The European finance ministers have agreed to the European Chips Act. This new European legislation aims to stimulate chip production on European soil. In this way, the EU Commission wants to reduce the EU’s dependence on foreign countries.
Chips play a vital role in a very wide range of devices. It includes high-tech equipment such as industrial robots and production systems, but also household appliances such as refrigerators and dishwashers, cars, computers and mobile phones. Shortages of chips disrupted the production of a wide range of goods last year.
The car industry hit hard
One of the sectors hardest hit is the automotive industry. Figures from Allianz Trade showed in September that 18 billion fewer vehicles were produced worldwide due to the chip shortage. European car manufacturers in particular are hard hit by the shortage. The cost of the chip shortage for European manufacturers in 2021 and 2022 is estimated by Allianz Trade at around 100 billion euros.
The European chip law should prevent this situation from occurring again. With the help of the legislation, the EU Commission wants to make grants and tax benefits available to tile companies that want to establish or expand tile production on European soil. In this way, the EU must not only become less dependent on foreign countries in terms of chip production. In the medium term, the EU Commission wants the EU to be a leader in semiconductor manufacturing.
As part of the European Chips Act, a budget of more than 43 billion euros is to be made available. This budget must consist of both private and public investments. A quarter of the budget must come from public funds. The European Commission wants the private sector to contribute the remaining three quarters.
Subsidy for more chips than originally intended
The European Chips Act was announced in February by the European Commission. The version now approved by the European Ministry of Economy is an amended version of this proposal. The modified variant allows for subsidies for, among other things, several types of chips. These are all chips that can create innovation in the areas of computing power, energy efficiency, the environment and artificial intelligence (AI).
Various investments announced
Various companies have already announced an expansion of their chip production in the EU. Consider Bosch, which will invest around 3 billion euros up to and including 2026 in expanding its chip production. Among other things, the company wants to be able to supply more chips to the automotive industry.
Bosch is investing 170 million euros in two new R&D centers in Germany. 250 million euros are aimed at expanding a wafer factory in Dresden. Bosch also announces research into the production of chips based on gallium nitride.
Intel invests 17 billion euros
Another example is Intel, which in March announced an investment of 17 billion euros in two chip factories in Magdeburg, also in Germany. The American company talks about a ‘mega location’ for chip production. The Netherlands was also considered a place of business, but lost the battle to Germany.
Intel expects construction of the manufacturing facilities to begin in the first half of 2023. Production could then begin in 2027. Over time, Intel is considering expanding the location to six to eight chip factories.
At the same time, Intel is also investing in France. The company is building an R&D location in the Plateau de Saclay, just south of Paris. Intel wants to make France its European headquarters for chip R&D, focusing on high-performance computing and artificial intelligence. In addition, Intel invests in R&D centers in Poland and Spain.
US Chips and Science Act
In addition to the EU, the United States (US) is also obliged to increase chip production on its own soil. The Americans introduced the US Chips and Science Act for this purpose. This law was signed into law by US President Joe Biden in August. In total, the United States will release 52 billion dollars to stimulate the production and research of semiconductors on American territory. Like the EU, the US wants to reduce its dependence on foreign countries.
Author: Wouter Hoeffnagel
Photo: axonite via Pixabay