CELEX: 52022PC0046
Language: en
Date: 2022-02-08
Title: Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing a framework of measures for strengthening Europe's semiconductor ecosystem (Chips Act)

EUROPEAN
                         COMMISSION
                                                  Brussels, 8.2.2022
                                                  COM(2022) 46 final
                                                  2022/0032 (COD)
                                     Proposal for a
   REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
    establishing a framework of measures for strengthening Europe's semiconductor
                                 ecosystem (Chips Act)
                               (Text with EEA relevance)
EN                                                                                EN
 ---pagebreak---                                     EXPLANATORY MEMORANDUM
   1.         CONTEXT OF THE PROPOSAL
   •          Reasons for and objectives of the proposal
   Semiconductor chips are central to the digital economy. They make digital products work:
   from smartphones and cars, to critical applications and infrastructures in health, energy,
   communications and automation to most other industry sectors. They are also key to the
   technologies of the future, including artificial intelligence (AI) and 5G/6G communication.
   There is no “digital” without chips.
   Within the past year, Europe has witnessed disruptions in the supply of chips, causing
   shortages across multiple economic sectors and potentially serious societal consequences.
   Many European sectors, including automotive, energy, communication and health as well as
   strategic sectors such as defence, security, and space are under threat by such supply
   disruptions. At the same time, fake chips start appearing on the market, compromising the
   security of electronic devices and systems.
   The current crisis has revealed structural vulnerabilities of the European value chains. The
   global semiconductor shortage has exposed European dependency on supply from a limited
   number of companies and geographies, and its vulnerability to third country export
   restrictions and other disruptions in the present geopolitical context. Furthermore, this
   dependency is exacerbated by the extremely high barriers to entry and capital intensity of the
   sector. For example, the most computationally powerful chips require manufacturing to a
   precision of a few nanometres (nm).1 Building such facilities entails an upfront investment of
   at least EUR 15 billion2 and requires three years to achieve production-readiness with
   adequate yields3. The expenditures to design such chips can range from EUR 0.5 billion to
   well over EUR 1.0 billion. Research and development (R&D) intensity in the sector is high
   and more than 15%.4
   Today, European players invest mainly in R&D, but not enough in translating its results into
   industrial benefits. Such R&D is a key enabler of miniaturisation in semiconductor
   technologies required for the production of the next generation computationally powerful
   chips. Europe is home to world-leading research and technology organisations (RTOs).
   However, many results of European R&D are industrially deployed outside the Union.
   The Union is strong in the design of semiconductor components for power electronics, radio
   frequency and analogue devices, sensors and microcontrollers that have a widespread use in
   the automotive and manufacturing industries today. It is less strong in the design of digital
   logic (processors and memory), which become essential as data, AI and connectivity become
   increasingly pervasive.
   The Union 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 strong and diversified industrial user sectors, e.g. automotive, industrial
   1
      In semiconductor manufacturing, the process technology has traditionally been correlated with the transistor
      dimension. The process “node” is measured in nanometres (nm); 1 nanometre = 1 billionth of a meter.
      Smaller process nodes produce smaller transistors, which are faster and more power-efficient. The state of
      the art process node is 5 nm today, with 3 nm in pre-production, and 2 nm under development.
   2
      https://news.samsung.com/global/samsung-electronics-announces-new-advanced-semiconductor-fab-site-in-
      taylor-texas, 24.11.2021.
   3
      https://semianalysis.substack.com/p/tsmc-3nm-wafer-shipments-pushed-into, 14.10.2021
   4
      https://min.news/en/tech/def29226dea2b06f47efea4aae13e8f3.html, 22.01.2022
EN                                                         1                                                       EN
 ---pagebreak---    automation, healthcare, energy, communication, etc. However, collaboration along the value
   chain is weak.
   The Union’s overall global semiconductors market share is 10% in value5, well below its
   economic weight. Despite its strong global position in materials and equipment
   manufacturing, the Union is heavily dependent on third-country suppliers for the design,
   manufacturing, packaging, testing and assembly of chips.
   Today, semiconductors are at the centre of strong geostrategic interests and at the core of the
   global technological race. Countries are keen to secure their supply in the most advanced
   chips as it will condition their capacity to act (economically, industrially and militarily) and
   drive digital transformation. All major world regions are heavily investing and rolling out
   support measures to innovate and strengthen their production capabilities.
   The Union has the assets to become an industrial leader in the chips market of the future. Its
   ambition is to double its world production share today to 20% in value by 20306. The goal is
   not only to reduce dependencies, but also to seize the economic opportunities as the global
   market for semiconductors is expected to double before the end of the decade, increasing
   competitiveness of the semiconductor ecosystem, and of industry at large, through innovative
   products for European citizens.
   New market trends and opportunities are emerging. Semiconductor companies increasingly
   co-design customised chips with end-user companies to improve system performance through
   hardware-software optimisation. AI, edge cloud and the digital transformation of industrial
   sectors offer new opportunities for future competitiveness of European technology and
   industry leadership.
   At the same time, technology is constantly evolving. Further miniaturisation continues,
   towards smaller node dimensions in the mainstream process technologies (FinFET and
   FDSOI) along the lines of Moore’s law7, while more energy-efficient solutions are in high
   demand to ensure that the ever-growing processing footprint remains sustainable. Emerging
   computing paradigms, such as neuromorphic computing and quantum technologies are
   promising technologies for new application areas. New materials such as Silicon Carbide
   (SiC) and Gallium Nitride (GaN) are essential for power management, e.g. the optimal use of
   battery power, in particular for electric vehicles of all kinds and renewable energy generation.
   This explanatory memorandum accompanies the proposal for a Regulation of the European
   Parliament and Council establishing a framework of measures for strengthening the
   semiconductor ecosystem in the Union (Chips Act).
   This proposal delivers on the political commitment by President von der Leyen, who
   announced in her 2021 State of the Union speech that the aim is to jointly create a state-of-
   the-art European chip ecosystem, including production8. The proposal’s underlying strategic
   5
      Strengthening the Global Semiconductor Supply Chain in an uncertain era, BCGxSIA, April 2021.
      https://www.bcg.com/publications/2021/strengthening-the-global-semiconductor-supply-chain
   6
      The Digital Compass fixed as an objective that by 2030 “the production of cutting-edge and sustainable
      semiconductors in Europe including processors is at least 20% of world production in value” (COM(2021)
      118, 9.3.2021). The Proposal for the 2030 Policy Programme “Path to the Digital Decade” has reaffirmed this
      ambition (see footnote 15).
   7
      Moore’s law is the observation that the number of transistors in an integrated circuit doubles about every two
      years.
   8
      State of the Union address 2021. https://ec.europa.eu/info/sites/default/files/soteu_2021_address_en_0.pdf
EN                                                         2                                                         EN
 ---pagebreak---    vision for strengthening Europe’s semiconductor ecosystem is explained in the accompanying
   Communication.9
   To fulfil this vision, the European Chips Strategy is articulated around five strategic
   objectives:
       Europe should strengthen its research and technology leadership;
       Europe should build and reinforce its own capacity to innovate in the design,
        manufacturing and packaging of advanced chips, and turn them into commercial products;
       Europe should put in place an adequate framework to increase substantially its production
        capacity by 2030;
       Europe should address the acute skills shortage, attract new talent and support the
        emergence of a skilled workforce;
       Europe should develop an in-depth understanding of global semiconductor supply chains.
   The proposal aims at reaching the strategic objective of increasing the resilience of Europe’s
   semiconductor ecosystem and increasing its global market share. It also aims at facilitating
   early adoption of new chips by European industry and increasing its competitiveness. For this,
   it needs to attract investment in innovative production facilities, have a skilled workforce, but
   also be in the position to design and produce the most advanced chips that will define the
   markets of tomorrow, develop capabilities and have the possibility to test and prototype
   innovative designs through pilot lines in close collaboration with its industrial vertical sectors.
   These are necessary steps, but not sufficient unless the Union has the analytical capability of
   increasing the knowledge of the policy makers of the value chain and is capable to benefit
   from increased capacity to serve the common interest of the single market in case of crisis.
   The objective is not to become self-sufficient, which is not an achievable target. We must
   strengthen our strengths, develop new strengths and work with third countries in a supply
   chain where interdependencies will remain strong.
   In terms of delivering on these objectives, the proposal will aim to:
       Set up the Chips for Europe Initiative, to support large-scale technological capacity
        building and innovation throughout the Union to enable the development and deployment
        of cutting-edge and next generation semiconductor and quantum technologies that will
        reinforce the Union’s advanced design, systems integration, chips production capabilities
        and skills, including emphasis on start-ups and scale-ups (pillar 1, “Chips for Europe
        Initiative”).
   In particular, the Initiative will build an innovative virtual design platform to reinforce
   Europe’s design capacity, which will be accessible on open, non-discriminatory and
   transparent terms. The platform will stimulate a wide cooperation of user communities with
   design houses, start-ups and SMEs, intellectual property (IP) and tool suppliers, designers and
   RTOs, and will integrate existing and new design facilities with extended libraries and EDA10
   tools.
   The Initiative will support pilot lines that provide the means for third parties under open,
   transparent, and non-discriminatory terms to test, validate and further develop their product
   designs. The development of new advanced pilot lines will prepare for the next generation of
   production capabilities and their validation.
   9
       COM(2022) 45, 08.02.2022. A Chips Act for Europe.
   10
       Electronic Design Automation tools, i.e. software tools for designing integrated circuits.
EN                                                         3                                           EN
 ---pagebreak---    Furthermore, the Initiative will contribute to building advanced technology and engineering
   capacities for accelerating the innovative development of quantum chips, e.g. in the form of
   design libraries for quantum chips, pilot lines, and testing and experimentation facilities.
   The Initiative will support a network of competence centres across the Union that will provide
   expertise to stakeholders, including end-user small and medium-sized enterprises (SMEs),
   start-ups as well as vertical sectors, and improve their skills. Competence centres will
   facilitate open, transparent, and non-discriminatory access to and effective use of the design
   infrastructure and the pilot lines. They will become poles of attraction for innovation and for
   new, highly skilled talent.
   Additionally to the Initiative, activities to facilitate access to debt financing and equity in the
   semiconductor value chain, to be described collectively as the ‘Chips Fund’, should support
   the development of a dynamic and resilient semiconductor ecosystem by providing
   opportunities for increased availability of funds to support the growth of start-ups, scale-ups
   and SMEs as well as investments across the value chain, including for companies in the
   semiconductor value chains potentially with blending provided by the Initiative.
       Create a framework to ensure security of supply by attracting investments and
        enhanced production capacities in semiconductor manufacturing as well as advanced
        packaging, test, and assembly via first-of-a-kind Integrated Production Facilities and Open
        EU Foundries (pillar 2, “Security of supply”).
