COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS A Chips Act for Europe
Date: 2022-02-08
Institutions: Directorate-General for Communications Networks, Content and Technology, European Commission
Subjects: EU Member State, EU production, State aid, advanced technology industry, digital technology, electronic component, joint venture, security of supply, supply chain, value chain

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 8.2.2022  COM(2022) 45 final  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS A Chips Act for Europe  
 
 
A CHIPS ACT FOR EUROPE 

1.  Introduction 

Semiconductor chips are the essential building blocks of digital and digitised products. From 
smartphones and cars, through critical applications and infrastructures for healthcare, energy, 
mobility,  communications  and  industrial  automation,  chips  are  central  to  the  modern  digital 
economy.  They  determine  performance  characteristics  of  digital  systems,  among  them 
security and energy-efficiency – essential to the EU’s digital and green transitions. They are 
also crucial to key digital technologies of the future, including artificial intelligence (AI), 5G 
and  edge  computing,  as  set  out  in  the  EU’s  2030  Digital  Decade.1  Put  simply,  there  is  no 
“digital” without chips.  

Since  the  beginning  of  the  pandemic  in  early  2020,  Europe  and  other  regions  of  the  world 
have been experiencing  significant  supply challenges,  and  shortages of chips.  As the digital 
transformation accelerates and penetrates every part of society, a penury of chips undermines 
industrial production and economic development across all sectors and has potentially serious 
societal consequences. Supply chain disruptions in semiconductors have focused the world’s 
attention on chips as the heart of the economy and of our daily lives.  

The  semiconductor  sector  is  both  capital  and  knowledge  intensive,  and  subject  to  rapid 
technological  evolution.  Production  of  chips  takes  place  in  a  supply  chain  that  is  global, 
complex and, in some important segments, overly concentrated. For example, today only two 
companies in the world, located in Taiwan and South Korea, are capable of manufacturing the 
most advanced chips.  

In  semiconductors,  Europe  is  strong  in  some  specific  areas,  such  as  in  the  design  of 
components  for  power  electronics,  radio  frequency  and  analogue  devices,  sensors  and 
microcontrollers that are widely used in the automotive and manufacturing industries. Europe 
is also the world's centre for semiconductor research. It has leading research centres that are 
advancing  global  developments  of  state-of-the-art  semiconductor  technologies.  European 
technology is in fact a key enabler of miniaturisation2 in chips; concepts such as FinFET and 
Gate All Around3 are required for the production of the next-generation powerful chips, and 
FDSOI technology4 is crucial for reducing energy consumption.  

Europe  is  also  very  well  positioned  in  terms  of  the  materials  and  equipment  needed  to  run 
large  chip  manufacturing  plants,  with  many  companies  playing  essential  roles  along  the 
supply  chain.  It  has  also  strong  and  diversified  industrial  end  user  sectors  e.g.  automotive, 
industrial automation, healthcare, energy, communication, agriculture etc. 

1   COM(2021) 118 
2    Miniaturisation (Moore’s law) is a major driving force behind the design of  chips - doubling the amount of 
transistors in a given area of semiconductor, and hence doubling the computing power, every 18 months, has 
persisted for almost 60 years. Today’s advanced chips pack some tens of billions of transistors in each cm2 of 
silicon.  

3   Gate-all-around field-effect transistors (GAAFETs), successors of Fin field effect transistors (FinFETs) that 

are used for advanced chips, represent an essential technology to achieve transistor sizes below 3 nm. 

4   A  process  technology  such  as  fully  depleted  silicon  on  insulator  (FDSOI)  provides  the benefits  of  reduced 
silicon  geometries  with  a  simplified  manufacturing  process  and  a  good  compromise  between  performance 
and power consumption. 

1 

 
 
 
                                                 
Despite  these  strengths,  Europe  has  an  overall  global  semiconductors  market  share  of  only 
10%5 and largely relies on third-country suppliers. In case of disruption of the supply chain, 
Europe’s chips’ reserves in some industrial sectors, such as automotive, may run out in a few 
weeks,6 forcing many European industries to slow down or halt production. Moreover, Europe 
has limited chip manufacturing capabilities, mainly in mature production nodes (at 22 nm and 
above), and none in leading-edge chips (at 7 nm and below).7 It has also strong dependencies 
in design, packaging and assembly.8 
As the digital  transition  accelerates and  worldwide demand for chips  grows rapidly9   and is 
expected  to  double  by  the  end  of  the  decade,10  semiconductors  are  at  the  centre  of  strong 
geostrategic  interests,  and  of  the  global  technological  race.  Leading  economies  are  keen  to 
secure their supply in the most advanced chips as this increasingly conditions their capacity to 
act (economically, industrially, militarily) and drive digital transformation. They  are already 
heavily investing and rolling out support measures to innovate and strengthen their production 
capacities. The proposal for a US Chips Act provides for an allocation of USD 52 billion to 
manufacturing and R&D until 2026.11 China is accelerating efforts to close its technological 
gap and, by 2025 it is  estimated that it will have invested around USD 150 billion over the 
past decade in line with a series of plans and initiatives such as the “Made in China 2025”.12 
Japan  has  recently  announced  USD  8 billion  in  public  funding  for  domestic  semiconductor 
investment,  which  is  set  to  be  complemented  with  additional  funding.13  South  Korea  will 
bolster  its  semiconductor  industry  by  supporting,  through  tax  incentives,  its  domestic 
companies’ private investments in R&D and manufacturing, which are estimated at USD 450 
billion until 2030.14   

Faced  with  growing  geopolitical  tensions,  fast  growth  in  demand,  and  the  possibility  of 
further  disruptions  in  the  supply  chain,  Europe  must  use  its  strengths  and  put  in  place 
effective  mechanisms  to  establish  greater  leadership  positions  and  ensure  security  of 
supply within the global industrial chain. This is the only way for Europe to have the means to 
achieve  the  leverage  required  in  times  of  crisis  and  keep  the  global  supply  chains  running 

5    Source:  “Strengthening  the  semiconductor  supply  chain  in  an  uncertain  era”,  Boston  Consulting  and  SIA 

(Semiconductor Industry Association) 

to 

the 

fallen 

in  2019 

industry  have 

from  40  days 

6   Commission estimates, based on “just in time” manufacturing practices, which minimise waste and increase 
efficiency  by  keeping  inventories  low.  Such  practices  are  widely  leveraged  in  the  auto  supply  chain,  The 
semiconductor shortage in autos: Strategies for success | McKinsey. For example in the US chips inventory 
for 
supply.  
https://www.commerce.gov/news/blog/2022/01/results-semiconductor-supply-chain-request-information  
7   In semiconductor manufacturing, the process technology has traditionally been correlated with the transistor 
dimension  and  is  measured  in  nanometres  (nm);  1  nm  is  one  billionth  of  a  meter.  Smaller  process  nodes 
deliver  higher  performance  and  power  efficiency,  but  are  also  more  complex  and  expensive  to  produce. 
Manufacturing takes place down to 5 nm today, with 3 nm in pre-production and 2 nm under development 
8   Packaging and assembly are the last stages in the fabrication of chips. They refer to a number of processing 
steps necessary to supply the chip in a form factor that can be used in electronic devices. Wafers are cut into 
dies, interconnections are  made, then chips are encapsulated to  ensure protection from external  factors like 
humidity, chemicals, etc. In advanced packaging, multiple components are integrated into a single device. 
9    Demand  was  17%  higher  in  2021  than  2019,  and  was  not  accompanied  by  commensurate  increases  in  the 
supply,  resulting  in  major  mismatch  against  supply  https://www.commerce.gov/news/blog/2022/01/results-
semiconductor-supply-chain-request-information  

than  5  days  of 

less 

10   Forecast by SEMI (Semiconductor Equipment and Materials International) and VLSI Research. 
11  https://www.congress.gov/bill/117th-congress/senate-bill/1260?s=1&r=52  
12  https://crsreports.congress.gov/product/pdf/R/R46767  
13  https://www.reuters.com/technology/japan-create-scheme-subsidise-domestic-chip-output-nikkei-2021-11-

07/  

14  https://spectrum.ieee.org/south-koreas-450billion-investment-latest-in-chip-making-push  

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despite  the  new  geopolitics  of  supply  chains  at  play.  It  means  promoting  more  balanced 
interdependencies as well as resilient supply chains without single points of failure. 

Europe  has  the  assets  to  become  an  industrial  leader  in  the  semiconductor  markets  of  the 
future. Its ambition is to reach at least 20% of world production in value of cutting-edge and 
sustainable semiconductors by 2030.15 The goal is not only to reduce excessive dependencies, 
but  also to seize the opportunities offered by increasingly digitised markets and technological 
change. This will improve the competitiveness of the European semiconductor ecosystem and 
of  European  industry  at  large,  including  SMEs,  as  industry  across  the  whole  EU  will  have 
more  secure  access  to  performant  and  energy-efficient  chips  and  will  deliver  innovative 
products to Europe’s citizens and world markets.  

