EU's chip production plan aims to ease dependency on Asia

The European Union is announcing a $48 billion plan to become a major microchip producer to try to curb its dependency on Asian markets for the component that powers everything from cars to game consoles

Belgium EU Chips Act

The European Union announced a $48 billion plan Tuesday to become a major microchip producer to try to curb its dependency on Asian markets for the component that powers everything from cars to hospital ventilators and game consoles.

At a time when natural gas shortages and reliance on Russia for energy shows the political risks of economic dependency, the 27-nation bloc is moving to boost its economic independence in the critical semiconductor sector with its Chips Act.

“Chips are at the center of the global technological race. They are, of course, also the bedrock of our modern economies,” European Commission President Ursula von der Leyen said.

The EU move mirrors U.S. President Joe Biden s $52 billion push to invest in a national chip-producing sector to make sure more production occurs in the United States.

As the economy has bounced back from the COVID-19 pandemic over the past year, there has been a supply chain bottleneck for semiconductors. In Europe, some consumers have had to wait up to almost a year to get a car because of lack of spare parts.

“The pandemic has also painfully exposed the vulnerability of its supply chains,” von der Leyen said. “We have seen that whole production lines came to a standstill.”

“While the demand was increasing, we could not deliver as needed because of the lack of chips,” she added.

Semiconductors are the tiny microchips that act as the brains for everything from smartphones to cars, and an extended shortage has highlighted the importance of chipmakers, most of which are based in Asia, to global supply chains.

Von der Leyen said Europe’s Chips Act will link research, design and testing and coordinate EU and national investment. The 43 billion euro plan pools public and private funds and allows for state aid to get the massive investments off the ground.

Now, EU nations only have 9% of the global market share of semiconductors, and von der Leyen wants to increase that to 20% by 2030. Because global market production is expected to about double over the same time, “it means basically quadrupling our efforts," she said.

She said the plan will add 15 billion euros ($17 billion) in public and private investment on top of funds already committed in the EU's budget.