   In particular, the proposal defines criteria for facilitating the implementation of specific
   projects that contribute to the security of supply of semiconductors in the Union. To this end,
   it distinguishes between two types of first-of-a-kind facilities11, namely Integrated Production
   Facilities and Open EU Foundries12. If an application by a facility to be recognised as one of
   the two types of first-of-a-kind facilities is successful, the proposal requires Member States to
   ensure efficient processing of administrative applications related to the planning, construction
   and operation of a recognised first-of-a-kind facility.
   In response to increasing need for cyber-resilient supply chains13 the Commission will work
   with Member States and private actors to identify sectorial requirements for trusted chips with
   a view to establishing common standards and certification, as well as common requirements
   for procurement, to be developed with the support of the European standardisation
   organisations where appropriate and bearing in mind the principles of the New Legislative
   Framework for conformity assessment and market surveillance.
       Set up a coordination mechanism between the Member States and the Commission
        for strengthening collaboration with and across Member States, monitoring the supply of
        semiconductors, estimate demand, anticipate shortages, trigger the activation of a crisis
        stage and act through a dedicated toolbox of measures (pillar 3, “Monitoring and Crisis
        Response”).
   11
       ‘First-of-a-kind facility’ means an industrial facility capable of semiconductor manufacturing, including
       front-end or back-end, or both, that is not substantively already present or committed to be built within the
       Union, for instance with regard to the technology node, substrate material, such as silicon carbide and
       gallium nitride, and other product innovation that can offer better performance, process innovation or energy
       and environmental performance.
   12
       Integrated Production Facilities are first-of-a-kind semiconductor design and manufacturing facilities,
       including front-end or back-end, or both, in the Union that contribute to the security of supply for the internal
       market. Open EU Foundries are first-of-a-kind semiconductor front-end or back-end, or both, manufacturing
       facilities in the Union that offer production capacity to unrelated undertakings and thereby contribute to the
       security of supply for the internal market.
   13
       31 % of cyber-attacks in 2020 targeted the EU. https://www.ibm.com/security/data-breach/threat-intelligence
EN                                                          4                                                            EN
 ---pagebreak---    •          Consistency with existing policy provisions in the policy area
   This proposal is coherent with the Commission’s overall digital vision, targets, and avenues
   for a successful digital transformation of the European Union by 2030 as presented in the
   Commission Communication “The 2030 Digital Compass: the European way for the Digital
   Decade” (‘Digital Compass Communication’)14 and the subsequent Commission’s proposal
   for the Digital Decade Policy Programme15, with the particular target on semiconductors. This
   proposal is intended to help equip the Union with the capabilities that will be needed to
   deliver on its 2030 target.
   This proposal is consistent with the Commission’s Communication updating the 2020 new
   industrial strategy16 in May 2021 that identifies areas of strategic dependencies that could lead
   to vulnerabilities such as supply shortages. The proposal addresses the design, manufacturing,
   packaging, testing and assembly challenges identified in the Communication and
   accompanying staff working document. The Communication announces the Industrial
   Alliance on Processors and Semiconductor technologies (Alliance)17 to identify gaps in the
   production of microchips and the technology developments needed for companies and
   organisations to thrive, help the competitiveness of companies, increase Europe’s digital
   sovereignty, and address the demand for the next generation of secure, energy-efficient,
   powerful chips and processors. In the context of this Regulation, the Alliance will play an
   advisory role.
   This proposal is consistent also with the Commission’s standardisation strategy18 and the
   2022 Annual Union Work Programme for European standardisation19 that were adopted on 2
   February 2022. They envisage the development of standards for the certification of chips in
   terms of security, authenticity and reliability.
   This proposal also takes account of the objectives of the Observatory for Critical
   Technologies20, which aims to help identify the Union’s current and possible future digital
   strategic dependencies and contribute to strengthening its digital sovereignty.
   This proposal addresses the sector-specific and unique challenges of the semiconductors
   supply chain and is a separate initiative from the planned “Single Market Emergency
   Instrument” that the Commission announced in its updated industrial strategy.
   This proposal contributes to the implementation of the Declaration on A European Initiative
   on Processors and semiconductor technologies, signed by 22 Member States on 7 December
   2020.21 In the declaration, the 22 Member States agreed to “undertake particular efforts to
   14
      Communication from the Commission to the European Parliament, the Council, the European Economic and
      Social Committee and the Committee of the Regions 2030 Digital Compass: the European way for the
      Digital Decade, COM(2021) 118, 9.3.2021.
   15
      COM(2021) 574 final. Proposal for a Decision of the European Parliament and of the Council establishing
      the 2030 Policy Programme “Path to the Digital Decade”. 15.9.2021.
   16
      Communication from the Commission to the European Parliament, the European Council, the Council, the
      European Economic and Social Committee and the Committee of the Regions, “Updating the 2020 New
      Industrial Strategy: Building a stronger Single Market for Europe’s recovery” COM(2021) 350 final.
   17
      The Commission launched the Alliance on Processors and Semiconductor technologies in July 2021.
      https://digital-strategy.ec.europa.eu/en/policies/alliance-processors-and-semiconductor-technologies.
   18
      Communication from the Commission to the European Parliament, the Council, the European Economic and
      Social Committee and the Committee of the Regions “An EU Strategy on Standardisation - Setting global
      standards in support of a resilient, green and digital EU single market”, COM(2022) 31.
   19
      C(2022) 546 Commission Notice - The 2022 annual Union work programme for European standardisation.
   20
      COM(2021) 70, Action Plan on synergies between civil, defence and space industries.
   21
      Joint declaration on processors and semiconductor technologies. 7 December 2020.
EN                                                           5                                                EN
 ---pagebreak---    reinforce the semiconductor ecosystem and to expand industrial presence across the supply
   chain.” Member States also 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.” This proposal is consistent with these objectives.
   Furthermore, the proposal is in line with the recent Communication “A competition policy fit
   for new challenges”, where the Commission acknowledges that it may “envisage approving
   public support to fill possible funding gaps in the semiconductor ecosystem for the
   establishment in particular of European first-of-a-kind facilities in the Union, based on Article
   107(3) TFEU. Such aid would have to be subject to strong safeguards to ensure aid is
   necessary, appropriate and proportionate, undue competition distortions are minimised, and
   that benefits are shared widely and without discrimination across the European economy.”22
   The Chips for Europe Initiative will pool resources from the Union, Member States and third
   countries associated with the existing Union programmes, as well as the private sector.
   The actions under the Chips for Europe Initiative will be primarily implemented through the
   Chips Joint Undertaking, i.e. the amended and renamed current Key Digital Technologies
   Joint Undertaking23. This Joint Undertaking currently provides extensive support for
   industrially driven research, technology development, and innovation in the area of electronic
   components and systems, and related software and systems technologies. These activities will
   become part of the Chips for Europe Initiative.
   The Chips for Europe Initiative builds on and complements the five specific objectives of the
   Digital Europe programme (DEP)24, which support digital capacity building in key digital
   domains where semiconductor technology underpins performance gains, including High
   Performance Computing, Artificial Intelligence, and Cybersecurity, together with skills
   development and the deployment of digital innovation hubs. The Chips for Europe Initiative
   through new Specific Objective 6, which should have a thematic focus on semiconductor
   technologies, will invest in capacity building to reinforce advanced research, design,
   production and systems integration capabilities in cutting-edge and next generation
   semiconductor technologies.
   The Chips for Europe Initiative also builds on and complements Horizon Europe programme
   (HE)25, which in the area of semiconductors provides support for academically driven
   research, technology development and innovation. The Initiative will focus on supporting
   investment into cross-border and openly accessible research, development and innovation
   infrastructures set up in the Union to enable the development of semiconductor technologies
   across Europe. New semiconductor technologies from research and innovation actions
   supported by Horizon Europe may be progressively taken up and deployed by the capacity
   22
      Communication from the Commission to the European Parliament, the Council, the European Economic and
      Social Committee and the Committee of the Regions. A competition policy fit for new challenges,
      COM(2021) 713, 18 November 2021.
   23
      Regulation (EU) 2021/2085 of the Council of 19 November 2021 establishing the Joint Undertakings under
      Horizon Europe and repealing Regulations (EC) No 219/2007, (EU) No 557/2014, (EU) No 558/2014, (EU)
      No 559/2014, (EU) No 560/2014, (EU) No 561/2014 and (EU) No 642/2014, OJ L 427, 30.11.2021, p. 17.
   24
      Regulation (EU) 2021/694 of the European Parliament and of the Council of 29 April 2021 establishing the
      Digital Europe Programme and repealing Decision (EU) 2015/2240, OJ L 166, 11.5.2021, p. 1.
   25
      Regulation (EU) 2021/695 of the European Parliament and of the Council of 28 April 2021 establishing
      Horizon Europe – the Framework Programme for Research and Innovation, laying down its rules for
      participation and dissemination, and repealing Regulations (EU) No 1290/2013 and (EU) No 1291/2013, OJ
      L 170, 12.5.2021, p. 1.
EN                                                       6                                                     EN
 ---pagebreak---    building parts of the Chips for Europe Initiative. Conversely, the technology capacities of the
   Initiative will be made available to the research and innovation community, including for
   actions supported through Horizon Europe.
   This proposal is provided in light of the opportunities offered by the InvestEU26 programme
   and the significant contribution to digital transformation provided by the Recovery and
   Resilience Facility27, for which at least 20% of funds must contribute to digital objectives.
   This proposal is also consistent with the Security Union Strategy28.
   In order to accelerate the implementation of the actions, the Chips for Europe Initiative
   provides for a new legal instrument – the European Chips Infrastructure Consortium (ECIC) –
   that is specifically developed to simplify and structure the legal relationships between the
   private-public consortium members, including particularly RTOs, and provide a structural
   dialogue with the Commission for the implementation of the actions under the Initiative. This
   new legal instrument is voluntary and will complement the Union’s toolbox of various other
   legal instruments, including European Digital Infrastructure Consortium15, that allow to
   combine funding from Member States, the Union budget, and private investments. Legal
   entities, when forming a public-private consortium for the purpose of the implementing
   actions under the Initiative, will have a choice among the available Union’s legal instruments
   that better fits the specific purpose, composition and set-up of a particular consortium. The
   Chips Joint Undertaking entrusted with the overall implementation of the certain actions
   under this Initiative, may under the conditions provided in the Article 134 of the
   Commission’s Proposal for a Council Regulation amending Regulation (EU) 2021/2085
   establishing the Joint Undertakings under Horizon Europe, as regards the Chips Joint
   Undertaking29 provide that certain actions may be carried out only by legal entities
   cooperating within a consortium that may be structured in a form of European Chips
   Infrastructure Consortium, or any other available Union legal instruments available for
   forming a consortium.
   •         Consistency with other Union policies
   The proposed measures can support some of the main policies of the Union, such as the Green
   Deal30. The application of semiconductor technologies, and digital technologies in general,
   are powerful enablers for the sustainability transition and can lead to new products and more
   efficient and effective ways of working that contribute to the Green Deal objectives.