To  achieve  this,  Europe  will  have  to  substantially  increase  its  production  capacity,  and 
establish capabilities in leading-edge technologies. Without rapid and sufficient investments, 
Europe’s  market  share  will drop  to  less  than  5%,  given  the  doubling  of  the  market  and  the 
scale  of  efforts  taking  place  in  other  parts  of  the  world.  It  could  also  delay  the  adoption  of 
next-generation  chips  by  European  industry,  putting  its  broader  competitiveness  and 
technology autonomy at risk.  

While the semiconductor industry invests more than any other industry in R&D  and capital 
equipment,  the  risks  associated  with  investment  and  their  very  long-term  returns,  coupled 
with  the  strategic  relevance  of  semiconductor  technology,  have  meant  that  the  sector  has 
always  been  subject  to  public  support.16  The  EU  has  been  supporting  the  sector  mainly 
through  its  framework  research  programmes  and  has  previously  set  ambitious  goals  for 
market  share  together  with  industry.17  However,  most  of  the  investments  have  focused  on 
R&D  and  were  not  sufficient  to  address  the  scale  of  the  challenge  in  the  sector.  A  more 
comprehensive  set  of  actions  and  financing  schemes  is  needed,  and  a  much  closer 
collaboration of supply and demand side actors.   

The impact of the chips shortages on the European economy has highlighted the urgency of 
taking further steps. Efforts must start now, mobilising all relevant public and private actors, 
leveraging  strengths,  diversifying  capabilities,  addressing  structural  gaps,  embracing  new 
markets and building international partnerships. 

On 15 September 2021, Commission President Ursula von der Leyen announced an EU Chips 
Act in her State of the Union speech18, pointing out the needs to link together Europe’s world-
class research capacities and to coordinate EU and national investment along the value chain. 

The  EU  Chips  Act  proposes  to  build  on  Europe’s  strengths  and  address  outstanding 
weaknesses, to develop a thriving semiconductor ecosystem and resilient supply chain, while 
setting measures to prepare, anticipate and respond to future supply chain disruptions. 

The Chips Act is a unique opportunity for Europe to act jointly across all Member States and 
to  the  benefit  of  the  whole  of  Europe.  In  the  short  term,  it  will  allow  to  understand  and 
anticipate future chips crises, addressing them through close coordination with Member States 
and equipping the Union with the instruments that some like-minded countries have at their 
disposal.19 In the short- to mid-term, it will strengthen manufacturing activities in the Union 

15   See footnote 1. 
16   PCAST report on semiconductors 2017 
17   Electronics industry submits plan to make Europe a global leader in micro and nano-electronics  
18   State of the Union 2021 - Streaming Service of the European Commission (europa.eu)  
19    E.g., the Defence Production Act in the US. 

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and  support  scale-up  and  innovation  across  the  whole  value  chain  addressing  security  of 
supply  and  a  more  resilient  ecosystem.  And,  in  the  mid-  to  long-term,  it  will  reinforce 
Europe’s technological leadership while preparing the required technological capabilities that 
would  support  transfer  of  knowledge  from  the  lab  to  the  fab  and  position  Europe  as  a 
technology leader in innovative downstream markets.   

This  Communication provides  the  context  and proposes a set  of measures for strengthening 
Europe’s semiconductor ecosystem for the Digital Decade. To this end, it is accompanied by:  

–  A  proposal  for  a  Regulation  of  the  European  Parliament  and  the  Council,  to  build  a 
resilient European ecosystem and strengthen Europe’s technological leadership, to provide 
an  appropriate  framework  for  investment  in  the  production  of  chips,  and  to  ensure 
effective coordination between Member States and the Commission in addressing crises in 
the semiconductor market. 

–  A Commission Recommendation, addressed to Member States, anticipating key measures 
foreseen  in  the  proposed  Regulation,  until  the  proposal  is  adopted,  and  proposing  a 
governance  framework  that  can  kick-start  immediately  to  help  overcome  the  current 
shortage.  

–  A  proposal  for  a  Council  Regulation  amending  Council  Regulation  (EU)  2021/2085 

establishing the Joint Undertakings under Horizon Europe. 

2. 

 Europe’s perspectives and market opportunities 

2.1 Global semiconductor shortage  

The  current  semiconductors  shortage  is  the  result  of  a  combination  of  factors:  a  strong  and 
accelerating demand for digital technologies, structural features of the semiconductor supply 
chains – such as long manufacturing cycles colliding with just-in-time production models of 
semiconductor  users,  or  inflexible  and  concentrated  supply  that  was  further  exacerbated  by 
the COVID-19 crisis – as well as geopolitical tensions. Due to the wide digitalisation of the 
economy and society, the demand for chips had strongly increased even before the pandemic 
(e.g.  in  5G  phones  and  antennas,  new  video  games,  sensors  and  devices  for  the  Internet  of 
Things, etc.). The pandemic has exacerbated the situation and exposed the vital role of chips 
for modern economies and societies through a number of parallel developments.  

Teleworking,  home-schooling,  and  digital  entertainment  resulting  from  lock-downs  led  to  a 
surge  in  demand  for  IT  equipment,  among  them  PCs,  laptops  and  peripherals,  wireless 
networks, game consoles, as well as data centres, servers and networking equipment, and to a 
surge in demand for the necessary chips. 

in 

the 

A number of chip factories shut down temporarily due to the pandemic as well as to natural 
disasters 
the  global  semiconductor  value  chains. 
Semiconductor shipments to Europe from East Asia have further slowed down due to general 
supply chain issues caused by transport restrictions imposed by governments across the globe 
to fight the pandemic.  

two  years,  straining 

last 

Industry’s  planning  and  demand  forecasting  became  more  difficult.  Carmakers  were  among 
the ones to bear the brunt of the shortage. In early 2020, automakers cut back chip orders as 
demand declined. Foundries allocated available capacity to IT equipment. When demand for 
vehicles recovered in late 2020, foundries were running at full capacity, leaving automakers 

4 

 
 
with wait times of up to a year or more.20 As a result, multiple car factories have been shut 
down across Europe and worldwide, and workers laid off.21 European carmakers have called 
for  an  increase  of  EU  chip  production  capacity  and  reduced  reliance  on  foreign  imports.22 
Globally, relative to standing orders, due to the chip shortage, 11.3 million cars could not be 
produced in 202123 and in some Member States production decreased by 34% when compared 
to 2019, back to 1975 levels.24 The industrial equipment sector was equally hard hit25. 

Supply crunches were also further reinforced by trade tensions between the US and China and 
it  is  believed  that  the  fear  of  additional  export  bans  by  the  US  has  led  some  Chinese 
companies to stockpile chips. 

Most importantly, the surge in demand was not matched by supply, which could not increase 
with sufficient speed. Production lines are set up for each specific type of chip, a process that 
takes  several  months  and  several  billions  of  Euros.  Production  lines  are  also  few  and 
concentrated; they always need to work close to full capacity in order to cover the very high 
capital investment costs, leaving little flexibility for accommodating spikes in demand.  

Overall, multiple economic sectors have been affected. Delays in the delivery of specialised 
chips for healthcare devices such as intensive care monitoring equipment, pacemakers, blood 
sugar  monitors  or  defibrillators  have  potential  life-threatening  consequences.26  Credit  cards 
cannot  be  produced  in  sufficient  numbers,  consumer  electronic  devices  are  out  of  stock. 
Strategic  sectors  such  as  defence,  security  and  aerospace  are  also  under  threat.  Unreliable 
counterfeit  chips  have  begun  to  infiltrate  the  markets,  compromising  the  security  and 
reliability of electronic devices27. 

The  current  shortage  is  unlikely  to  phase  out  before  2023  or  even  2024.  As  demand  will 
further accelerate and production capacities take time to consolidate, shortages for chips will 
continue, and inflationary pressure will intensify.  

2.2 Evolution of semiconductor markets and technology  
The  value  of  the  global  chips  market  in  2021  was  roughly  USD  550  billion.28  The  bulk  of 
global demand comes today from end-use applications in computing, including PCs and data 
centre  infrastructure  (32%),  communications,  including  mobile  handsets  and  network 
infrastructure  (31%),  and  consumer  electronics  (12%).  The  growth  rate  is  high  in  segments 
previously ruled by  analogue  and  mechanical  technology, such as  automotive and industrial 

20  ‘Understanding the global chip shortages’, J.P. Kleinhans & J. Hess, Stiftung Neue Verantwortung (2021) 
21   Shortages  related  to  semiconductors  are  estimated  to  cost  the  automotive  industry  USD  210  billion  in 

revenues in 2021 - Alixpartners (2021). 

