Impending legislation to safeguard the EU’s supply of semiconductors will seek final approval from the European institutions shortly, as Europe faces gnawing questions about its digital and strategic sovereignty.
The EU ‘Chips Act’ promises €43 billion of public and private investments and a relaxation of regulations to increase semiconductor production in Europe and reduce dependency on China.
Semiconductors are an essential component of Europe’s green and digital transitions. There are fears that Europe is falling behind its digital rivals, heightened by geopolitical ramifications for semiconductor supplies in light of recent tensions in Taiwan. Those concerns were illustrated this month when the Netherlands imposed export restrictions to protect domestic supply.
Brussels aims to double its share of global semiconductor production to 20% by 2030, mirroring the recent $280 billion CHIPS and Science Act that was passed by the American Congress. The EU’s Chips Act contains provisions for monitoring supply chains and allows authorities to intervene in cases where the bloc’s strategic interests are at risk.
The Act was adopted by both the European Council and Parliament earlier this year, with final negotiations pending. If passed, it is expected to take effect in late 2023.
The Act has been criticised by free market advocacy groups, with allegations claiming it favours larger countries and forms part of a broader trend of protectionism by the EU, an example of which has Brussels ramping up economic support for its struggling green sector this month.
The Chips Act has also been castigated by the nonpartisan Bruegel group, which labelled the legislation as poorly focused and impossible to implement in light of the interwovenness of the global semiconductor market.
The Act has been welcomed by some economists as vital to Europe’s strategic autonomy and necessary in light of similar moves underway in China. Speaking to The European Conservative, macroeconomist and financial commentator Philip Pilkington called the Act “a step forward” due to the capital allocations given to such a strategic industry.
The Chips Act is an attempt to get ahead of the problem and forms part of a wider EU policy for strategic and economic autonomy in the aftermath of Russia’s invasion of Ukraine. Fears exist that Europe’s mistakes concerning overdependence on Russian gas imports could be repeated in years to come with an over-reliance on Chinese semiconductors.
It may be too little too late. Criticism of the EU’s suffocating approach towards innovation, technology, and geopolitical considerations dominated last week’s event hosted by The European Conservative, looking at the bloc’s future legislative agenda. MCC research fellow Dr. Norman Lewis concluded that the EU had fallen fatally behind in the global digital race through over-regulation and a “risk-averse precautionary culture.” Fellow panellist Pieter Cleppe has written of the geostrategic implications of the Act on international affairs in light of previous EU failures to foster domestic production.