   Semiconductor supply disruptions and dependencies on other regions can slow down the
   sustainability transition of European sectors benefiting from digital solutions. To address the
   disruptions and dependencies, the proposal strengthens Europe’s semiconductor production
   capacity. Where applicable, facilities should be fully compliant with requirements stemming
   from Union legislation such as related to environmental impact assessment, emissions to air,
   water and soil, including the risk and prevention of industrial accidents, and seek to ensure
   high energy and resource and water efficiency. Strengthening the production capacity requires
   quick set-up of semiconductor manufacturing facilities, which may exceptionally be
   26
      Regulation (EU) 2021/523 of the European Parliament and of the Council of 24 March 2021 establishing the
      InvestEU Programme and amending Regulation (EU) 2015/1017, OJ L 107, 26.3.2021, p. 30.
   27
      Regulation (EU) 2021/241 of the European Parliament and of the Council of 12 February 2021 establishing
      the Recovery and Resilience Facility, OJ L 57, 18.2.2021, p. 17.
   28
      Communication on the EU Security Union Strategy. COM(2020) 605 final.
   29
            COM(2022) 47, 08.02.2022.
   30
      Communication from the Commission to the European Parliament, the European Council, the Council, the
      European Economic and Social Committee and the Committee of the Regions. The European Green Deal.
      COM(2019) 640, 11.12.2019.
EN                                                        7                                                    EN
 ---pagebreak---    considered as being of overriding public interest where necessary for derogations in permit
   granting procedures, including in certain environmental assessments, provided that the
   remaining other conditions set out in the relevant provisions are fulfilled. At the same time,
   the first-of-a-kind concept includes possible qualification also based on the facility’s
   envisaged energy or environmental performance.
   Digital technologies, both when manufactured and used have their own environmental
   footprint, including from the release of fluorinated greenhouse gases during manufacturing to
   their significant energy consumption for their production and during their use. The
   information and communications technology (ICT) sector is responsible for 5-9% of the
   world’s total electricity use and more than 2% of all emissions31. Data centres alone
   accounted for 2.7% of electricity demand in 2018 in the Union and will reach 3.21% by 2030,
   if development continues on the current trajectory32. Such energy consumption needs to be
   reduced. The proposal, and in particular the setting up design facilities and pilot lines under
   pillar 1, will lead to the design, testing and validation of new, low power processors.
   Processors are the core components of servers that handle the computational workload in data
   centres. Larger data centres contain millions of such servers and improvements in the power
   consumption of processors can have a significant bearing on the overall power consumption
   of a data centre. Such chips with a low-energy footprint contribute also to positioning the
   Union as a leader in sustainable digital technologies.
   The proposal contributes to the objectives of parts of the Fit for 55 package that focus on
   promoting cleaner vehicles and fuels in a technologically neutral way33. The revision of the
   CO2 emission standards for new cars and vans aims at further reducing the greenhouse gas
   emissions of these vehicles, providing a clear and realistic pathway towards zero-emission
   mobility. Consumer demand for zero emission vehicles, such as electrically chargeable
   vehicles, is increasing already34. Electrically chargeable vehicles typically have more than
   twice the amount of semiconductor content per vehicle than cars with internal-combustion
   engines35. Advanced packaging technologies are increasingly important to address increasing
   power and energy-efficiency requirements by electrical vehicles. It follows that this is
   consistent with the objectives of the Fit for 55 package.
   The proposal is in line with the Circular Economy Action Plan 36, which identifies electronics
   and ICT as a key value chain and announces a Circular Electronics Initiative to encompass
   “regulatory measures for electronics and ICT including mobile phones, tablets and laptops
   under the Ecodesign Directive so that devices are designed for energy efficiency and
   durability, reparability, upgradability, maintenance, reuse and recycling”.
   31
      Proposal for a Directive of the European Parliament and of the Council on energy efficiency (recast).
      COM(2021) 558, 14.7.2021.
   32
      https://digital-strategy.ec.europa.eu/en/library/energy-efficient-cloud-computing-technologies-and-policies-
      eco-friendly-cloud-market
   33
      Communication from the Commission to the European Parliament, the Council, the European Economic and
      Social Committee and the Committee of the Regions. 'Fit for 55': delivering the EU's 2030 Climate Target on
      the way to climate neutrality. COM(2021) 550, 14.7.2021.
   34
      For instance, the share of electric cars in new sales in Europe is increasing and is expected to make up 14% in
      2021. https://think.ing.com/articles/slow-start-for-electric-vehicles-in-the-us-but-times-are-changing
   35
      https://www.idtechex.com/en/research-article/ev-power-electronics-driving-semiconductor-demand-in-a-
      chip-shortage/24820
   36
            COM(2020) 98 final, 11.03.2020.
EN                                                           8                                                        EN
 ---pagebreak---    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. The
   Sustainable Product Initiative, based on expansion of the scope of the Ecodesign Directive,
   will provide a potential vehicle for such requirements. The Commission is also investigating
   various possibilities for take-back and sell-back schemes for consumer electronics, to boost
   the supply of functional used devices.
   With digitalisation and electrification increasing, energy-efficient chips contribute to other
   policies as well, including policies on industrial manufacturing, transport and energy, e.g. the
   upcoming Digitalisation of Energy Action Plan37. The demand for semiconductor
   technologies is expected to double in a decade. More and more chips are embedded in robots
   and manufacturing machines, in industry and in agriculture, but also in transport vehicles and
   other devices. Because the proposal aims at smart use of chips and other digital technologies,
   and production of more energy-efficient chips, it is consistent with and contributes to several
   sectoral policies.
   2.         LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
   •          Legal basis
   This Regulation pursues two separate specific objectives, which form essential parts of its
   general objective to establish a coherent framework for strengthening the Union’s
   semiconductor ecosystem. The first specific objective of the Regulation, underlying pillar 1, is
   creating large innovation capacities and the adequate technological capabilities in the
   semiconductor industry to accelerate and adjust to innovation. In addition, underlying pillars 2
   and 3, the Regulation aims to increase the Union’s resilience and security of supply in the
   field of semiconductor technologies by supporting and coordinating investment in advanced
   semiconductor manufacturing (pillar 2) and enabling coordinated monitoring and crisis
   response (pillar 3).
   The appropriate legal basis for the first objective are Articles 173(3), 182(1) and 183 of the
   Treaty on the Functioning of the European Union (TFEU). Article 173(3) provides that the
   European Parliament and the Council, acting in accordance with the ordinary legislative
   procedure and after consulting the European Economic and Social Committee, may decide on
   specific measures in support of actions taken in the Member States to secure the conditions
   necessary for the competitiveness and innovation capacity of the Union and ensure the
   adjustment of the industry to structural changes due to fast innovation cycles. This legal basis,
   with regard to most activities undertaken under the Initiative, is appropriate given that pillar 1
   of this Regulation aims to accelerate the semiconductor production of the Union’s industry,
   reinforce sovereignty in the semiconductor supply chain, boost industrial capacities, facilitate
   the development of innovative start-ups and SMEs, and encourage new investments in
   innovation and technological development. In view of the broad nature of the Initiative, it is
   also based on the TFEU Title ‘Research and technological development and space’ (Articles
   182(1) and 183).
   The appropriate legal basis for the second objective, underlying pillars 2 and 3, is Article 114
   TFEU. Pillars 2 and 3 of this proposal aim to create a harmonised legal framework for
   37
      https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13141-Digitalising-the-energy-
      sector-EU-action-plan_en
EN                                                         9                                                   EN
 ---pagebreak---    increasing the Union’s resilience and security of supply. The use of semiconductors is critical
   for multiple economic sectors and societal functions in the Union and therefore, a resilient
   supply is essential for the functioning of the internal market. Thus, any supply disruption must
   be anticipated and addressed without delay in order to preserve the stable functioning of
   strategic downstream sectors. In light of the significant economic impact of the current
   semiconductor shortage, it is likely that Member States initiate regulatory measures to address
   the structural vulnerabilities of the sector that have led to the current shortage or to respond to
   and mitigate future shortages in crisis situations38. While adequate with a view to addressing
   deficiencies at a national level, such regulatory measures could entail an incoherent response
   to the need to strengthen resilience and to address possible crises in the internal market,
   thereby leading to fragmentation of the sector. With a view to enabling coordinated measures
   for building resilience, harmonised rules for facilitating the implementation of specific
   projects that contribute to the security of supply of semiconductors in the Union (pillar 2) are
   necessary. The proposed monitoring and crisis response mechanism (pillar 3) should be
   uniform to enable a coordinated approach to crisis preparedness for the cross-border
   semiconductor value chain. The proposal provides for the appropriate governance structure
   and cooperation between Member States at Union level, hence supporting trust, innovation
   and growth in the internal market. Article 114 TFEU is therefore a pertinent legal basis for
   pillars 2 and 3 in order to ensure the proper functioning of the internal market.
   Other articles of the TFEU or each article on its own cannot justify both of the above
   objectives. Article 122 TFEU is not pertinent, as it does not provide for a basis for both
   objectives and is not compatible with either of Articles 114 and 173 TFEU. The proposed
   elements are provided in one act, as all the measures constitute a coherent approach to
   address, in different ways, the need for strengthening of the Union’s semiconductor
   ecosystem.
   •         Subsidiarity (for non-exclusive competence)
   The objectives of the proposal cannot be achieved by Member States acting alone, as the
   problems are of a cross-border nature, and not limited to single Member States or to a subset
   of Member States. The proposed actions focus on areas where there is a demonstrable value
   added in acting at Union level due to the scale, speed and scope of the efforts needed.
   Providing a comprehensive response to the semiconductor crisis requires a rapid and
   coordinated joint action from a variety of stakeholders, and in cooperation with Member
   States. No single Member State is capable of achieving this alone. Moreover, given the
   complexity of the semiconductor ecosystem, the consequence of the Union’s structural
   dependencies and supply shortages are so far-reaching that intervention at the level of the
   Union is best placed to address such issues.
   Action at Union level can clearly best drive European actors towards a common vision and
   implementation strategy. This is key to generate economies of scale and of scope and generate
   critical mass necessary for cutting-edge capacities, limiting, if not avoiding, fragmentation of
   efforts, subsidy races, and suboptimal national solutions.
   Union action is needed in relation to the areas that this proposal addresses through its three
   pillars.
   38
      For instance, it has been announced that Spain intends to reform its National Security Law (Ley de Seguridad
      Nacional) in this sense.
EN                                                        10                                                       EN
 ---pagebreak---       With regard to the first pillar (“Chips for Europe Initiative”), the Initiative will support
       large scale technological capacity building and innovation through the Union to enable the
       development and deployment of cutting-edge and next generation semiconductor and
       quantum technologies and to address Europe’s chronic structural weaknesses in design
       and production. Member States set up a first ‘Important Project of Common European
       Interest’ (IPCEI) in 2018, supporting cross-border innovative projects across the
       microelectronics value chain, with a second IPCEI in this field being planned. 39 While
       such initiatives are of strategic importance for the sector, at this stage it is likely that they
       alone would not sufficiently address the capacity building in the form of pilot lines and
       design infrastructures that need to be made widely available to all interested third parties
       across Europe and which will also enable the Union to play a stronger role in a global and
       interdependent ecosystem. Such large-scale facilities can only be delivered at Union level
       due to the scale of investments and know-how necessary.