22   https://www.acea.auto/message-dg/chip-shortage-auto-industry-calls-for-more-eu-made-semiconductors/  
23   Estimates from AutoForecast Solutions. 
24   Source: Verband der Automobilindustrie 
25   The impact of shortages led to a 5.1 percentage point shortfall in EU-wide industrial production in the period 
January-October  2021.  One-third  of  this  shortfall  came  from  the  sectors  motor  vehicles  (0.9%)  and 
machinery and equipment (0.8%). https://voxeu.org/article/impact-shortages-manufacturing-eu  

26   A recent survey of the Advanced Medical Technology Association found two-thirds of medical technology 
companies  use  semiconductors  in  at  least  half  of  their  products. All  respondents  have  experienced  some 
disruption 
to  52+  weeks;  
Pacemaker, Ultrasound Companies Seek Priority Amid Chip Shortage, The Wall Street Journal (2021). 

their  chip  supply  chain.  Delays  vary  significantly, 

from 

two 

to 

27  In  this  context,  the  November  2021  plenary  meeting  of  Government  &  Authorities  Meeting  on 

Semiconductors (GAMS) discussed the issue of counterfeit semi-conductors. 

28   According to  IC Insights, sales in 2021 were 26% higher than in 2020 and the expected growth in 2022 is 

11%. 

5 

 
 
                                                 
manufacturing (12% each), where Europe is strong29 (Figure 1). 

Figure 1: Semiconductor market segments, by device type and by end-user sector demand30 

Driven  by  the  relentless  growth  in  data  volumes,  and  the  integration  of  ever  increasing 
computational  power,  AI  and  connectivity  into  everything,  the  global  market  for  chips  is 
expected to exceed USD 1 trillion by 2030. 

Increasing demand for chips is also driven by new market opportunities that include: 

  Artificial Intelligence: AI  will have an increased impact  across many sectors. Dedicated 
computing  and  sensing  architectures  are  required  to  deliver  the  necessary  performance, 
and  the  segment  of  AI  chips  is  by  far  the  fastest  growing  in  microelectronics,  with 
expected annual growth rates above 40% for the coming years.31 

  Edge  computing:  data  processing  is  gradually  shifting  from  cloud  data  centres  to  the 
periphery of the network, where data is generated. 5G connectivity will further boost the 
market  expansion of the  Internet  of Things and  analysts expect  up to  80% of data to  be 
processed at the edge by 2025, driving the annual growth rate at 35% of edge computing 
markets  around  industrial  Internet  of  Things  and  enterprise-generated  data,32  sectors 
where the EU has core competences.  

  Digital transformation at large and the evolution of verticals: at the core of the strategy 
for any industry, a 10-fold increase in connected devices is expected by 2025. This is in 
particular  the  case  for  sectors  such  as  manufacturing  and  automation,  agriculture, 
telecommunication  networks,  energy  infrastructure  or  healthcare  services.  For  example, 
semiconductors in the healthcare sector are expected to grow at an annual growth rate of 
10%  in  2020-2025.33  Demand,  driven  by  electrification  and  autonomous  driving,  is  also 

29   Semiconductor Industry Association Factbook 2021  (figures for 2020). 
30   Source SIA / WSTS, IC insights. 
31   Forecasts by Technavio, Allied Market Research, Market Research Future 
32   IOT Analytics  
33   “Semiconductor in Healthcare Market: Industry Insights, Major Key Players and Current Trends Analysis”, 

MarketWatch, 2021. 

6 

 
 
 
 
                                                 
surging in the automotive sector: by 2026, the electronics market for vehicles is expected 
to grow at a nearly 15% annual growth rate to USD 78 billion by 2026.34 

Relevant trends include also custom designs  for specific industry sectors’ needs. In order to 
satisfy a variety of use cases in traditional and emerging market segments and achieve higher 
performance,  domain-specific  architectures  are  required,  raising  demand  for  custom  chips. 
The increased value of semiconductors is leading user enterprises, such as online platform or 
automotive companies, to co-design or even produce their own chips. 

The  sector  is  also  driven  by  rapid  technological  evolution  bringing  miniaturisation  to  new 
frontiers  while  increasing  computing  performance,  reducing  costs  and  limiting  power 
consumption. Representative examples include: new transistor technologies such as Gate All 
Around and advanced FDSOI; new system integration architectures that enable the bundling 
of  different  chips;  and  emerging,  ground-breaking  technologies,  such  as  quantum35  and 
neuromorphic36 as well as new  computing  architectures based  on advanced processor cores, 
including open-source. Furthermore, the use of new wafer materials, such as Silicon Carbide 
and  Gallium  Nitride  will  deliver  increased  performance  for  communication  and  for  power 
electronics applications in electro-mobility and renewable energy.  

Finally,  keeping  electronic  products  in  use  for  longer,  through  design  for  durability  and 
upgrading services, will reduce replacement rates and  the need for new products. Microchip 
materials  can  be  recovered  from  electronic  waste;  it  is,  for  instance,  technically  possible  to 
recycle compound semiconductor materials, although currently only in very small quantities. 

2.3 Europe’s Position  

European  industry  has  many  strengths  and  some  weaknesses  in  the  semiconductor  value 
chain. An overview of Europe’s position is presented in Figure 2.  

The  semiconductor  sector  is  characterised  by  intense  R&D  activity,  with  companies 
reinvesting  more  than  15%  of  their  revenues  into  research  in  next-generation  technologies. 
The  EU  is  home  to  world-leading  research  and  technology  organisations  (RTOs)  and  many 
excellent universities and research institutes spread across the Union. European RTOs pioneer 
the  techniques  behind  the  production  of  some  of  the  world’s  most  advanced  chips.  The 
computational  performance  of  today’s  chips  is  due  to  the  incessant  miniaturisation  of  the 
FinFET  process  technology  that  has  in  turn  been  facilitated  by  Extreme  Ultraviolet  (EUV) 
lithography  developed  in  Europe.  A  complementary  process  technology,  FDSOI,  developed 
and industrialised in  Europe, offers substantial  performance advantages  in energy-efficiency 
useful  for  battery-powered  devices.  Chips  based  on  both  FinFET  and  FDSOI  process 
technologies are present in every mobile handset manufactured today. 

34  Forecast by Yole Developpement 
35  Quantum  technologies  hold  the  promise  of  unprecedented  computing,  communication,  and  sensing 
capabilities, as stand-alone solutions or integrated with the classical solutions. The first components based on 
quantum technologies are already appearing on the market. 

36   Neuromorphic  architectures  emulate  the  neural  structure  and  operation  of  the  human  brain  and  facilitate 

learning of the chips over time with significant improvements in energy efficiency.  

7 

 
 
 
                                                 
Figure 2: Semiconductor supply chain: EU global market shares of relevant segments 

Semiconductor  manufacturing  requires  huge  numbers  of  unique  materials,  chemicals  and 
sophisticated  equipment  provided  by  specialist  vendors  for  each  stage  of  the  manufacturing 
process. Europe is home to world-leading suppliers of  equipment and raw materials such as 
substrates  and  gases37.  In  this  part  of  the  supply  chain,  certain  European  manufacturing 
equipment  players  are  very  strong  in  their  respective  market  segments,  to  the  point  that  no 
advanced chip in the world can be produced without equipment made in the EU, such as EUV 
lithography machines. 

Europe  also  has  leading  chipmakers  specialised  in  the  design  of  specific  semiconductor 
components. EU semiconductor suppliers  are  global  leaders in chips  for  automotive and for 
industrial equipment, which are two high-growth markets38.     

Europe is also home to industrial sectors that represent a strong user base and will be among 
those driving the demand for the future, including – but not restricted to – demand for more 
advanced  nodes.  Semiconductor  companies  increasingly  co-design  chips  with  end-user 
companies  for  improving  system  performance;  a  trend  where  Europe  has  room  for 
improvement.  

Despite  these  strengths,  today,  the  EU  share  of  global  revenues  for  semiconductor  chips  is 
around  10%  overall  while  it  was  more  than  20%  in  the  1990s.39  Manufacturing  in  Europe 
declined  in  part due to  the absence of large  computing  companies  and  the fading of mobile 
handset  manufacturers  that  could  justify  the  very  sizeable  investments.  The  high  costs  of 
manufacturing also led to its being offshored to Asia, benefitting from lower costs and higher 
public  support.    Over  the  past  few  years  the  European  semiconductor  industry  has  been 

37   Despite these strengths, Europe is dependent on third countries on certain materials, such as photoresist or 
silicon metal. To help build resilience in raw materials, the European Commission established the European 
Raw Materials Alliance (ERMA).    

38   EU companies are strong in the design of chips  for automotive, but part of production takes place also in 

other regions. 

39    Source Decision / Carsa 

8 

 
 
                                                 
investing in manufacturing again, but not to a scale that is sufficient to sustain the expected 
growth of the future. 

