EU Chips Act comes into force to ensure supply chain resilience

The EU Chips Act has officially come into force today, putting in place a comprehensive set of measures to shore up the European Union’s semiconductor supply chain resilience and reach its target to double its current global market share to 20% in 2030.

The act is made of three pillars, the first of which is a Chips for Europe Initiative, a program that aims to bridge the gap between research and innovation by promoting advanced semiconductor technologies by European businesses.

The second pillar consists of efforts to attract new investment by granting fast-track permitting to “first-of-its-kind” facilities in Europe and designating additional centers of excellence.

Finally, a coordinated mechanism is set to be established between EU member states and the European Commission — the EU’s executive branch —  enabling the bloc to monitor the supply of semiconductors, estimate demand, anticipate shortages, and if necessary, trigger the activation of a crisis intervention. A semiconductor alert system was set up on 18 April 2023 to allow any stakeholder to report semiconductor supply chain disruptions.

The EU is investing $3.6 billion of its own funds to support the act, with the aim of attracting a further $43.7 billion in private investment. The act comes into force five months after the European Council and the European Parliament reached an agreement on a final draft.

“With the entry into force today of the European Chips Act, Europe takes a decisive step forward in determining its own destiny. Investment is already happening, coupled with considerable public funding and a robust regulatory framework,” said Thierry Breton, commissioner for Internal Market, in comments posted alongside the announcement.

“We are becoming an industrial powerhouse in the markets of the future — capable of supplying ourselves and the world with both mature and advanced semiconductors. Semiconductors that are essential building blocks of the technologies that will shape our future, our industry, and our defense base,” he said.

EU not the only jurisdiction to support domestic chip making

The European Union’s Chips Act is not the only government-backed plan aimed at shoring up domestic chip manufacturing in the wake of the supply chain crisis that has plagued the semiconductor industry in recent years. In the past year, the US, UK, Chinese, Taiwanese, South Korean, and Japanese governments have all announced similar plans.

Last month, US President Joe Biden escalated the country’s trade war with China by signing an executive order that will further restrict US investment in sensitive technology industries in China. The new rules will impact three sectors — semiconductors and microelectronics, quantum information technologies, and certain artificial intelligence systems.

“This program will seek to prevent foreign countries of concern from exploiting US investment in this narrow set of technologies that are critical to support their development of military, intelligence, surveillance, and cyber-enabled capabilities that risk US national security,” Biden wrote in a letter to Congress.