      Regarding the second pillar (“Security of supply”), actions aimed at accelerating
       investment in semiconductor manufacturing can only be adequately designed and
       implemented at Union level, given the scale of the investments needed and because such
       manufacturing facilities will, by definition, serve the full internal market, strengthen the
       whole ecosystem, and guarantee security of supply in crises.
      In relation to the third pillar (“Monitoring and Crisis Response”), enhanced Union
       cooperation will ensure the necessary and comparable intelligence gathering. Together,
       Member States and Commission will be able to anticipate shortages, activate the crisis
       stage in a situation of severe shortage and put in place the necessary measures to address
       such a crisis in more effective ways than through a patchwork of national measures.
   •         Proportionality
   The proposal is designed to strengthen Europe’s semiconductor ecosystem via short-term
   preparedness and monitoring to increase transparency of semiconductor supply chains, mid-
   term security of supply actions to enhance semiconductor production capacity in Europe, and
   longer-term technology and innovation leadership actions to set up design and production
   facilities for advanced and emerging semiconductor technologies.
   In this context, the proposal focuses on those parts of the semiconductor ecosystem that
   contribute most to the resilience of the Union’s supply chain. The focus on the semiconductor
   ecosystem itself, rather than the larger electronics components and systems domain, or
   application areas using semiconductors and/or electronics components and systems, is
   intended to limit actions to one of today’s most crucial pain points for the European economy
   and society at large.
   The Chips for Europe Initiative in pillar 1 puts in place the mechanisms necessary for
   ensuring longer-term competitiveness and innovation capacity of European industry via
   research and design capabilities, pilot lines for testing and experimentation, capacities for
   quantum chips, competence centres, and a fund for start-ups, scale-ups and SMEs.
   The security of supply actions to enhance the Union’s semiconductor production capacity in
   pillar 2 may recognise a certain facility as an Integrated Production Facility or as an Open EU
   Foundry. With such recognition, Member States are required to ensure permits for such
   facilities and foundries are granted through fast procedures.
   39
      Four Member States (France, Germany, Italy, and Austria) and the United Kingdom participated in the first
      IPCEI. It features 32 companies, with EUR 1.9 billion public support and a contribution by industry of
      roughly EUR 6 billion.
EN                                                    11                                                        EN
 ---pagebreak---    The preparedness actions in pillar 3 are based on monitoring and information exchange by
   Member States and the Union to anticipate disruptions in the supply chain. In case of
   (anticipated) disruptions, coordinated measures may be taken to mitigate or prevent
   semiconductor shortages and other disruptions.
   •           Choice of the instrument
   The proposal takes the form of a Regulation of the European Parliament and of the Council.
   This is the most suitable legal instrument for pillar 1 of the proposal setting up the Chips for
   Europe Initiative, as only a Regulation, with its directly applicable legal provisions, can
   provide the necessary degree of uniformity needed for the establishment and operation of a
   Union Initiative aiming at supporting an industrial sector across the internal market. The
   choice of a Regulation as a legal instrument for pillar 2 is justified by the need for a uniform
   application of the new rules, in particular the definition of Integrated Production Facilities and
   Open EU Foundries, as well as a uniform procedure for their recognition and support.
   Additionally, a Regulation is the most suitable instrument for pillar 3, as this part should
   provide for a mechanism to anticipate and address serious disruptions of the supply of
   semiconductors in the Union. The mechanism does not require the transposition through
   national measures and is directly applicable.
   3.          RESULTS             OF         EX-POST           EVALUATIONS,                 STAKEHOLDER
               CONSULTATIONS AND IMPACT ASSESSMENTS
   •           Stakeholder consultations
   In her speech at the World Economic Forum in January 2022, President von der Leyen
   mentioned that “we will propose our European Chips Act in early February” and that “we
   have no time to lose”40. 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 drives digital transformation. They are already heavily investing
   and rolling out support measures to innovate and strengthen their production capacities, or
   expect to do so soon41. There are indications that Union companies and RTOs may be
   attracted to move to other regions. International players are less likely to expand existing
   facilities or set up new production facilities in the Union without full clarity on investment
   conditions, possibilities for public support, public investments in skills, infrastructure, and
   advanced R&D, etc.
   Given the urgent need to act, no impact assessment was carried out and no online public
   consultation was foreseen. The analysis and all supporting evidence will be set out in a staff
   working document published at the latest within three months of the proposal’s publication.
   Nevertheless, ad-hoc workshops with industry stakeholders on specific topics related to pillar
   1 indicated the need to consider facilities for upcoming technologies, such as photonics,
   neuromorphic computing, and quantum technologies, as well as new materials42. In addition,
   40
       ‘State of the World' Special Address by President von der Leyen at the World Economic Forum.
       https://ec.europa.eu/commission/presscorner/detail/en/speech_22_443
   41
       For instance: USA: https://www.congress.gov/bill/117th-congress/senate-bill/1260?s=1&r=52
       China: https://crsreports.congress.gov/product/pdf/R/R46767
       Japan:       https://www.reuters.com/technology/japan-create-scheme-subsidise-domestic-chip-output-nikkei-
       2021-11-07/
       South Korea: https://spectrum.ieee.org/south-koreas-450billion-investment-latest-in-chip-making-push
   42
       https://ecscollaborationtool.eu/ecs-sria-workshops.html
EN                                                         12                                                     EN
 ---pagebreak---    these workshops emphasised the need for due consideration of alternative instruction set
   architectures, such as RISC-V.
   Furthermore, in the context of the ECSEL Joint Undertaking – the predecessor of the Key
   Digital Technologies Joint Undertaking – meetings with industry representatives and public
   authorities took place in summer 2021, where the Digital Compass objectives, the update of
   the industrial strategy, the Industrial alliance, and the European Chips Act were discussed.
   Regular meetings with Member States took place monthly in 2021 to prepare the planned
   second IPCEI on Microelectronics. The Member States provided inputs for the definition and
   assessment of Integrated Production Facilities and Open EU Foundries in pillar 2, as well as
   for the definition of specific facilities under pillar 1.
   A meeting with CEOs representing key stakeholders in the European semiconductor sector
   took place on 10 January 2022. Key takeaways from that meeting were: the need to build on
   European strengths, e.g. R&D and equipment manufacturing; clear support for pilot lines and
   design infrastructures; support for start-ups and scale-ups; the need to increase Europe’s
   manufacturing capacity for both mature and advanced technologies; and the need for a
   worldwide level playing field43.
   There were also numerous meetings with representatives of CEOs on the need to strengthen
   the European semiconductors sector, following Commissioner Breton’s meetings with the
   CEOs of the main semiconductor players and RTOs. These provided inputs particularly to
   pillar 1.
   The European Forum for Electronic Components and Systems (EFECS), in November 2021,
   with over 500 participants, provided a large platform for discussion on industrial needs.
   Further input was provided in meetings with industry associations and their members, such as
   SEMI, ESIA, and Digital Europe.
   Moreover, long-standing and regular contacts with industry stakeholders, Member States,
   trade associations and user associations enabled the collection of a fair amount of information
   and feedback relevant to the proposal.
   Many reports have been published since end-2019 on the semiconductor sector describing
   trends and providing facts and figures, and served to inform the proposal44.
   •        Impact assessment
   This proposal is not accompanied by a formal impact assessment. Considering the urgency as
   explained above, an impact assessment could not have been delivered in the timeframe
   available prior to the adoption of the proposal. The analysis and all supporting evidence will
   43
      https://digital-strategy.ec.europa.eu/en/news/ceo-roundtable-semiconductors-10-january-2022
   44
      A non-exhaustive list: Measuring distortions in international markets: The semiconductor value chain OECD
      2019; The Geopolitics of Semiconductors, prepared by EURASIA group, Sept 2020; The global
      semiconductor value chain, Stiftung Neue Verantwortung, Oct 2020; The Weak Links in China's Drive for
      Semiconductors, Montaigne institute, Jan 2021; Strengthening the Semiconductor supply chain in an
      uncertain Era, BCGxSIA, April 2021; SIA Factbook, May 2021; Building Resilient Supply Chains,
      Revitalizing American Manufacturing, and Fostering Broad-Based Growth, A Report by the White House,
      June 2021; Mapping China’s semiconductor ecosystem in global context, Stiftung Neue Verantwortung, June
      2021; Semiconductors Global Policy Review Access Partnership, Sept 2021; Semiconductors: U.S. Industry,
      Global Competition, and Federal Policy, Congressional Report Service October 2021; Semiconductor
      Strategy for Germany and Europe, ZVEI, Oct 2021; A semiconductor strategy for the European Union,
      Bundesagentur für Sprunginnovationen (SPRIN-D), 2021; Understanding the global chip shortage Stiftung
      Neue Verantwortung, Nov 2021.
EN                                                        13                                                    EN
 ---pagebreak---    be set out in a staff working document published at the latest within three months of the
   proposal’s publication.
   •         Fundamental rights
   Article 16 of the Charter of Fundamental Rights of the European Union (‘the Charter’)
   provides for the freedom to conduct a business. The measures under pillars 1 and 2 of this
   proposal create innovation capacity and foster the security of supply of semiconductors,
   which can reinforce the freedom to conduct a business in accordance with Union law and
   national laws and practices. Nevertheless, some measures under pillar 3 needed to address
   serious disruptions to of the semiconductor supply in the Union may temporarily limit the
   freedom to conduct a business and the freedom of contract, protected by Article 16 and the
   right to property, protected by Article 17 of the Charter. Any limitation of those rights in this
   proposal will, in accordance with Article 52(1) of the Charter, be provided for by law, respect
   the essence of those rights and freedoms, and comply with the principle of proportionality.
   The obligation to disclose specific information to the Commission, provided that certain
   conditions are met, respects the essence of and will not disproportionately affect the freedom
   to conduct a business (Article 16 of the Charter). Any information request serves the objective
   of general interest of the Union to enable the identification of potential mitigation measures to
   a semiconductor shortage crisis. These information requests are appropriate and effective to
   attain the objective by providing information necessary to assess the crisis at hand. The
   Commission in principle only requests the desired information from representative
   organisations and may issue requests to individual undertakings only if it is necessary in
   addition. Since information on the supply situation is not available otherwise, there is not any
   equally effective measure to attain the information necessary to enable European decision-
   makers to take mitigation action. In light of the serious economic and societal consequences
   of semiconductor shortages and the respective importance of mitigation measures,
   information requests are proportionate to the desired aim. Furthermore, the limitation to the
   freedom to conduct a business and the right to property are offset by appropriate safeguards.
   Any request to information may only be launched in a situation of crisis in which the
   Commission has activated the crisis stage through an implementing act.
