EU Chip Production Plan

February 9, 2022

On January 8, 2022, the European Union announced a USD 48 billion plan, in a bid to become a major semiconductor producer.

Key Points

The Chip production plan seeks to curb its dependency on Asian markets for component powering everything from game consoles to cars hospital ventilators.
The European Union is boosting its economic independence in semiconductor sector with its Chips Act, at a time when natural gas shortages and Europe’s reliance on Russia for energy is at the political risks of economic dependency.

Background

Move of European Union is similar to U.S. President Joe Biden’s USD 52 billion investment in national chip-producing sector for ensuring more production in the United States.

Significance of the Chip plan

The chip policy is significant for European Union, because of supply chain bottleneck for semiconductors, as economy bounced back from COVID-19 pandemic. In Europe, some consumers waited for almost a year to get a car because of unavailability of spare parts. Pandemic has further exposed the vulnerability of its supply chains, as production lines came to a standstill. Semiconductors are the tiny microchips, which act as the brains for smartphones and cars. Extended shortage has highlighted the significance of chipmakers, based in Asia, to global supply chains.

Europe’s Chips Act

Chips Act of Europe will link research, design & testing as well as coordinate EU and national investment. The plan will pool public and private funds. It will also allow the state aid to get investments off the ground.

EU market share of semiconductor

EU nations accounts for only 9% of the global market share of semiconductors. EU plan seeks to increase it to 20% by 2030. Because global market production is likely to get double over the same time.

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