Today  most  companies  run  their  businesses  based  on  fabless  (or  fab-lite)  models  whereby 
they outsource all (or some) of their manufacturing to  foundries. Europe’s chipmakers have 
focussed on production for the markets where they are strong, such as analogue, and which do 
not yet require the leading edge-nodes demanded by computing and communications. Even if 
equipment  for manufacturing below 7 nm  is  made in  Europe only,  Europe has no foundries 
producing  below  22  nm  process  nodes,  whereas  the  markets  of  the  future  will  increasingly 
move towards chips below 5 nm process nodes. As for assembly, test and packaging of chips, 
these have been traditionally outsourced to East Asia.  

With billions of transistors in a single chip, a new design can require several years of effort by 
hundreds of engineers, making use of external  IP and Electronic Design Automation (EDA) 
software.  The  major  vendors  are  located  outside  Europe.  However,  there  is  considerable 
design  talent  across  the  Union  and  more  recently,  a  growing  number  of  small  European 
companies  are  active  in  the  design  of  advanced  processors  and  accelerators,  notably  for  AI 
chips.  

3.  A chips strategy for the Digital Decade  

3.1 Europe’s vision and strategic assets to realise it  

Given the central role that chips play in the digital economy, their geopolitical dimension and 
the current strong concentration in production capacity, the Union has to urgently reinforce its 
semiconductor ecosystem, increasing its resilience as well as security of supply and reducing 
its external dependencies.  

In  December  2020,  22  Member  States  signed  a  Declaration  on  A  European  initiative  on 
processors  and  semiconductor  technologies.40  They  took  note  that  Europe’s  share  of  the 
global semiconductor market is well below its economic standing. They agreed to undertake 
“a  particular  effort  to  reinforce  the  processor  and  semiconductor  ecosystem  and  to  expand 
industrial presence across the supply chain, in order to address key technological, security and 
societal  challenges”.  Building  on  that,  the  Commission’s  Digital  Compass41  published  in 
March 2021 set an objective that by 2030 “the production of cutting-edge and sustainable 
semiconductors in the Union is at least 20% of world production”. The Proposal for the 
2030 Policy Programme “Path to the Digital Decade”42 has reaffirmed this ambition. 

Europe has very strong assets, which are diversified and spread across many Member States, 
and can fulfil this ambitious vision with the necessary effort and a critical mass of investment, 
both from the public and private side.   

Europe must and can mobilise an unprecedented level of investment given the high positive 
spill-over effects the sector has across the economy and many areas of public interest. Major 
public investment  will be essential to  attract  high levels  of private investment, which in  the 
case  of  European  companies  is  already  of  the  order  of  EUR  6  billion  per  year.  Increased 
investment  in  semiconductors  will  serve  all  industrial  sectors  and  society  at  large,  bringing 
benefits to all Member States. 

40   Joint declaration on processors and semiconductor technologies | Shaping Europe’s digital future (europa.eu)  
41   COM(2021) 118 
42   COM(2021) 574  

9 

 
 
                                                 
Working  even  more  closely  together  will  be  another  success  factor.  Europe  must  and  can 
mobilise all its talents and assets. A close collaboration between many of the relevant public 
and private stakeholders is already taking place in the Key Digital Technologies (KDT) Joint 
Undertaking.43 This needs to be strengthened and further expanded to involve all the actors of 
the value chain, the leaders of the research community, through European projects addressing 
Member States’ collective interest.  

Moreover, the value that Europe accords to security, including that of critical infrastructures, 
data  protection,  and  energy  efficiency  should  be  leveraged,  for  example  through  the 
application  of  certification  requirements  in  public  procurement,  which  can  help  in  driving 
demand.  

While Europe is leading in research with important organisations across the continent, it must 
and can close the gap from the lab to the fab by leveraging its strengths in (i) equipment and 
materials, (ii) systems solutions and systems integration, (iii) strong presence in high-growth 
market segments like automotive, medtech, communications, energy and machinery, and (iv) 
research and academic excellence, where technology capacities should be further reinforced. 
Successful  outcomes  crucially  depend  on  joint  efforts  and  close  collaboration  of  all  sides  – 
industry along the value chain, public sector and research organisations. 

Finally, Europe’s efforts must focus on the opportunities ahead. First, by looking at what the 
growth market and circular economy needs, i.e., low power components, a new generation of 
processors that are more powerful and adapted to data analysis, AI and edge computing, radio 
frequency  and  5G/6G  components  for  terabit  communications,  and  more  integrated  power 
electronics, including recyclability and broader sustainability aspects. Second, by focusing on 
what technology is offering to address these needs: 2 nm and below in FinFET and Gate-all-
around  and  below  10  nm  in  FDSOI,  quantum,  neuromorphic  but  also  EUV  lithography  for 
production.  Europe  must  advance  its  capabilities  in  these  areas,  lead  technological 
developments and their industrialisation, leveraging investments and facilitating the adoption 
of these new technologies by the European industry, in particular by SMEs, to ensure that it 
stays competitive in the technological race, including for industries traditionally more focused 
on mature chips.  

3.2 Strategic objectives 

To fulfil this vision, the European strategy for chips is articulated around the following five 
strategic objectives: 

First,  Europe  should  strengthen  its  research  and  technology  leadership.  This  is  an 
imperative  to  preserve  Europe’s  current  assets  in  several  break-through  technologies, 
including  in  equipment  manufacturing  and  advanced  materials,  needed  to  build  next-
generation production facilities serving all its sectors.  

Second,  Europe  should  build  and  reinforce  its  own  capacity  to  innovate  in  the  design, 
manufacturing and packaging of advanced, energy-efficient and secure chips, and turn 
them  into  manufactured  products.  This  will  guarantee  the  supply  of  chips  in  the  longer 
term,  serving  industry  and  public  sector  needs  and  stimulating  innovation  in  the  wider 

43   The  KDT  Joint  Undertaking  (https://www.kdt-ju.europa.eu)  was  launched  in  November  2021.  It  is  a  tri-
partite  effort  shared  by  Commission,  Participating  States  (Member  States  and  associated  countries)  and 
industry. It mobilises up to EUR 3.6 billion of public investment (EU and Participating States) until 2027. In 
addition, it is envisaged that the private stakeholders will invest an equal amount.  

10 

 
 
                                                 
economy.  For  this,  investment  in  pilot  lines  as  well  as  in  advanced  design  and  testing  and 
experimentation  facilities  and  tools  is  essential.  Pilot  lines  will  be  available  for  access  to 
actors  of  the  supply  chain  on  open  and  non-discriminatory  terms;  as  unique  world-class 
facilities,  they  will  make  Europe  a  strong  partner  on  the  global  stage,  and  provide  a  strong 
basis to the strengthening of international cooperation.  

Third,  Europe  should  put  in  place  an  adequate  framework  to  increase  substantially  its 
production capacity by 2030. As the market is expected to double by 2030, quadrupling the 
production is necessary to reach Europe’s objectives. This is not only a volume question. It is 
also  about  being  in  a  position  to  produce  in  Europe  the  most  advanced  chips,  serve  users’ 
needs  and  diversify  access  to  markets,  addressing  those  where  Europe  is  not  present  today, 
while ensuring chip production considers also its possible environmental footprint. Further, it 
is necessary to strengthen security of supply, notably for critical sectors such as those relevant 
for public safety. For this, Europe needs to attract investments in production facilities on its 
territory that can come both from inside and outside the Union, and set up the right conditions 
and a favourable framework for private investment to take place.  

Fourth,  Europe  should  address  the  acute  skills  shortage,  attract  new  talent  and  support 
the  emergence  of  a  skilled  workforce,  as  current  shortages  are  limiting  efforts  aimed  at 
strengthening the ecosystem.  

Overall,  Europe  should  develop  an-in-depth  understanding  of  global  semiconductor 
supply  chains  to  monitor  its  functioning,  understand  future  trends,  anticipate  disruptions, 
build international partnerships based on more balanced capabilities and mutual interest, react 
in time to prevent international supply chains from breaking down and enable the EU to take 
appropriate measures when necessary.  

To achieve all the above, the Union should work closely with Member States and all relevant 
public and private stakeholders to coordinate efforts, pool knowledge and resources and create 
a vibrant and resilient semiconductors ecosystem in Europe. In addition, given the globalised 
semiconductor  value  chain  the  Union  should  establish  strong  international  partnerships,  in 
particular  with  like-minded  partners.  This  will  enhance  coordination  and  minimise  potential 
conflicting objectives. Such partnerships will provide for a close assessment of third country’s 
policies in the sector as well as for joint approaches to address supply challenges, including 
through mutually beneficial diversification strategies. 

Implementing the above should enable Europe to build a dynamic ecosystem across the EU, 
to the benefit of all Member States, attracting investments in production, design and R&D as 
well  as  the  best  talents  worldwide  that  will  be  able  to  deliver  on  the  vision.  These 
developments  will  strengthen  Europe’s  capabilities  to  achieve  its  environmental  goals, 
accelerate  the  digital  and  green  transitions  while  improving  the  Union’s  security.  This 
requires  decisive  action  now  and  is  the  reason  why  the  Commission  proposes  a  package  of 
measures as outlined in this Communication. 

