Proposal for a European Regulation establishing the European Chips Act

Chips Act

In February 2022, the European Commission proposed the European Chips Act, a proposal submitted by the Commission on 8 February 2022. This law aims to strengthen Europe’s competitiveness and resilience in the strategic semiconductor sector.

Semiconductors are essential components in digital and digitised products, from smartphones to cars, through critical applications and infrastructure in areas such as healthcare, energy, communications and industrial automation. The recent shortage of semiconductors has highlighted Europe’s reliance on a limited number of external suppliers, such as Taiwan and Southeast Asia for manufacturing, and the United States for chip design. In response to these critical dependencies, the European Chips Act seeks to strengthen manufacturing activities in the European Union, stimulate the European design ecosystem and encourage expansion and innovation throughout the value chain.

  1. The first pillar of the law is the “Chips for Europe” initiative, which aims to strengthen Europe’s technological leadership. This will be achieved by facilitating the transfer of knowledge from the laboratory to the factory, reducing the gap between research, innovation and industrial activities, and by encouraging the industrialisation of innovative technologies by European companies. The initiative will combine investments from the European Union, Member States and the private sector, through the strategic reorientation of the Key Digital Technologies Joint Undertaking, which will now be called the “Chips Joint Undertaking”. A budget of EUR 6.2 billion of public funds will be earmarked for this initiative, of which EUR 3.3 billion will come from the EU budget for the period up to 2027.
  2. The second pillar of the European Chips Act will incentivise public and private investments in manufacturing facilities for chip makers and their suppliers. To ensure security of supply, the law will establish a framework for EU integrated production facilities and open foundries that are ‘pioneers’ in the European Union and contribute to security of supply and a resilient ecosystem in the interest of the Union. These pioneering facilities will be eligible for State aid, subject to the Commission’s approval, and Member States will need to provide administrative support, such as the implementation of rapid application processing systems.
  3. The third pillar of the European Chips Act will establish a coordination mechanism between Member States and the Commission to strengthen collaboration in the field of semiconductors. This mechanism will monitor the supply of semiconductors, calculate demand, anticipate potential shortages and, if necessary, trigger a crisis phase. The Act establishes a set of specific measures that could be taken to address these situations.

The adoption of the European Chips Act will allow for faster implementation of investment projects in the industrial deployment of semiconductors in Europe. It is estimated that investment plans in this sector, including the second major project of common European interest in microelectronics under evaluation, amount to between EUR 90.000 million and EUR 100.000 million. The law will help attract investment and secure the semiconductor supply chain in Europe, promoting autonomy and technological leadership in this strategic field. 

Last reviewed on: 22 Aug 2023