   The obligation to accept and prioritise priority rated orders respects the essence of and will
   not disproportionately affect the freedom to conduct a business and the freedom of contract
   (Article 16 of the Charter) and the right to property (Article 17 of the Charter). This obligation
   serves the objective of general interest of the Union to ensure critical sectors affected by
   supply disruptions on account of a semiconductor shortage continue to operate. The
   obligation is appropriate and effective to attain this objective by ensuring the available
   resources are preferentially utilised for products supplied to these sectors. There is no equally
   effective measure. It is proportionate to oblige in a situation of crisis semiconductor
   manufacturing facilities that have applied to be recognised as “Integrated Production
   Facilities” and “Open EU Foundries”, other semiconductor manufacturing facilities which
   have accepted such possibility in the context of receiving public support, or undertakings
   along the semiconductor supply chain which have been subjected to a priority rated order
   from a third country to the extent this impacts significantly the security of supply to critical
   sectors, to accept and prioritise certain orders. Appropriate safeguards ensure that any
   negative impact of the prioritisation obligation on the freedom to conduct a business, the
   freedom of contract and the right to property does not amount to a violation of these rights.
   Any obligation to prioritise certain orders may only be launched in a situation of crisis in
   which the Commission has activated the crisis stage through an implementing act. The
   undertaking concerned may request the Commission to review the priority rated order if it is
   unable to perform the order or performing the order would place unreasonable economic
EN                                                 14                                                 EN
 ---pagebreak---    burden on them and entail particular hardship. Furthermore, the subject of the obligation is
   exempt from any liability for damages for the violation of contractual obligations resulting
   from compliance with the obligation.
   4.          BUDGETARY IMPLICATIONS
   The proposal establishes the Chips for Europe Initiative, which will not have a separate
   financial envelope, but will be supported by funding from the HE, and the DEP, to be
   enlarged by a new Specific Objective 6. The Regulation 2021/2085 establishing the Joint
   Undertakings under HE is amended and expanded to allow the Key Digital Technologies
   Undertaking, renamed as a Chips Joint Undertaking (Chips JU) to implement the increased
   contribution from HE and contributions from DEP under the Specific Objective 6. The
   financial consequences of the proposal on the Union budget are presented in the financial
   statement accompanying the proposal and will be met from the available resources of the
   Multiannual financial framework 2021-2027.
   The EU budget will support the Chips for Europe Initiative with a total of up to EUR 3.3
   billion, including EUR 1.65 billion via HE and EUR 1.65 billion via DEP. Out of this total
   amount, EUR 2.875 billion will be implemented through the Chips Joint Undertaking, EUR
   125 million through InvestEU (to be complemented with other by 125 million under InvestEU
   itself) and EUR 300 million through the EIC. This comes in addition to the budget already
   dedicated to activities in microelectronics under this MFF to reach almost 5 billion.
   In particular, an amount of up to EUR 1.65 billion will be implemented under HE in favour of
   the Chips for Europe Initiative: EUR 900 million under Cluster 4 EUR 150 million from
   Cluster 3, EUR 300 million from Cluster 5 and EUR 300 million under the European
   Innovation Council (EIC). In addition, the Commission proposes to reduce the budget of HE
   by an amount of EUR 400 million to increase the amounts available for DEP. In order to
   compensate for this reduction of EUR 400 million, the Commission proposes to make
   available again, for the benefit of the HE programme, a further amount of EUR 400 million
   (in current prices) of commitment appropriations over the period 2023-2027, resulting from
   total or partial non-implementation of projects belonging to that programme or its
   predecessor. This amount will be in addition to the EUR 0.5 billion (in 2018 prices) already
   mentioned in the Joint Declaration by the European Parliament, the Council and the
   Commission on the re-use of decommitted funds in relation to the research programme 45. The
   Commission therefore invites the European Parliament and Council to supplement this Joint
   Declaration with a mention of the additional amount to make available again.
   Under DEP, a new Specific Objective 6 is proposed for the purposes of the Chips for Europe
   Initiative. This Specific Objective 6, covers components a to d of Article 5, and it is to be
   implemented by the Chips JU. A total of up to EUR 1.65 billion will be allocated to this new
   Specific Objective 6 of the programme: EUR 600 million reallocated from the existing
   objectives of the DEP, a reduction of EUR 400 million of the Connecting Europe Facility
   Programme (CEF), including EUR 150 million from CEF-Digital and EUR 250 million from
   CEF-Transport46, the reduction of EUR 400 million of cluster 4 of the HE programme (as
   45
             OJ C 444I , 22.12.2020, p. 3–3.
   46
       In line with the conclusion above on consistency of the EU Chips Act with other Union policies, in particular
       the European Green Deal and the Fit for 55 package, this should not negatively affect the overall CEF
       Transport objectives and the deployment of sustainable transport infrastructure.
EN                                                        15                                                         EN
 ---pagebreak---    mentioned in the above paragraph, compensated by the reuse of decommitments), and EUR
   250 million from the unallocated margin of heading 1 to finance the Initiative under the DEP.
   The Commission proposes to handle the reductions of the financial envelopes of CEF and HE
   within the 15% variation provided by Point 18 of the Interinstitutional Agreement of 16
   December 2020 between the European Parliament, the Council of the European Union and the
   European Commission on budgetary discipline, on cooperation in budgetary matters and on
   sound financial management, as well as on new own resources, including a roadmap towards
   the introduction of new own resources47. The Commission invites the European Parliament
   and Council to refer to these variations, which are required for the efficient implementation of
   the Chips for Europe Initiative, in the Joint Declaration referred to in the previous paragraph.
   Further details are provided in the Legislative Financial Statement annexed to this proposal.
   5.        OTHER ELEMENTS
   •         Implementation plans and monitoring, evaluation and reporting arrangements
   The Commission will evaluate the output, results and impact of this proposal three years after
   the date on which it becomes applicable and every four years thereafter. The main findings of
   the evaluation will be presented in a report to the European Parliament and the Council, which
   will be made public. In order to conduct the evaluation, the European Semiconductor Board,
   the Member States and national competent authorities will provide information to the
   Commission on its request.
   Detailed explanation of the specific provisions of the proposal
   1.1.      Chapter I – General Provisions
   Chapter I lays out the subject matter of the Regulation. It also sets out the definitions used
   throughout the instrument. The Regulation establishes a framework, consisting of three
   “pillars”, for strengthening Europe’s semiconductor ecosystem. In particular, the Regulation
   establishes the Chips for Europe Initiative that creates the conditions necessary to strengthen
   the Union’s industrial innovation capacity (pillar 1), includes the definition and criteria of
   first-of-a-kind Integrated Production Facilities and Open EU Foundries (pillar 2) and a
   coordination mechanism for monitoring and crisis response (pillar 3).
   1.2.      Chapter II – Chips for Europe Initiative
   Chapter II sets up the Chips for Europe Initiative that will reinforce the Union’s
   competitiveness, resilience and innovation capacity. Through investments into the Chips for
   Europe Initiative, the Union should increase its effectiveness in turning its research and
   technology developments into demand-oriented, application-driven, secure and energy-
   efficient semiconductor technologies of the highest quality. At the same time, the Union
   should provide an opportunity for its supply industry to leverage on such investments.
   To this end, this Chapter includes the general provisions and objectives of the Chips for
   Europe Initiative. The Initiative aims to support large-scale capacity building throughout the
   Union in existing and cutting-edge and next generation semiconductor technologies. The
   Initiative comprises five components: design capacities for integrated semiconductor
   technologies, pilot lines for preparing innovative production, and testing and experimentation
   facilities, advanced technology and engineering capacities for accelerating the development of
   47
            OJ L 433I, 22.12.2020, p. 28–46.
EN                                                 16                                               EN
 ---pagebreak---    quantum chips, a network of Competence Centres and skills development and the ‘Chips
   Fund’ activities for access to capital by start-ups, scale-ups and SMEs.
   The Initiative shall be supported by funding from HE and DEP, and in particular its new
   Specific Objective 6 thereof, and implemented in accordance with the Regulations
   establishing those programmes.
   The Regulation provides for a procedural framework to facilitate combined funding from
   Member States, investment without prejudice with State aid rules, the Union budget and
   private investment. This will take the form of a new instrument with legal personality, the
   European Chips Infrastructure Consortium (‘ECIC’), which can be used by legal entities to
   structure their collaborative work within a consortium, on a voluntary basis. In addition,
   Section 1 sets up a mechanism for establishing a European network of Competence Centres
   for the purpose of implementing actions on competence centres and skills under the Chips for
   Europe Initiative.
   The Chapter also includes provisions on the implementation. The primary implementation of
   the Initiative will be entrusted to the Chips Joint Undertaking as proposed in the
   Commission’s Proposal for a Council Regulation amending Regulation (EU) 2021/2085 . The
   technical description of the actions is provided in Annex I. Annex II includes measurable
   indicators to monitor the implementation and to report on the progress of the Initiative
   towards the achievement of its objectives. The Commission is enabled to adopt delegated acts
   to amend the list of measurable indicators. The Initiative builds on Europe’s existing strengths
   in the global semiconductor value chain and enhances synergies with actions currently
   supported by the Union and Member States. Therefore, in order to maximise its positive
   impacts, the Initiative should enable synergies with Union programmes described in Annex
   III.
   1.3.      Chapter III – Security of Supply
   Chapter III sets out the framework for Integrated Production Facilities and Open EU
   Foundries. Integrated Production Facilities and Open EU Foundries are manufacturing
   facilities providing semiconductor manufacturing capabilities that are “first-of-a-kind” in the
   Union and contribute to the security of supply and to a resilient ecosystem in the internal
   market. In particular, in order to qualify as Integrated Production Facilities and Open EU
   Foundries, the facility should have a clear positive impact on the semiconductor value chain
   in the Union.
   While Integrated Production Facilities are vertically integrated production facilities, Open EU
   Foundries offer a significant degree of their production capacity to other industrial players,
   such as fabless semiconductor companies (i.e. companies that design but do not manufacture
   chips). Investment in these facilities facilitates the development of semiconductor
   manufacturing in the Union. Hence, upon recognition as an Integrated Production Facility or
   Open EU Foundry by the Commission, these facilities shall be considered to contribute to the
   security of supply of semiconductors in the Union and therefore in the public interest. In order
   to reach security of supply, Member States may, without prejudice to State aid rules, apply
   support schemes and shall provide for administrative support, including fast tracking of
   administrative application procedures related to their planning, construction and operation.
   The Commission will recognise a facility as an Integrated Production Facilities or Open EU
   Foundries if they fulfil the criteria set out in this Chapter. The Commission may repeal its
   decision if the recognition was based on incorrect information or the facility no longer fulfils
   the criteria.
EN                                                  17                                              EN
 ---pagebreak---    1.4.      Chapter IV – Monitoring and Crisis Response
   Chapter IV contains a mechanism for coordinated monitoring of the semiconductor value
   chain and responding to disruptions of the supply of semiconductors that have an impact on
   the proper functioning of the internal market.