3.3 Delivering on the ambition 

The  European  chips  strategy  sets  out  a  number  of  measures  and  initiatives  combined  with 
substantial investment to deliver on the vision and objectives set out above.  
The overall level of policy-driven investment44 in support of the EU Chips Act is estimated to 
be  in  excess  of  EUR  43  billion  up  to  2030,  on  the  basis  of  announcements  to  date.  This  is 

44 Public investment and leveraged equity support 

11 

 
 
                                                 
likely  to  attract  and  leverage  further  long-term  private  investments  of  a  commensurate 
volume.  
This public investment includes EUR 11 billion foreseen for the Chips for Europe Initiative45 
to finance technology leadership in research, design and manufacturing capacities up to 2030. 
It  will  require  pooling  investment  from  the  Union  and  the  Member  States,  to  which  private 
actors are also expected to participate. It will be complemented by equity support to start-ups, 
scale-ups and other companies in the supply chains, through investment facilitation activities 
described collectively as the ‘Chips Fund’ with a projected overall investment value of at least 
EUR  2  billion.  These  different  actions,  in  combination,  should  result  directly  in  public  and 
private investments well in excess of EUR 15 billion. This will come on top of the loans that 
the EIB could offer to the entire semiconductor ecosystem.  

Additionally, Member States’ support to the Chips for Europe Initiative may also come from 
measures addressing microelectronics in their recovery and resilience plans, or from national 
or regional funds. Member States can also consider taking advantage of unused loan capacity 
under the Recovery and Resilience Facility to provide further support 

Member States are for example already planning to invest in a new IPCEI, supporting cross-
border  innovative  projects  along  the  microelectronics  value  chain,  including  through  the 
Recovery  and  Resilience  Facility  and  Structural  Funds.  This  investment  complements  the 
upcoming support to the set-up of large manufacturing facilities. 

The  above  investments  will  complement  existing  programmes  and  actions  in  R&I  in 
semiconductors such as Horizon Europe and the Digital Europe Programme. When it comes 
to the support to technological leadership, the scope of the Digital Europe programme will be 
enlarged. Additionally, the KDT Joint Undertaking will be reinforced and reoriented towards 
the objectives of Europe’s chips strategy and will be renamed ‘Chips Joint Undertaking’. The 
Joint Undertaking will step up its efforts to combine the financial and technical means that are 
essential  to  master  the  escalating  pace  of  innovation  in  the  semiconductor  arena,  generate 
important  spill-overs  for  society,  and  share  risk-taking  by  federating  strategies  and 
investments  towards  a  common  European  interest.  It  will  partner  with  Member  States  to 
facilitate a coherent alignment with national programmes, and support innovative large-scale 
projects. It is designed to cater for Member States’ collective interest in the development of 
infrastructure and strengthened capacities to the benefit of actors in the value chain across the 
Union. Its success can therefore only be built on a collective effort by  Member States, with 
the  Union,  to  support  both  the  significant  capital  costs  and  the  wide  availability  of  virtual 
design,  testing  and  piloting  resources  and  diffusion  of  knowledge,  skills  and  competences. 
Under its renewed mission, the Joint Undertaking will become the lighthouse of the Union’s 
efforts in semiconductors.  

The  following  sections  describe  the  specific  measures  and  initiatives  for  delivering  the 
objectives.  

45 Including the existing KDT Joint Undertaking 

12 

 
 
 
 
  
                                                 
3.3.1  Leadership in research, innovation and equipment manufacturing 

To preserve and strengthen its leadership in research and innovation as well as in equipment 
manufacturing,  Europe  has  already  planned  to  invest  in  next-generation  technologies  under 
the Horizon Europe programme.  

Future research activities to be supported under the Chips Joint Undertaking will contribute to 
reinforcing  support  to  the  future  needs  of  vertical  industries,  and  ensuring  that  societal  and 
environmental  challenges  are  addressed.  Research  efforts  will  focus  for  example  on 
technologies to achieve transistor sizes below 2 nm, disruptive technologies for AI, ultra low-
power  energy-efficient  processors,  novel  materials46,  as  well  as  heterogeneous  and  3D 
integration  of  different  materials,  and  emerging  design  solutions,  for  instance  based  on  the 
open-source RISC-V computing architecture. 

The Joint Undertaking may also engage with other relevant European partnerships addressing 
for  example  materials,  manufacturing,  smart  networks  and  healthcare,  or  users  industries 
using chips.  
In  addition,  the  EUR  1  billion  Quantum  Technologies  Flagship47  under  Horizon  Europe  is 
supporting  research  in  quantum  chips,  given  their  disruptive  potential  for  complex 
computational tasks or in ultra-secure communication. 

Further  support  to  industrial  research  and  innovation  comes  from  Member  States  through 
Important  Projects  of  Common  European  Interest  (IPCEIs).  A  second  IPCEI  addressing 
microelectronics is currently under preparation48. The IPCEI is expected to involve over 100 
prospective  participants  from  about  20  Member  States.  All  major  market  segments  are 
addressed,  with  particular  emphasis  on  innovation  in  areas  such  as  AI  processors,  edge 
computing, electric mobility, security and energy efficiency. The IPCEI also includes projects 
in communication, an important vertical market that would reinforce European competences 
in 5G and 6G technologies. The projects will follow a holistic approach involving the whole 
semiconductor supply chain.  

3.3.2   Leadership in the design, manufacturing and packaging  

A new ‘Chips for Europe’ initiative will aim at reinforcing the EUs semiconductor technology 
and  innovation  capacities  and  ensuring  semiconductor  technology  leadership  in  the  mid  to 
long  term.    It  will  ensure  the  deployment  across  Europe  of  advanced  semiconductor  design 
tools, pilot lines for next generation chips and testing facilities for innovative applications of 
latest  semiconductor  technology.  It  will  also  foster  technology  and  engineering  capacity  in 
quantum chips by building advanced technology and engineering capacities in this field.  

The  Initiative  will  expand  and  build  on  Europe’s  leadership  in  research,  including  on  the 
capabilities  of  its  RTOs  and  of  key  production  equipment  providers,  integrated  design 
manufacturers49 and strong users’ sectors.  

46   On  7  February  2022,  major  players  of  industry  and  research  organisations  presented  the  “Manifesto 
proposing a Systemic Approach of Advanced Materials for Prosperity: a 2030 Perspective” highlighting that 
the next generation of semiconducting materials will boost new “innovation markets” in Europe. 

47   The  Quantum  Flagship  is  a  long-term  research  initiative  developing  quantum  technologies  such  as  in 
quantum  computing  and  simulation,  quantum  communication  networks  and  in  quantum  sensing  and 
metrology. 

48   https://ec.europa.eu/commission/commissioners/2019-2024/breton/blog/ipcei-microelectronics-major-step-

more-resilient-eu-chips-supply-chain_en  

49  Semiconductor companies that cover chips design and manufacturing and sell them to their clients.  

13 

 
 
                                                 
The  Initiative  will  pool  investments  from  the  Union  and  the  Member  States  to  leverage 
additional  investments  from  private  investors.  This  undertaking  complements  the  already 
planned research activities, the results of which will be constantly fed into the pilot lines and 
the  design  infrastructure.  The  Initiative  will  help  consolidate  fragmented  efforts  and 
significantly scale them up to bridge the gap from the lab to the fab and to create the future-
proof ecosystem for translating Europe’s R&I excellence into industrial innovation capacity. 

The  Initiative  will  nurture  a  vibrant  and  resilient  semiconductors  ecosystem  in  Europe, 
including technology innovation actors as well as supply and user industries, fostering early 
adoption and sharing benefits across Europe. Close collaboration between supply and demand 
side  actors  will  be  a  key  success  factor.  The  European  Alliance  on  Processors  and 
Semiconductor technologies50 will play an advisory role for the Initiative, together with other 
relevant stakeholders.  

The implementation of the new Chips for Europe Initiative will take place mainly through the 
‘Chips  Joint  Undertaking’.  The  combination  of  R&I  activities  and  capacity  building  in  the 
Chips  for  Europe  Initiative  within  the  same  Joint  Undertaking  will  lead  to  mutual  benefits 
thanks to  synergies between the  Initiative and the scope and objectives of the  existing Joint 
Undertaking. 

Design strategy 

Design  is  a  key  capability  in  semiconductors  for  conceiving  novel  systems  adapted  to 
different  application  and  users’  needs.  To  strengthen  Europe’s  capacity  to  innovate  in  the 
design, manufacture and packaging of advanced chips, a large-scale design infrastructure for 
integrated  semiconductor  technologies  will  be  built  through  a  virtual  platform  available 
across  Europe.  Stakeholders  including  innovative  SMEs  and  RTOs  will  have  access  to  the 
design infrastructure, with clear IP rules. 

