In an era defined by technological development and innovation, the creation of the EU Chips Act has revolutionized the semiconductor industry. This significant step taken as a response to overcome the semiconductor shortage demonstrates the European Union’s commitment to boost European competitiveness and resilience in the sector and help achieve the digital and green transition by strengthening its technological leadership in the global sphere.
The semiconductor crisis: understanding the motive for change
Download the ebook: Rethinking Smart Cities After COVID-19
The impacts of the Covid-19 pandemic and the global focus on achieving a green transition requested greater international support to meet the population’s growing demand for technological advancements. As a result, the semiconductor crisis emerged, impacting various sectors.
Covid-19 had a significant effect on the semiconductor industry. The increase in remote working and educational conditions due to the pandemic restrictions surged the demand for electronic devices, accelerating the development of emerging technologies and, consequently, the demand for semiconductors. This sudden and rapid increase in the need for such technologies made it inviable for tech companies to provide the requested quantities within a limited timeframe.
Furthermore, supply chain disruptions caused by the imposed restrictions that obliged companies to shut down have further exacerbated the shortage and made it inviable to cover the technological needs of the population.
Moreover, the green transition within the automotive sector, led by the modernization of vehicles, has also boosted the use of semiconductors. The increasing reliance on semiconductors to support specific functions of modern electric vehicles has increased the supply shortage and amplified the delays in the automotive industry’s efforts to develop new vehicles.
The growing demand for electronic devices generated by the pandemic conditions, coupled with the increased sales of green vehicles, has strained the semiconductor supply chain. This situation underscores the need for collective action to enhance resilience, supply sources diversification, and foster collaboration among industry stakeholders to mitigate future disruptions.
The EU Chips Act: Fostering semiconductor advancements and supply chain resilience
The European Union, or EU, is taking the lead in addressing the semiconductor shortage caused by the Covid-19 pandemic restrictions and the green transition by introducing the Chips Act. This act aims to strengthen manufacturing activities within EU members, stimulate the European design ecosystem and support the power of innovation by eliminating the dependency on foreign knowledge and external manufacturing for chips.
The EU Chips Act has defined five specific aims to address the skills shortage, attract new talent, and support the creation of a skilled workforce, emphasizing the importance of education in developing innovative techniques.
Aim 1: Strengthen Europe’s research and technological leadership towards smaller and faster chips
The European Union aims to improve its position in semiconductor production and innovation by creating smaller and faster chips. To achieve this objective, the Act highlights its commitment to fostering and supporting research and education in technological innovation, positioning Europe as a global competitor in the semiconductor industry.
Aim 2: Increase production capacity to 20% of the global market by 2030
The EU aims to increase its production capacity to reach 20% of the global market share by 2030. To achieve this objective, the EU aims to incentivize and financially support the fabrication of semiconductors, strengthening Europe’s leadership and economic competitiveness in the technological industry.
Aim 3: Build and reinforce capacity to innovate in advanced chip design, manufacturing, and packaging
The EU Chips Act encourages investment in R&D, advanced manufacturing techniques, and talent acquisition to foster Europe's position and competitiveness in the semiconductor sector.
Aim 4: Develop an in-depth understanding of the global semiconductor supply chains
The EU Chips Act has the objective of developing a comprehensive understanding of the global semiconductor supply chains. Achieving this objective involves mapping the semiconductor supply chains to identify vulnerabilities and ensure a resilient supply network.
Aim 5: Address the skills shortage, attract new talent, and support the emergence of a skilled workforce
The EU Chips Act recognizes the importance of education in the development of innovative techniques and aims to address the skills shortage and attract new talent to empower the EU in the fabrication of semiconductors.
Driving semiconductors' transformation: The key pillars of the EU chips act
The EU Chips Act focuses on three main pillars to achieve its objectives and position the European Union as a leader in the semiconductor industry.
The first pillar focuses on enhancing collaboration between research and technology production by bridging the gap between public and private sectors. This includes creating research and education centers to foster design innovation, develop technical skills and attract new talent. To support this initiative and ensure its sustainability in the long term, the European Union will provide funding through the Chips Fund and InvestEU scheme to support this initiative.
Semiconductors supply securitization
The second pillar prioritizes securing the supply of semiconductors by stimulating the industry production and development and attracting investments. The EU Chips Act proposes integrated production facilities and open EU Foundries to ensure the correct functioning of the supply chain.
Coordination and collaboration
The third pillar establishes coordination mechanisms between EU member states and the Commission to strengthen collaboration across the member states. Monitoring systems will be implemented to control the supply and demand trends of the semiconductor industry. Additionally, they would anticipate shortages and activate crisis measures if needed.
The EU Chips Act represents a significant moment for Europe, empowering member states with the necessary tools to become semiconductor production leaders. This initiative highlights the importance of innovation and supporting global growth. It also highlights the crucial role of public support in addressing complex societal challenges and meeting population needs.