largest chip manufacturer, Infineon, is behind the Chips Act.
(Photo: dpa)
As one of the first chip companies, the US group Intel could benefit from the billions in public funds. The second largest semiconductor manufacturer in the world is about to announce the location for two new factories in the EU, CEO Pat Gelsinger recently told the Handelsblatt. A prerequisite for the investment decision, however, is the promise of several billions in subsidies. Four billion euros per plant are under discussion.
The Dresden region, the most important center for semiconductor factories in Germany, has hopes for new investments. Recently, Saxony often lost out. Instead, corporations based in Dresden invested abroad: The contract manufacturer Globalfoundries, for example, is building new factories in the USA and Singapore. “It is absolutely necessary that the framework conditions are created in Europe that have long been in force in other regions of the world,” said Dirk Röhrborn, CEO of the Silicon Saxony Association.
Economists are also in favor of stronger attempts at political control. “The geographical concentration of semiconductor production is a risk,” emphasized Dalia Marin, Professor of International Economics at the Technical University of Munich. “The state intervention is therefore fully justified.”
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