This  platform  will  build  on  existing  and  new  design  libraries  integrating  a  large  number  of 
cutting-edge  and  new  technologies.  In  combination  with  existing  Electronic  Design 
Automation  tools,  the  platform  would  allow  to  design  novel  components  and  systems 
demonstrating  new  functionalities  such  as  low  energy,  security,  as  well  as  new  system 
integration and 3D  assembly capabilities.  It will  be continuously  upgraded with  new design 
capabilities  as  it  will  be  integrating  more  and  more  technologies  and  design  for  processors, 
including  open  source.  Innovative  design  requirements  will  also  target  the  durability  and 
upgradability of electronic products. 

The Alliance and the Chips Joint Undertaking will bring together chips producers and users to 
design and develop dedicated processors in areas such as industrial automation, automotive or 
communications,  as  well  as  the  many  SMEs  in  Europe  that  are  active  on  the  design  front. 
International  cooperation  will  also  be  important  to  access  state-of-the-art  design  tools.  The 
Platform will stimulate a wide cooperation of users’ communities with design houses, IP and 
tool  suppliers,  designers  and  RTOs  and  will  help  ensure  that  the  IP  of  next  generations  of 
chips comes from Europe. 

Pilot lines for preparing innovative production and for testing and experimentation  

The middle stages of chips product development can be very costly and risky, becoming real 
bottlenecks  to  industrialisation.  The  Initiative  will  therefore  create  and  use  extended  pilot 

50 https://digital-strategy.ec.europa.eu/en/policies/alliance-processors-and-semiconductor-technologies  

14 

 
 
                                                 
lines to prototype and scale up innovation, to bridge from demonstration in a lab to production 
in a manufacturing facility.  

The  Initiative  will  build  on  existing  pilot  lines,  developing  an  infrastructure  capable  of 
bringing  new  advanced  technologies  to  a  higher  level  of  maturity,  facilitating  accelerated 
industrial take up and commercialisation. Such leading-edge facilities will provide the means 
for industry to test, experiment and validate novel prototype system designs, integrating new 
breakthrough  technologies  such  as  e.g.  quantum,  AI  or  neuromorphic,  as  well  as  new 
functionalities  such  as  security  or  energy  efficiency.  This  will  help  provide  immediate 
feedback  to  designers  to  refine  and  improve  their  design  models  before  the  transfer  to 
manufacturing, allowing them to significantly shorten the development cycle.  

The Initiative will support the development of new pilot lines such as one on FDSOI (10 nm 
and below), one on leading edge nodes (below 2 nm), and one for 3D heterogeneous systems 
integration and advanced packaging. These pilot lines will foster European IP in  production 
technology  and  in  advanced  manufacturing  equipment  and  materials.  They  will  strengthen 
partnerships with equipment suppliers for advanced technology development, and will support 
industry-driven projects that centre on the transition from the lab to the fab for prototypes, on 
validating proof of concepts, and on technology transfer to production lines. These pilot lines 
– and in particular the one on FDSOI – will enable to develop highly energy efficient chips 
which are central for the green transition in sector like automotive, ICT, or mobility.  

Pilot  lines  and  the  design  platform  above  will  be  linked,  as  the  pilot  lines  will  enable  the 
design community to test and validate technology options before these become commercially 
available.  This  link  ensures  that  new  chip  and  system  designs  fully  exploit  the  potential  of 
new technologies and deliver cutting-edge innovation. 

This  technology  infrastructure  is  fundamental  to  expand  Europe’s  knowledge,  capacity  and 
capabilities closing the innovation gap from research to commercially funded manufacturing, 
and  to  increase  both  demand  and  production  in  Europe  by  the  end  of  the  decade.51  Strong 
synergies  can  be  attained  through  combined  development  of  the  different  pilot  lines,  e.g. 
through  a  European  Chips  Industry  Consortium,  pooling  the  Union’s  contribution  with  the 
collective resources of the Member States and other participants. 

Additionally,  Quantum  is  a  highly  promising  emerging  technology  for  computing, 
communication, and sensing. The Initiative will support building technology and engineering 
capacities for accelerating the development  of quantum chips  (i.e. chips  exploiting quantum 
effects). Activities will include the development of pilot lines for quantum chips as well as for 
their testing and experimentation.  

Certification of chips  

Future  smart  devices,  systems  and  connectivity  platforms  will  have  to  rely  on  advanced 
electronics and they will have to meet energy efficiency, trust and cybersecurity requirements, 
which will largely depend on the features of the underlying technology. Member States have 
already agreed to “work towards common standards and, where appropriate, certification for 
trusted  electronics,  as  well  as  common  requirements  for  procurement  of  secure  chips  and 
embedded systems in applications that rely on or make extensive use of chip technology.”  

51  The investments in design infrastructure and pilot lines may require co-financing by Member States, which 

will need to respect state aid rules where relevant. 

15 

 
 
                                                 
Building  upon  its  world-leading  position  in  the  development  of  green,  trusted  and  secure 
chips,52 Reference certification procedures for specific critical sectors and technologies with 
potential  high  social  impact  are  necessary.  Certification  of  these  chips  for  green,  trust  and 
security should cover the value chain up to integration in end products and would be reflected 
in public procurement and promoted in international standardisation activities.  

The Commission, in consultation with public and private stakeholders, including through the 
Alliance on Processors and Semiconductor Technologies, will identify and prioritise sectors 
and products with relevant green, trust and security issues in need of certification processes, 
taking  into  account  legally  applicable  requirements  emanating  from  harmonised  Union  law, 
and relevant activities within the European cybersecurity certification framework53. 

3.3.3  Boosting Europe’s ecosystem and ensuring the security of supply 

Investment  in  new  advanced  production  facilities  is  imperative  to  safeguard  the  Union’s 
security of supply and supply chain resilience while generating significant positive impacts to 
the wider economy. Positive impacts take place both when production evolves towards more 
advanced technologies (e.g. scaling, functional integration or performance, including energy 
performance), and when innovative technology processes are put in place.  

Private investment in these advanced facilities  may likely require significant public support. 
In  light  of  the  extremely  high  barriers  to  entry  and  the  capital  intensity  of  the  sector,  the 
Commission  recognises  the  need  for  a  case-by-case  assessment,  where  public  support 
includes  State  aid  that  does  not  fall  under  existing  guidelines.  In  such  cases,  as  already 
announced in the Communication on a competition policy fit for new challenges,54 it may be 
justified to cover with public resources up to 100% of a proven funding gap, if such facilities 
would  otherwise  not  exist  in  Europe.  Such  cases  are  to  be  assessed  by  the  Commission 
directly under Article 107(3)(c)  TFEU. Under  this provision,  the Commission  may  consider 
aid to facilitate the development of certain economic activities or of certain economic areas to 
be compatible with State aid rules, where it does not adversely affect trading conditions to an 
extent contrary to the common interest, weighing the positive effects of such State aid against 
its likely negative impact on trade and competition. 

In  the  overall  balancing  of  the  positive  effects  of  the  aid  against  its  negative  effects  on 
competition  and  trade,  the  Commission  will  take  into  account  the  fact  that  new  production 
facilities are first-of-a-kind in the Union, in that they are established with a view to producing 
technologies that go beyond the Union’s state-of-the-art, for instance in terms of technology 
node,  substrate  material,  such  as  silicon  carbide  and  gallium  nitride,  and  other  product 
innovation that can offer better performance, process technology or energy and environmental 
performance.  The  Commission  will  also  consider  the  long-term  viability  of  those  facilities 
without continued operating support as well as clear commitments to continued innovation in 
the Union’s semiconductor ecosystem55.  

52   A number of common criteria certificates was issued in 2020 by a set of leading EU manufacturers. 
53  Regulation (EU) 2019/881 of the European Parliament and of the Council of 17 April 2019 on ENISA (the 
European  Union  Agency  for  Cybersecurity)  and  on  information  and  communications  technology 
cybersecurity certification and repealing Regulation (EU) No 526/2013 (Cybersecurity Act) (Text with EEA 
relevance). 

54  COM(2021) 713 final. 
55   Such additional investment in R&D for future technologies would take the form of independent contribution 

from beneficiaries and would not be part of the funding gap calculation. 