   Section 1 (Monitoring) sets out a monitoring and alerting system of the semiconductor value
   chain. The system is based on regular monitoring activities of Member States consisting of, in
   particular, the observation of early warning indicators and the availability and integrity of the
   services and goods provided by key market actors. The Commission provides the basis for the
   monitoring activities through a Union risk assessment in which it identifies the early warning
   indicators. To ensure industry participation, the Member States will invite relevant
   stakeholders and industry associations to inform about significant fluctuations in demand and
   disruptions of their supply chain. Member States should provide regular updates and
   exchange their findings in the European Semiconductor Board. If Member States become
   aware of a potential semiconductor crisis or the occurrence of a relevant risk factor in the
   frame of their monitoring activities or through an update from stakeholders, they shall alert
   the Commission. Upon this alert, or upon an alert through other sources including information
   from international partners, the Commission shall convene an extraordinary meeting of the
   European Semiconductor Board. The meeting will serve to assess the need to activate the
   crisis stage and discuss potential coordinated procurement ahead of a shortage. Furthermore,
   the Commission shall enter into consultations or cooperation, on behalf of the Union, with
   relevant third countries with a view to seeking cooperative solutions to address supply chain
   disruptions.
   Section 2 (Crisis Stage) provides the rules to activate the semiconductor crisis stage and
   details the emergency measures that can be used to respond to the crisis.
   The Commission is enabled to activate the crisis stage by means of an implementing act when
   there is concrete, serious, and reliable evidence of a semiconductor crisis. Such a
   semiconductor crisis occurs when there are serious disruptions in the supply of
   semiconductors leading to significant shortages, which involve significant negative effects on
   one or more important sectors of the Union, or prevent the supply, repair and maintenance of
   essential products used by critical sectors. The implementing act will specify the duration of
   the crisis stage or its prolongation. Before the expiry of the crisis stage, the Commission shall
   assess, taking into account the opinion of the European Semiconductor Board, whether the
   activation of the crisis stage should be prolonged. During the crisis stage, the European
   Semiconductor Board will hold extraordinary meetings to allow for Member States to work
   closely with the Commission and coordinate any national measures taken with regard to the
   semiconductor supply chain.
   When the crisis stage is activated, the Commission may take certain emergency measures set
   out in this Regulation. The Commission may request representative organisations of
   undertakings, or, if need be, individual undertakings operating along the semiconductor
   supply chain for information necessary for assessing the semiconductor crisis and identifying
   potential mitigation measures. These entities are obliged to provide the Commission with the
   requested information. The requested information can consist of information regarding their
   production capabilities, production capacities, current primary disruptions or any other
   existing data necessary to assess the nature of the semiconductor crisis or to identify and
   assess potential mitigation or emergency measures at national or Union level. Where
   appropriate, the Commission may oblige IPFs, OEFs, semiconductor manufacturing facilities
   which have previously accepted this possibility in the context of receiving public support, or
   undertakings along the semiconductor supply chain which have been subjected to a priority
EN                                                 18                                                EN
 ---pagebreak---    rated order request from a third country to an extent that significantly impacts the operation of
   critical sectors, to accept and prioritise the production of crisis-relevant products for critical
   sectors. Additionally or alternatively, upon the request of two or more Member States, the
   Commission may, on their behalf, act as a central purchasing body in order to procure crisis-
   relevant products for critical sectors. The Commission will, in consultation with the European
   Semiconductor Board, assess the utility, necessity and proportionality of the request. For the
   definition of critical sectors, this Regulation refers to the sectors enlisted in Annex of the
   Commission proposal for a Directive of the European Parliament and of the Council on the
   resilience of critical entities48, and additionally the defence sector and other activities that are
   relevant for public safety and security, and provides that the Commission may limit these
   emergency measures to certain sectors within this list.
   1.5.      Chapter V – Governance
   Chapter V sets up the governance systems at Union and national level. At Union level, the
   proposal establishes a European Semiconductor Board, composed of representatives from the
   Member States and chaired by the Commission. The European Semiconductor Board will
   provide advice on the Initiative to the Public Authorities Board of the Chips Joint
   Undertaking (pillar 1); provide advice and assistance to the Commission in order to exchange
   information on the functioning of the IPF and OEF (pillar 2); discuss and prepare the
   identification of specific critical sectors and technologies, address monitoring and crisis
   response issues (pillar 3), and to provide support in the consistent application of the proposed
   Regulation and facilitate cooperation among Member States. The European Semiconductor
   Board shall support the Commission in international cooperation. It shall also coordinate and
   exchange information with relevant crisis structures established under Union law. The
   European Semiconductor Board will meet in different compositions and hold separate
   meetings for its tasks under pillar 1 and for its tasks under pillars 2 and 3. The Commission
   may establish standing or temporary sub-groups of the European Semiconductor Board and
   invite organisations representing the interests of the semiconductor industry and other
   stakeholders to such sub-groups as observers.
   At national level, Member States will designate one or more national competent authorities
   and, among them, a national single point of contact for the purpose of implementing the
   Regulation.
   1.6.      Chapter VI, VII, VIII – Final Provisions
   Chapter VI emphasizes the obligation of all parties to respect the confidentiality of sensitive
   business information and trade secrets. The obligation applies to the Commission, the national
   competent authorities and other authorities of the Member States, as well as all
   representatives and experts attending meetings of the European Semiconductor Board and the
   Committee. The Chapter also establishes rules on effective, proportionate, and dissuasive
   penalties and fines for noncompliance with the obligations under this Regulation, subject to
   appropriate safeguards. The Commission may impose periodic penalty payments for failure of
   the relevant undertakings to accept and prioritise certain orders in a semiconductor crisis.
   Furthermore, the Commission may impose fines on an undertaking that provides incorrect,
   incomplete or misleading information, or does not supply the information within the
   prescribed time limit.
   Chapter VII sets out rules and conditions for the exercise of delegation and implementing
   powers. The proposal empowers the Commission to adopt, where appropriate, implementing
   48
            COM(2020) 829. 16.12.2020.
EN                                                   19                                                 EN
 ---pagebreak---    acts to allow for procedural specification and ensure uniform application of the Regulation
   and delegated acts to amend Annex I (the activities set out therein in a manner consistent with
   the objectives of the Initiative) and Annex II (the measurable indicators and the provisions on
   the establishment of a monitoring and evaluation framework to supplement this Regulation).
   Chapter VIII contains amendments to other acts, including the Digital Europe programme,
   and an obligation for the Commission to prepare regular reports for the evaluation and review
   of the Regulation to the European Parliament and to the Council.
EN                                                20                                               EN
 ---pagebreak---                                                            2022/0032 (COD)
                                             Proposal for a
       REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
        establishing a framework of measures for strengthening Europe's semiconductor
                                        ecosystem (Chips Act)
                                      (Text with EEA relevance)
   THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,
   Having regard to the Treaty on the Functioning of the European Union, and in particular
   Articles 173(3), 182(1), 183 and 114 thereof,
   Having regard to the proposal from the European Commission,
   After transmission of the draft legislative act to the national parliaments,
   Having regard to the opinion of the European Economic and Social Committee49,
   Having regard to the opinion of the Committee of the Regions50,
   Acting in accordance with the ordinary legislative procedure,
   Whereas:
   (1)     Semiconductors are at the core of any digital device: from smartphones and cars,
           through critical applications and infrastructures in health, energy, communications and
           automation to most other industry sectors. While semiconductors are essential to the
           functioning of our modern economy and society, the Union has witnessed
           unprecedented disruptions in their supply. The current supply shortage is a symptom
           of permanent and serious structural deficiencies in the Union’s semiconductor value
           and supply chain. The disruptions have exposed long-lasting vulnerabilities in this
           respect, notably a strong third-country dependency in manufacturing and design of
           chips.
   (2)     A framework for increasing the Union’s resilience in the field of semiconductor
           technologies should be established, stimulating investment, strengthening the
           capabilities of the Union’s semiconductor supply chain, and increasing cooperation
           among the Member States and the Commission.
   (3)     This framework pursues two objectives. The first objective is to ensure the conditions
           necessary for the competitiveness and innovation capacity of the Union and to ensure
           the adjustment of the industry to structural changes due to fast innovation cycles and
           the need for sustainability. The second objective, separate and complementary to the
           first one, is to improve the functioning of the internal market by laying down a
           uniform Union legal framework for increasing the Union’s resilience and security of
           supply in the field of semiconductor technologies.
   49
       OJ C , , p. .
   50
       OJ C , , p. .
EN                                                  21                                             EN
 ---pagebreak---    (4) It is necessary to take measures to build capacity and strengthen the Union’s
       semiconductor sector in line with Article 173(3) of the Treaty. These measures do not
       entail the harmonisation of national laws and regulations. In this regard, the Union
       should reinforce the competitiveness and resilience of the semiconductor technological
       and industrial base, whilst strengthening the innovation capacity of its semiconductor
       sector, reducing dependence on a limited number of third country companies and
       geographies, and strengthening its capacity to design and produce advanced
       components. The Chips for Europe Initiative (the ‘Initiative’) should support these
       aims by bridging the gap between Europe’s advanced research and innovation
       capabilities and their sustainable industrial exploitation. It should promote capacity
       building to enable design, production and systems integration in next generation
       semiconductor technologies, enhance collaboration among key players across the
       Union, strengthening Europe's semiconductor supply and value chains, serving key
       industrial sectors and creating new markets.
   (5) The use of semiconductors is critical for multiple economic sectors and societal
       functions in the Union and therefore, a resilient supply is essential for the functioning
       of the internal market. Given the wide circulation of semiconductor products across
       borders, the resilience and security of supply of semiconductors can be best addressed
       through Union harmonising legislation based on Article 114 of the Treaty. With a
       view to enabling coordinated measures for building resilience, harmonised rules for
       facilitating the implementation of specific projects that contribute to the security of
       supply of semiconductors in the Union are necessary. The proposed monitoring and
       crisis response mechanism should be uniform to enable a coordinated approach to
       crisis preparedness for the cross-border semiconductor value chain.
   (6) The achievement of these objectives will be supported by a governance mechanism.
       At Union level, this Regulation establishes a European Semiconductor Board,
       composed of representatives of the Member States and chaired by the Commission.
       The European Semiconductor Board will provide advice to and assist the Commission
       on specific questions, including the consistent application of this Regulation,
       facilitating cooperation among Member States and exchanging information on issues
       relating to this Regulation. The European Semiconductor Board should hold separate
       meetings for its tasks under the different chapters of this Regulation. The different
       meetings may include different compositions of the high-level representatives and the
       Commission may establish subgroups.
   (7) Given the globalised nature of the semiconductor supply chain, international
       cooperation with third countries is an important element to achieve a resilience of the
       Union’s semiconductor ecosystem. The actions taken under this Regulation should
       also enable the Union to play a stronger role, as a centre of excellence, in a better
       functioning global, interdependent semiconductors ecosystem. The Commission,
       assisted by the European Semiconductor Board, should cooperate and build
       partnerships with third countries with a view to seeking solutions to address, to the
       extent possible, disruptions of the semiconductor supply chain.
