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15 September 2021

The European Chips Act: why Ursula von der Leyen is embracing silicon nationalism

The European Commission president has outlined plans to make the EU less dependent on Asian semiconductor producers.

By Oscar Williams

On Tuesday evening (14 September), Apple’s executives unveiled their latest creations. As with previous iPhone launches, Tim Cook and his team spent much of the event talking about the advanced semiconductors that power their devices. While many manufacturers have been forced to stall production during the global chip shortage, Apple, the world’s largest chip buyer, was keen to signal that it had emerged from the crisis unscathed.

Less than 24 hours later, the European Commission president, Ursula von der Leyen, delivered her own annual address. Like Cook, the German politician committed part of her speech to semiconductors, setting out plans for a new “European Chips Act” to make the EU more self-sufficient when it comes to producing the foundational technology that powers so much of modern life.

“The aim,” said Von der Leyen, “is to jointly create a state-of-the-art European chip ecosystem, including production, that ensures our security of supply and will develop new markets for ground-breaking European tech.” She warned that Europe depends on “chips manufactured by Asia. So this is not just a matter of our competitiveness. This is also a matter of tech sovereignty.”

The chip shortage is now a long-term concern not only for consumer electronics companies but for the automotive industry, which employs 13.8 million people across the EU, as well as manufacturers of other goods from toasters to aircraft engines.

The Commission chief admitted bringing large-scale chip manufacturing within the EU is “a daunting task” and “that some claim it cannot be done. But they said the same thing about Galileo 20 years ago. And look what happened… Today European satellites provide the navigation system for more than 2 billion smartphones worldwide.”

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But Margrethe Vestager, the EU’s digital and competition chief, told me recently that while boosting European research and production was essential, the Commission did not aspire for the EU to become entirely self-sufficient. (Vestager was speaking to the New Statesman for an upcoming profile.)

“What is important is of course access… Europe has a stronghold in the machinery producing chips,” Vestager said. “We have a stronghold in research. [Belgium’s Interuniversity Microelectronics Centre] is the biggest and most renowned chip research institution globally. But there are other things that we don’t have. We don’t have a giant chip producer of the smallest chips, and we don’t necessarily have access to all the raw materials for producing chips.

“So the important thing for us now to figure out is how to make sure that we have we are sovereign in getting the chips that we need. To what degree would that entail production within European borders? Or can it be done in different ways? Because it is a global supply chain, and it’s really important that we get what we need.”

In a blogpost published on 15 September, the EU’s internal markets commissioner Thierry Breton said the “idea is not to produce everything on our own here in Europe”. He added that beyond developing local production, “we need to design a strategy to diversify our supply chains in order to decrease over-dependence on a single country or region”.

The US is also worried that it is overly dependent on Asian suppliers. Washington officials are particularly concerned about their dependence on the Taiwan Semiconductor Manufacturing Company, the world’s largest chip foundry, given the threat of a Chinese invasion of Taiwan and Beijing’s ambitious investments in silicon self-sufficiency.

The Biden administration has earmarked $50bn to reshoring US chip manufacturer. Some will inevitably see the Commission’s announcement as a rival approach. But as they share common concerns about their dependence on Asian suppliers, we may see closer collaboration between the US and EU on silicon sovereignty in the years to come.

[See also: Joe Biden crushes Xi Jinping’s precious semiconductor ambitions]

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