16 

 
 
                                                 
The  proposed  Chips  Act  Regulation  provides  for  a  definition  of  first-of-a-kind  that  the 
Commission  will  take  into  account  in  its  State  aid  assessment.  The  proposed  Chips  Act 
Regulation  also  introduces  two  types  of  first-of-a-kind  facilities:  ‘Open  EU  Foundries’, 
devoting  a  significant  amount  of  their  manufacturing  capacity  to  production  for  other 
industrial  players;  and  ‘Integrated  Production  Facilities’,  designing  and  producing 
components  serving  their  own  markets.  The  recognition  as  either  type  of  facility  triggers  a 
number of benefits. It allows access to fast-track permit granting and prioritised access to pilot 
lines set  up under the proposed Chips  for Europe  Initiative.  In addition,  it confirms  that the 
investment in the production facility contributes to the security of supply of semiconductors in 
the Union and is therefore in the public interest. The procedures for the recognition of ‘Open 
EU Foundries’ or ‘Integrated Production Facilities’ and for authorisation of State aid, where 
applicable,  will  be  conducted  in  parallel.  The  Commission  services  will  coordinate  these 
parallel  assessments  to  accelerate  the  decision  making  with  the  goal  of  taking  simultaneous 
decisions. 

The aid must have an incentive effect and be necessary, appropriate and proportionate. This 
means  in  particular  that  aid  must  not  be  granted  for  investments  that  have  already  been 
decided upon before an application for aid has been submitted, that the investment would not 
take place without the aid, that public financial support is a suitable tool and no less distortive 
alternative  exists,  and  that  undue  competition  distortions  are  minimised.  The  conditions 
according to which facilities under the Chips Act need to be first-of-a-kind plays a role also in 
this context, to the extent that it ensures to limit support to areas where sufficiently reliable 
supply is not available in the Union and that no existing or planned private initiative would be 
crowded out56. An additional factor to limit competition distortions and ensure proportionality 
is  to  avoid  overcompensation.  State  aid  amounts  up  to  the  sufficiently  proven  funding  gap 
could accordingly be accepted.57 

Depending on the merits of each individual case under review, additional positive effects to 
offset  remaining  risks of competition  distortion  will  be considered. Such effects include  the 
positive  impact  of  the  supported  project  on  the  semiconductor  value  chain  with  regard  to 
ensuring the security of supply and increasing qualified workforce, or its positive impact on 
the  innovation  potential  of  SMEs  and  verticals  that  can  access  innovative  products  at  their 
doorsteps,  or  any  other  benefit  that  can  be  shared  widely  and  without  discrimination  across 
the  EU  economy.  The  conditions  set  out  in  the  proposed  Chips  Act  for  the  recognition  of 
Open  EU  Foundries  and  Integrated  Production  Facilities  in  addition  to  first-of-a-kind  are 
relevant in this respect, notably the commitment to invest in the next generation of chips58 and 
the guarantees provided to avoid any extraterritorial application of public service obligations 
that may undermine the requirement to implement priority-rated orders. Positive contributions 
to cohesion and cross-border cooperation can also be considered relevant.  

56   It may be the case that several parallel projects are recognised as first-of-a-kind, as long as it can be proven 
that State supported activities do not crowd out existing or planned private activities. Each State aid proposal 
will be assessed based on its merits to avoid undue distortions of competition. This includes a comprehensive 
view on necessity, to avoid situations of overcapacity. 

57   This  means  that  the  funding  gap  to  secure  establishment  of  the  facility  in  the  Union  must  be  sufficiently 
proven,  i.e.  by  comparing  expected  production  costs  in  Europe  using  realistic  assumptions  as  part  of  a 
credible business plan, including benchmark returns on capital in the sector, and comparing those to realistic 
sourcing or production alternatives (also globally) based on concrete evidence from beneficiaries, and/or by 
safeguards to ensure a fair distribution of additional gains that were not forecasted in the notified funding gap 
analysis. 

58   The investment in research, development and innovation  would be independent of the funding gap analysis 

under a possible State aid assessment covering the manufacturing capacities. 

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For  projects  for  which  State  aid  is  notified  before  the  proposed  Chips  Act  is  adopted,  the 
Commission will take into account their compliance with the criteria for Open EU Foundries 
and Integrated Production Facilities as set out in the proposed Chips Act with the expectation 
that such projects would apply for formal recognition once the Chips Act enters into force. 

Investing in an innovative and vibrant semiconductor ecosystem  

The semiconductor industry tends to be less attractive for investors than other sectors because 
of high capital intensity, high risks, complex technical projects and longer times for return on 
investment.  As  a  result,  this  industry  has  been  facing  significant  shortages  in  access  to 
finance,  including  through  equity  and  loans.  In  particular  start-ups  and  SMEs  often  find  it 
difficult  to  secure  adequate  market  financing  for  investments  into  innovative  high-tech  or 
digital technologies, despite good growth prospects and sound business plans. 

To  facilitate  access  to  finance  and  support  the  development  of  a  dynamic  and  resilient 
semiconductor ecosystem, the Union will undertake activities, to be described collectively as 
‘Chips Fund’ activities, through two investment opportunities.59  

Firstly, a dedicated  semiconductor equity  blending  facility  will be set  up under  InvestEU in 
close  cooperation  with  the  European  Investment  Bank  Group.  It  will  provide  equity  and 
quasi-equity financing, notably through venture capital funds, to support scale-ups and SMEs 
excelling in semiconductor and quantum technologies to ease their market expansion, in view 
of  the  need  to  underpin  Europe's  economic  resilience.  The  EIB  is  also  ready  to  step  up  its 
financing  in  the  semiconductor  value  chain  in  line  with  the  EU  ambitions.  EIB  loans  can 
support  up  to  50%  of  investments  across  the  entire  value  chain  from  RDI  to  equipment, 
including  pilot  and  testing  centres,  from  design  to  large  scale  manufacturing  and  advanced 
chip capacity extensions.60  

Secondly,  the  European  Innovation  Council  (EIC)  of  Horizon  Europe  will  provide,  notably 
through its  Accelerator scheme, dedicated investment possibilities in  the form  of grants  and 
equity  to  support  high-risk,  innovative  SMEs,  including  start-ups,  with  market  creating 
innovation  potential  in  the  semiconductor  and  quantum  technologies  sector,  and  help  them 
mature their innovations and attract investors. 

3.3.4  Skills & Competences 

Demand  for  talent  in  electronics  has  been  increasing  in  the  last  20  years,  with  the 
microelectronics industry  in  Europe being directly responsible for 455,000 high-skilled jobs 
in 2018. However, female participation in electronics education and employment is low, and 
shortages in the workforce are an important barrier to further growth in the sector.  

The  main  challenge  for  the  sector  is  to  attract  and  retain  highly  skilled  talent.  To  do  this, 
access to state-of-the-art design and manufacturing equipment used by the industry, as well as 
more training for students on real-life business problems are needed.  

59   Member  States  can  co-fund  projects  supported  by  the  Chips  Fund  in  compliance  with  EU  State  aid  rules. 
Member State’s co-funding can occur through State bodies or vehicles using State resources, such as national 
promotional  banks and  institutions, and in blending operations or in the Member State compartment  under 
the InvestEU Regulation. 

60  Additional financing by the EIB would be subject to demand and to due diligence. 

18 

 
 
 
                                                 
 
The  Chips  for  Europe  Initiative  will  support  education,  training,  skilling  and  reskilling 
initiatives. Action will support access to postgraduate programmes in microelectronics, short-
term  training  courses,  job  placements/traineeships  and  apprenticeships,  training  in  advanced 
laboratories,  etc.  Additionally,  the  Initiative  will  support  a  network  of  competence  centres, 
located across Europe, that will provide access to technical expertise and experimentation in 
the area of semiconductors, helping companies, SMEs in particular, to approach and improve 
design  capabilities  and  developing  skills.  The  competence  centres  will  become  poles  of 
attraction for innovation and for new talent. 

The above would require close collaboration with the relevant actors, such as education and 
training providers, industry and Social Partners, to increase the availability of internships and 
apprenticeships,  raise  students’  awareness  of  the  opportunities  in  the  field  and  support 
dedicated scholarships for masters and PhDs, also aiming at increasing female participation, 
among others via the EU STEM Coalition.  

The  activities  will  draw  on  the  experience  of  the  European  Institute  for  Innovation  and 
Technology  (EIT)  and  will  consider  the  European  strategy  for  universities  and  the  Digital 
Education Action Plan.  

Member  States  should  also  strengthen  their  national  skills  strategies  in  microelectronics, 
including  in  those  reflected  in  the  national  reform  plans,  as  well  as  through  European 
Regional Development Fund and the European Social Fund Plus.   

Finally,  the  European  Alliance  on Processors  and  Semiconductor  technologies  could  be 
instrumental  in  ensuring  industry’s  commitment  in  the  framework  offered  by  the  Pact  for 
Skills61  by  organising  awareness  raising  in  relevant  education  institutions,  but  also  by 
pledging  to  increase  the  offering  of  internships  and  apprenticeships.  Erasmus+  also  offers 
opportunities for students undertaking internships in another European country.62 

3.3.5  Understanding the global supply chains and anticipating future crises  

The  semiconductor  value  chain  is  subject  to  risks  of  shortages;  the  increase  in  demand  is 
strong,  some  market  segments  are  concentrated,  costs  are  high  and  supply  is  not  flexible. 
Moreover, supply and demand are not transparent. In the presence of shortages, these factors 
expose  Europe  to  geopolitical  tensions.  To  mitigate  the  risks,  the  Union  and  the  Member 
States should coordinate their actions and develop capabilities  to monitor the functioning of 
the chips supply chains, including gathering intelligence, as well as to detect and respond to 
crises through correcting measures.  