   (8) The semiconductor sector is characterised by very high development and innovation
       costs and very high costs for building state of the art testing and experimentation
       facilities to support the industrial production. This has direct impact on the
       competitiveness and innovation capacity of the Union industry, as well as on the
       security and resilience of the supply. In light of the lessons learnt from recent
       shortages in the Union and worldwide and the rapid evolution of technology
       challenges and innovation cycles affecting the semiconductor value chain, it is
EN                                             22                                                EN
 ---pagebreak---              necessary to strengthen the Union’s competitiveness, resilience and innovation
             capacity by setting up the Initiative.
   (9)       Member States are primarily responsible for sustaining a strong Union industrial,
             competitive, sustainable and innovative base. However, the nature and scale of the
             innovation challenge in the semiconductor sector requires action to be taken
             collaboratively at Union level.
   (10)      The Horizon Europe Framework programme established by Regulation (EU) 2021/695
             of the European Parliament and of the Council51 (Horizon Europe) – the Framework
             Programme for Research and Innovation, has the objective to strengthen the European
             research area (ERA), encouraging it to become more competitive, including in its
             industry, while promoting all research and innovation (R&I) activities to deliver on the
             Union's strategic priorities and commitments, which ultimately aim to promote peace,
             the Union's values and the well-being of its peoples. As a major priority of the Union,
             the total financial resources allocated to the programme should not be reduced and the
             reduction of the financial resources of the programme, aimed to reinforce the financial
             envelope of the Digital Europe programme with the aim of contributing to the Chips
             initiative, should be compensated by another source. Consequently, without prejudice
             to the institutional prerogatives of the European Parliament and of the Council, an
             amount of commitment appropriations equivalent to the reduction should be made
             available to Horizon Europe over the period 2023-2027, resulting from total or partial
             non-implementation of projects belonging to that programme or its predecessor, as
             provided for in Article 15(3) of Regulation (EU, Euratom) 2018/1046 of the European
             Parliament and of the Council52 (the Financial Regulation). This amount will be in
             addition to the EUR 0.5 billion (in 2018 prices) already mentioned in the Joint
             Declaration by the European Parliament, the Council and the Commission on the re-
             use of decommitted funds in relation to the research programme.
   (11)      In order to equip the Union with the semiconductor technology research and
             innovation capacities needed to maintain its research and industrial investments at a
             leading edge, and bridge the current gap between research and development and
             manufacturing, the Union and its Member States should better coordinate their efforts
             and co-invest. To achieve this, the Union and Member States, should take into
             consideration the twin digital and green transition goals. The Initiative throughout all
             components and actions, to the extent possible, should mainstream and maximise the
             benefits of application of semiconductor technologies as powerful enablers for the
             sustainability transition that can lead to new products and more efficient, effective,
             clean and durable use of resources, including energy and materials necessary for
             production and the whole lifecycle use of semiconductors.
   51
       Regulation (EU) 2021/695 of the European Parliament and of the Council of 28 April 2021 establishing
       Horizon Europe – the Framework Programme for Research and Innovation, laying down its rules for
       participation and dissemination, and repealing Regulations (EU) No 1290/2013 and (EU) No 1291/2013. (OJ
       L 170, 12.5.2021, p. 1).
   52
       Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the
       financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013,
       (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013,
       (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU,
       Euratom) No 966/2012 (OJ L 193, 30.7.2018, p. 1).
EN                                                        23                                                   EN
 ---pagebreak---    (12)    In order to achieve its general objective, and address both the supply and demand side
           challenges of the current semiconductor ecosystem, the Initiative should include five
           main components. First, to reinforce Europe’s design capacity, the Initiative should
           support actions to build a virtual platform that is available across the Union. The
           platform should connect the communities of design houses, SMEs and start-ups,
           intellectual property and tool suppliers, with research and technology organisations to
           provide virtual prototype solutions based on co-development of technology. Second, in
           order to strengthen the security and resilience of supply and reducing the Union’s
           dependency on third country production, the Initiative should support development
           and access to pilot lines. The pilot lines should provide for the industry a facility to
           test, experiment and validate semiconductor technologies and system design concepts
           at the higher technology readiness levels beyond level 3 but under level 8 while
           reducing environmental impacts as much as possible. Union investments along
           Member States investment and with the private sector in pilot lines is necessary to
           address the existing structural challenge and market failure where such facilities are
           not available in the Union hindering innovation potential and global competitiveness
           of the Union. Third, in order to enable investments in alternative technologies, such as
           quantum technologies, conducive to the development of the semiconductors sector, the
           Initiative should support actions including on design libraries for quantum chips, pilot
           lines for building quantum chips and testing and experimentation facilities for
           quantum components. Fourth, in order to promote the use of the semiconductor
           technologies, to provide access to design and pilot line facilities, and to address skills
           gaps across the Union, the Initiative should support establishment of the competence
           centres on semiconductors in each Member State. Access to publicly funded
           infrastructure, such as pilot and testing facilities, and to the competence network,
           should be open to a wide range of users and must be granted on a transparent and non-
           discriminatory basis and on market terms (or cost plus reasonable margin basis) for
           large undertakings, while SMEs can benefit from preferential access or reduced prices.
           Such access, including for international research and commercial partners, can lead to
           broader cross-fertilisation and gains in know-how and excellence, while contributing
           to cost recovery. Fifth, The Commission should set-up a dedicated semiconductor
           investment facility support (as part of the investment facilitation activities described
           collectively as the ‘Chips Fund’) proposing both equity and debt solutions, including a
           blending facility under the InvestEU Fund established by Regulation (EU) 2021/523
           of the European Parliament and Council53, in close cooperation with the European
           Investment Bank Group and together with other implementing partners such as
           national promotional banks and institutions. The ‘Chips Fund’ activities should
           support the development of a dynamic and resilient semiconductor ecosystem by
           providing opportunities for increased availability of funds to support the growth of
           start-ups and SMEs as well as investments across the value chain, including for other
           companies in the semiconductor value chains. In this context, the European Innovation
           Council will provide further dedicated support through grants and equity investments
           to high risk, market creating innovators.
   (13)    In order to overcome the limitations of the current fragmented public and private
           investments efforts, facilitate integration, cross-fertilisation, and return on investment
           on the ongoing programmes and to pursue a common strategic Union vision on
   53
      Regulation (EU) 2021/523 of the European Parliament and of the Council of 24 March 2021 establishing the
      InvestEU Programme and amending Regulation (EU) 2015/1017 (OJ L 107, 26.3.2021, p. 30).
EN                                                    24                                                       EN
 ---pagebreak---            semiconductors as a means to realising the ambition of the Union and of its Member
           States to ensure a leading role in the digital economy, the Chips for Europe Initiative
           should facilitate better coordination and closer synergies between the existing funding
           programmes at Union and national levels, better coordination and collaboration with
           industry and key private sector stakeholders and additional joint investments with
           Member States. The implementation set up of the Initiative is built to pool resources
           from the Union, Member States and third countries associated with the existing Union
           Programmes, as well as the private sector. The success of the Initiative 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. Where
           appropriate, in view of the specificities of the actions concerned, the objectives of the
           Initiative, specifically the ‘Chips Fund’ activities, should also be supported through a
           blending facility under the InvestEU Fund.
   (14)    Support from the Initiative should be used to address market failures or sub-optimal
           investment situations in a proportionate manner, and actions should not duplicate or
           crowd out private financing or distort competition in the internal market. Actions
           should have a clear added value for the Union.
   (15)    The Initiative should build upon the strong knowledge base and enhance synergies
           with actions currently supported by the Union and Member States through
           programmes and actions in research and innovation in semiconductors and in
           developments of part of the supply chain, in particular Horizon Europe and the Digital
           Europe programme established by Regulation (EU) 2021/694 of the European
           Parliament and of the Council54 with the aim by 2030, to reinforce the Union as global
           player in semiconductor technology and its applications, with a growing global share
           in manufacturing. Complementing those activities, the Initiative would closely
           collaborate with other relevant stakeholders, including with the Industrial Alliance on
           Processors and Semiconductor Technologies.
   (16)    With a view to accelerating implementation of the actions of the Initiative, it is
           necessary to provide an option of implementing some of the Initiative actions, in
           particular on pilot lines, through a new legal instrument, the European Chips
           Infrastructure Consortium (ECIC). The ECIC should have legal personality. This
           means that when applying for the actions to be funded by the Initiative, the ECIC
           itself, and not individual entities forming the ECIC, can be the applicant. The main
           aim of the ECIC should be to encourage effective and structural collaboration between
           legal entities, including Research and Technology Organizations. For this reason, the
           ECIC has to involve the participation of at least three legal entities from three Member
           States and be operated as a public-private sector consortium for a specific action. The
           setting up of ECIC should not involve the actual setting up of a new Union body and
           should not be targeted at one specific action under the Initiative. It should address the
           gap in the Union’s toolbox to combine funding from Member States, the Union budget
           and private investment for the purposes of implementing actions of the Initiative. In
           particular, strong synergies can be attained through combined development of the
           different pilot lines in an ECIC, pooling the Union’s contribution with the collective
           resources of the Member States and other participants. The budget of the ECIC that
           would be made available by Member States and private sector participants over its
   54
      Regulation (EU) 2021/694 of the European Parliament and of the Council of 29 April 2021 establishing the
      Digital Europe Programme and repealing Decision (EU) 2015/2240. (OJ L 166, 11.5.2021, p. 1).
EN                                                    25                                                       EN
 ---pagebreak---            projected period of operation should respect the timeframes of the actions
           implemented under this Initiative. The Commission should not be directly a party in
           the Consortium.
   (17)    The primary implementation of the Initiative should be entrusted to the Chips Joint
           Undertaking as established by Council Regulation XX/XX amending Regulation (EU)
           2021/2085 establishing the Joint Undertakings under Horizon Europe, as regards the
           Chips Joint Undertaking55.
   (18)    In order to encourage the establishment of the necessary manufacturing and related
           design capabilities, and thereby ensure the security of supply in the Union, public
           support may be appropriate. In that respect, it is necessary to set out the criteria for
           facilitating the implementation of specific projects that contribute to achieving the
           objectives of this Regulation and distinguish between two types of facilities, namely:
           Integrated Production Facilities and Open EU Foundries.
   (19)    Integrated Production Facilities and Open EU Foundries should provide
           semiconductor manufacturing capabilities that are “first-of-a-kind” in the Union and
           contribute to the security of supply and to a resilient ecosystem in the internal market.
           The qualifying factor for the production of a first-of-a-kind facility could be with
           regard to the 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. A facility of a comparable
           capability on an industrial scale should not yet substantively be present or committed
           to be built within the Union, excluding facilities for research and development or
           small-scale production sites.
   (20)    Where an Open EU Foundry offers production capacity to undertakings not related to
           the operator of the facility, the Open EU Foundry should establish, implement and
           maintain adequate and effective functional separation in order to prevent the exchange
           of confidential information between internal and external production. This should
           apply to any information gained in the design and in the front-end or back-end
           manufacturing processes.
