The EU will legislate to reduce the dependence of Asia and the United States on semiconductors

The European Union will develop a European Chip Law that aims for the Old Continent to have technological sovereignty, especially in the manufacturing of semiconductors, thus sending a firm geopolitical and economic signal to the world.

The global shortage of semiconductors, caused by the disruption of global supply chains, is now of real concern to European Union (EU) leaders. Now the European Commission has announced that it intends to pass legislation that will make the EU much less dependent on chip supplies from outside the trading bloc, which includes not only China, Korea, Taiwan and other Asian nations but, potentially, the United States as well.

The new legislation will mark a common plan to increase European production capacity, as well as creating a framework for international cooperation and partnerships.

The European Chip Law, presented last week by the President of the Commission, Ursula von der Leyen, aims to create a “cutting-edge ecosystem” in which the different EU Member States collaborate to determine research and development priorities and agree on the financial contributions that each country will make to achieve the overall objective.

Speaking in Strasbourg during the annual “State of the European Union” address, Von der Leyen accepted that it will be a huge and expensive effort to start building (or, for that matter, rebuilding) a cutting-edge, vital and competitive European semiconductor industry more or less from scratch. Recent decades of growing complacency and increasing dependence on cheap imported chips have seen much of European semiconductor design and manufacturing decline and the bloc's global market share in the sector decline.

Compared to the current 10%, the goal is to double the EU quota in the global chip market by 2030. Von der Leyen admitted that it will be a huge task to build a strategically autonomous chip industry and that it will take years to become a reality, but he stressed that there is no choice but to “be bold again” and get to it immediately. To this end, the new legislation will offer incentives to boost domestic chip design and production within a public and private “semiconductor alliance.”

This bill follows in the footsteps of the CHIPS Act of the United States in which the fundamental role that a powerful national semiconductor industry will play in the future is recognized. As a result, the administration is granting tax credits for semiconductor R&D.