For  this,  the  Union  and its  Member  States  will  carry  out  a  coordinated  risk  assessment  that 
will identify early warning indicators and anticipate major risks for the supply chain.  There 
will be two types of measures: those belonging to permanent monitoring (preparedness) and 
those that may be activated only under a crisis (crisis response). In case of a supply shortage, 
measures  will  be  taken  to  ensure  Europe’s  security  of  supply.  Coherence  and  coordination 
with  other  crisis  instruments  such  as  the  Health  Emergency  Preparedness  and  Response 

61   EU Pact for Skills: upskilling and reskilling initiative for those training and working in the microelectronics 
industry  |  Shaping  Europe’s  digital  future  (europa.eu).  The  Pact  for  Skills  is  one  of  the  flagship  initiatives 
under the European Skills Agenda (europa.eu) and was launched on 10 November 2020. In microelectronics, 
it  represents  a  public  and  private  investment  of  EUR  2  billion  providing  upskilling  and  reskilling 
opportunities for more than 250,000 workers and students (2021-2025) in Europe's electronics clusters. 

62   https://myinternship.eu/  

19 

 
 
                                                 
Authority  (HERA)63  and  the  upcoming  Single  Market  Emergency  Instrument  (SMEI)64  will 
be ensured.  

Regarding preparedness, Member States would provide evidence on relevant national markets 
in  order  to  carry  out  a  risk  assessment  and  put  in  place  early  warning  for  anticipating 
semiconductor  shortages.  The  Commission  would  also  launch  targeted  stakeholder  surveys 
targeting companies involved in manufacturing as well as purchasing semiconductors.  

These inputs would allow the Commission to assess relevant factors, including choke points, 
trends and events, which could lead to disruptions of the semiconductor supply chain in the 
Union.  Furthermore,  Member  States  should  offer  the  possibility  for  relevant  stakeholder 
organisations, including industry associations and representatives of the main user categories, 
to  provide  information  regarding  atypical  changes  in  demand  and  supply,  and  known 
disruptions  of  their  supply  chain,  including  the  unavailability  of  critical  semiconductors  or 
raw materials, longer than average lead-time, delays in delivery and exceptional price surges.  

The analysis of the situation based on the data collected in the monitoring phase, and through 
discussions  with  international  partners,  is  crucial  to  anticipate  possible  disruptions  of  the 
value  chain.  Such  information  is  vital  in  order  to  build  on  international  partnerships  with 
specific  initiatives  that  may  help  to  forestall,  or  at  least  mitigate  the  effects  of,  such 
disruptions. To increase the potential for trustful and mutually beneficial solutions, the EU’s 
chips strategy will be instrumental to reduce not only asymmetry of means and of negotiating 
power, but  also  asymmetry of information  on industry developments. Where a supply chain 
potential crisis is detected, the Union will seek to enter into consultation with partners with a 
view to seeking cooperative solution to address the situation.  

In case of significant disruptions affecting critical sectors of the economy and society, a crisis 
response  would  be  triggered,  so  as  to  enable  a  rapid,  efficient  and  coordinated  Union 
response.  

A crisis response toolbox would be activated through a set of measures that are proportionate 
to  the  crisis  situation.  The  toolbox  would  include  measures  such  as  mandatory  information 
gathering,  prioritization  of  orders  for  critical  sectors,  and  common  purchasing  schemes.  In 
addition,  the  Board  may  express  its  views  to  the  Commission  whether  the  introduction  of 
exports  controls  is  suitable.  Such  a  Union  response  is  without  prejudice  to  further  possible 
initiatives, in parallel, in conjunction with international partners. 

To  address  the  above  and  facilitate  a  smooth,  effective  and  harmonised  cooperation,  a 
European  Semiconductors  Board  will  be  established.  It  will  be  composed  of  high-level 
representatives of the Member States and the Commission. It will provide advice to and assist 
the Commission in addressing preparedness and monitoring issues related to the security and 
resilience of the supply.  

To  activate  immediately  such  a  coordination  mechanism  and  enable  a  rapid,  effective  and 
coordinated  Union  response  to  the  current  chips  shortage,  the  Commission  puts  forward  a 
Recommendation to Member States, which encourages Member States to work together with 
the  Commission  to  monitor  the  semiconductor  supply  chain  and  anticipate  potential 
disturbances. Member States are encouraged to gather and provide information on the current 
state  of  the  semiconductor  crisis  in  their  national  markets  and  to  discuss  and  adopt 
appropriate, effective and proportionate crisis response measures on national and Union level. 

63   COM(2021) 576 final 
64   COM(2021) 350 final 

20 

 
 
                                                 
This immediate coordination mechanism can take important steps to overcoming the current 
shortage until the proposal for a Regulation is adopted. 

4.  International Cooperation 

By  enhancing  its  security  of  supply  and  its  capacity  to  design  and  produce  powerful  and 
resource-efficient  semiconductors,  the  EU  is  contributing  to  the  rebalancing  of  the 
semiconductors global supply chain. The aim is to improve its capacity throughout the supply 
chain, including at leading edge, and avoid any geographical segmentation or concentration in 
selected parts of the supply chain, in order to be in position to rely on an efficient negotiation 
power to leverage in time of crisis. Additionally, the EU has as an overall objective to serve 
the  global  demand,  which  will  increase  substantially,  and  to  win  its  share  of  the  growing 
market.  

To achieve this ambition, the EU will need to proactively manage its interdependencies with 
the rest of the world, with a twofold objective: (i) to ensure a reliable global marketplace for 
European products, and (ii) to ensure security of supply, including in crisis situations. 

Securing  these  objectives  will  require  building  balanced  semiconductor  partnerships  with 
like-minded  countries.  The  aim  of  these  partnerships  would  be  to  set  out  cooperative 
frameworks on initiatives  of mutual  interest and seek a commitment  to  ensure continuity of 
supply in times of crisis. For such a commitment to be meaningful, a strong factual basis with 
input from supply and demand side industry stakeholders is needed.  

The following elements could be part of the partnerships, as regards security of supply: better 
visibility of potential shocks, by regularly sharing information, best practices and intelligence 
on  mitigating  upcoming  shortages;  effective  early  warning  mechanisms,  to  strengthen 
preparedness  in  moments  of  crisis;  exchange  of  information  on  long-term  investment 
strategies;  international  standardisation  activities;  and,  coordination  on  export  controls, 
ensuring prior consultation and managing unintended consequences. Other relevant topics for 
resilience,  in  particular  workforce  development;  best  practices  to  reduce  the  environmental 
impacts  of  production,  and  enhanced  research  cooperation,  could  be  part  of  a  balanced 
partnership with clear mutual benefits in terms of resilience and security of supply as well as 
reciprocity65.  
As  a  first  step,  the  above  will  be  explored  –  using  existing  or  new  fora  –  with  like-minded 
partners, such as the United States, Japan, South Korea, Singapore, Taiwan and others.  

Additionally, the EU will establish strong cooperation with neighbouring countries, in view to 
enhance the resilience of the semiconductor supply chains.  

Europe’s aim will be to establish a cooperative approach that addresses its security of supply. 
At  the  same  time,  the  EU  should  be  prepared  for  a  possible  failure  of  such  an  approach,  a 
sudden change  in  the political  situation or unforeseen crises, which could  threaten the EU’s 
security of supply. The crisis response toolbox within the EU Chips Act would give the EU 
the  necessary  means  to  address  such  situations  and,  in  the  last  resort,  to  ensure  Europe’s 
overall resilience. 

65   The  Union  research  programme  Horizon  Europe,  which  will  partly  fund  the  Chips  Joint  Undertaking,  is 
already the most open in the world to third country partners. In the context of a broader partnership with one 
or more key like-minded partners on factors relevant to Union resilience and security of supply, the Union 
should  be  ready  to  examine  opportunities  for  enhanced  cooperation  with  such  partners,  including  in  the 
context of the Joint Undertaking, on the basis of reciprocity and of the strategic interest of the EU. 

21 

 
 
                                                 
5.  Conclusion 

Reinforcing Europe’s leadership capacities in semiconductors is a precondition for its future 
competitiveness,  and  a  matter  of  technological  sovereignty  and  security.  Implementation  of 
the Chips Act Package will be a major step in addressing Europe’s structural weaknesses in 
semiconductors  and  reinforcing  its  place  in  a  global  and  interdependent  ecosystem.  The 
Council and the European Parliament are invited to  support this approach, turning  ambition 
into reality in the shortest possible timeframe.   

22