   (21)    In order to qualify as Integrated Production Facilities or Open EU Foundries, the
           establishment and operation of the facility should have a clear positive impact on the
           semiconductor value chain in the Union, in particular with regard to providing a
           resilient supply of semiconductors to users on the internal market. The impact on
           several Member States, including cohesion objectives, should be considered as one of
           the indicators of a clear positive impact of an Integrated Production Facility and Open
           EU Foundry on the semiconductor value chain in the Union.
   (22)    It is important that Integrated Production Facilities and Open EU Foundries are not
           subject to extraterritorial application of public service obligations imposed by third
           countries that could undermine their ability to use their infrastructure, software,
           services, facilities, assets, resources, intellectual property or knowhow needed to fulfil
           the obligation on priority rated orders under this Regulation, which they would have to
           guarantee.
   (23)    In light of the fast development of semiconductor technologies and to strengthen the
           future industrial competitiveness of the Union, Integrated Production Facilities and
           Open EU Foundries should commit to continued and efficient investment into the next
   55
      […].
EN                                                    26                                              EN
 ---pagebreak---             generations of semiconductors, including by testing and experimenting new
            developments through priority access to the pilot lines set up by the Chips for Europe
            Initiative, without prejudice to effective access by others.
   (24)     To allow for a uniform and transparent procedure to attain recognition as an Integrated
            Production Facility and Open EU Foundry, the recognition decision should be adopted
            by the Commission following the application by an individual undertaking or a
            consortium of several undertakings. To account for the importance of a coordinated
            and cooperated implementation of the planned facility, the Commission should take
            into account in its assessment the readiness of the Member State or Member States
            where the applicant intends to establish its facilities to support the set-up. Furthermore,
            when assessing the viability of the business plan, the Commission could take into
            account the overall record of the applicant. In light of the privileges attached to
            recognition as an Integrated Production Facility or Open EU Foundry, the Commission
            should monitor whether facilities that have been granted this status continue to comply
            with the criteria set out in this Regulation.
   (25)     In light of their importance for ensuring the security of supply and enabling a resilient
            semiconductor ecosystem, Integrated Production Facilities and Open EU Foundries
            should be considered to be in the public interest. Ensuring the security of supply of
            semiconductors is important also for digitalisation that enables the green transition of
            many other sectors. To contribute towards security of supply of semiconductors in the
            Union, Member States may apply support schemes and provide for administrative
            support in national permit granting procedures. This is without prejudice to the
            competence of the Commission in the field of State aid under Article 107 and 108 of
            the Treaty, where relevant. Member States should support the set-up of Integrated
            Production Facilities and Open EU Foundries in accordance with Union law.
   (26)     It is necessary that Integrated Production Facilities and Open EU Foundries are set-up
            as quickly as possible, while keeping the administrative burden to a minimum. For that
            reason, Member States should treat applications related to the planning, construction
            and operation of Integrated Production Facilities and Open EU Foundries in the most
            rapid manner possible. They should appoint an authority which will facilitate and
            coordinate the permit granting processes and appoint a coordinator, serving as a single
            point of contact for the project. Moreover, where necessary for granting a derogation
            under Council Directive 92/43/EEC56 and Directive 2000/60/EC of the European
            Parliament and Council57, the establishment and operation of these facilities may be
            considered as being of overriding public interest within the meaning of the
            aforementioned legal texts, provided that the remaining other conditions set out in
            these provisions are fulfilled.
   (27)     The internal market would greatly benefit from common standards for green, trusted
            and secure chips. Future smart devices, systems and connectivity platforms will have
            to rely on advanced semiconductor components and they will have to meet green, trust
            and cybersecurity requirements which will largely depend on the features of the
            underlying technology. To that end, the Union should develop reference certification
   56
      Council Directive 92/43/EEC of 21 May 1992 on the conservation of natural habitats and of wild fauna and
      flora.
   57
      Directive 2000/60/EC of the European Parliament and of the Council of 23 October 2000 establishing a
      framework for Community action in the field of water policy.
EN                                                     27                                                      EN
 ---pagebreak---         procedures and require the industry to jointly develop such procedures for specific
        sectors and technologies with potential high social impact.
   (28) In light of this, the Commission, in consultation with the European Semiconductor
        Board, should prepare the ground for a certification of green, trusted and secure chips
        and embedded systems that rely on or make extensive use of semiconductor
        technologies. In particular, they should discuss and identify the relevant sectors and
        products in need of such certification.
   (29) In light of the structural deficiencies of the semiconductor supply chain and the
        resulting risk of future shortages, this Regulation provides instruments for a
        coordinated approach to monitoring and effectively tackling possible market
        disruptions.
   (30) Due to the complex, quickly evolving and interlinked semiconductor value chains with
        various actors, a coordinated approach to regular monitoring is necessary to increase
        the ability to mitigate risks that may negatively affect the supply of semiconductors.
        Member States should monitor the semiconductor value chain focusing on early
        warning indicators and the availability and integrity of the services and goods
        provided by key market actors, in such a way that it would not represent an excessive
        administrative burden for undertakings.
   (31) Any relevant findings, including information provided by relevant stakeholders and
        industry associations, should be provided to the European Semiconductor Board to
        allow for a regular exchange of information between high-level representatives of
        Member States and for integration of the information into a monitoring overview of
        the semiconductor value chains.
   (32) It is important to take into account the specific insights into the supply situation of
        users of semiconductors. Therefore, Member States should identify and regularly
        exchange with the main user categories on their national markets. 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 significant changes in demand and supply, and known
        disruptions of their supply chain, this could include the unavailability of critical
        semiconductors or raw materials, longer than average lead-time, delays in delivery and
        exceptional price surges.
   (33) In order to carry out these monitoring activities, the competent authorities of Member
        States may need certain information, which may not be publicly accessible, such as
        information on the role of an individual undertaking along the semiconductor value
        chain. In those limited circumstances in which it is necessary and proportionate for the
        purpose of carrying out the monitoring activities, the competent authorities of Member
        States should be able to request this information from the undertaking in question.
   (34) Member States should alert the Commission if relevant factors indicate a potential
        semiconductor crisis. In order to ensure a coordinated response to address such crises,
        the Commission should upon the alert by a Member State or through other sources,
        including information from international partners, convene an extraordinary meeting
        of the European Semiconductor Board for assessing the need to activate the crisis
        stage and for discussing whether it may be appropriate, necessary and proportionate
        for Member States to carry out coordinated joint procurement. The Commission
        should engage in consultations and cooperation with relevant third countries with a
        view to addressing any disruptions in the international supply chain, in compliance
EN                                              28                                               EN
 ---pagebreak---            with international obligations and without prejudice to procedural requirements under
           the Treaty on international agreements.
   (35)    As part of the monitoring, national competent authorities should also do a mapping of
           undertakings operating in the Union along the semiconductor supply chain established
           in their national territory and notify this information to the Commission.
   (36)    In order to facilitate effective monitoring, in-depth assessment of the risks associated
           with different stages of the semiconductor value chain is needed, including on the
           origins and sources of supplies beyond the Union. Such risks may be related to critical
           inputs and equipment for the industry, including digital products that may be
           vulnerable, possible impact of counterfeit semiconductors, manufacturing capacities
           and other risks that may disrupt, compromise or negatively affect the supply chain.
           Those risks could include supply chains with a single point of failure or which are
           otherwise highly concentrated. Other relevant factors could include the availability of
           substitutes or alternative sources for critical inputs and resilient and sustainable
           transport. The Commission should, assisted by the European Semiconductor Board
           and taking also into account information received from the main user categories,
           develop a Union level risk assessment.
   (37)    In order to forecast and prepare for future disruptions of the different stages of the
           semiconductor value chain in the Union, the Commission should, assisted by the
           European Semiconductor Board, identify early warning indicators in the Union risk
           assessment. Such indicators could include the availability of raw materials,
           intermediate products and human capital needed for manufacturing semiconductors, or
           appropriate manufacturing equipment, the forecasted demand for semiconductors on
           the Union and global markets, price surges exceeding normal price fluctuation, the
           effect of accidents, attacks, natural disasters or other serious events, the effect of trade
           policies, tariffs, export restrictions, trade barriers and other trade related measures, and
           the effect of business closures, delocalisations or acquisitions of key market actors.
           Member States should monitor these early warning indicators.
   (38)    A number of undertakings providing semiconductor services or goods are assumed to
           be essential for an effective semiconductor supply chain in the Union’s semiconductor
           ecosystem, due to the number of Union undertakings relying on their products, their
           Union or global market share, their importance to ensure a sufficient level of supply or
           the possible impact of the disruption of supply of their products or services. The
           Member States should identify those key market actors in their territory.
   (39)    Under Article 4 of Regulation (EU) 2019/452 establishing a framework for the
           screening of foreign direct investments into the Union58, in determining whether a
           foreign direct investment is likely to affect security or public order, Member States
           and the Commission may consider its potential effects on critical technologies and
           dual use items as defined in point 1 of Article 2 of Council Regulation (EC) No
           428/200959, including semiconductors.
   (40)    As part of the monitoring, Member States could specifically consider the availability
           and integrity of the services and goods of key markets actors. Such issues could be
   58
      Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a
      framework for the screening of foreign direct investments into the Union (OJ L 79I , 21.3.2019, p. 1–14).
   59
      Council Regulation (EC) No 428/2009 of 5 May 2009 setting up a Community regime for the control of
      exports, transfer, brokering and transit of dual-use items (OJ L 134, 29.5.2009, p. 1–269).
EN                                                          29                                                  EN
 ---pagebreak---             brought to the attention of the European Semiconductor Board by the Member State
            concerned.
   (41)     For a rapid, efficient and coordinated Union response to a semiconductor crisis it is
            necessary to provide timely and up-to-date information to the decision-makers on the
            unfolding operational situation as well as by ensuring that effective measures to secure
            the supply of semiconductors to affected critical sectors can be taken.
   (42)     The semiconductor crisis stage should be triggered in the presence of concrete,
            serious, and reliable evidence of such a crisis. A semiconductor crisis occurs in case of
            serious disruptions to the supply of semiconductors leading to significant shortages
            which entail significant delays and negative effects on one or more important
            economic sectors in the Union, either directly or through ripple effects of the shortage,
            given that the Union’s industrial sectors represent a strong user base of
            semiconductors. Alternatively or in addition, a semiconductor crisis also occurs when
            serious disruptions of the supply of semiconductors lead to significant shortages which
            prevent the supply, repair and maintenance of essential products used by critical
            sectors, for instance medical and diagnostic equipment.
   (43)     In order to ensure an agile and effective response to such a semiconductor crisis, the
            Commission should be empowered to activate the crisis stage by means of an
            implementing acts and for a predetermined duration period, taking into account the
            opinion of the European Semiconductor Board. The Commission should assess the
            need for prolongation and prolong the duration of the crisis stage for a predetermined
            period, should such a necessity be ascertained, taking into account the opinion of the
            European Semiconductor Board.
   (44)     Close cooperation between the Commission and the Member States and coordination
            of any national measures taken with regard to the semiconductor supply chain is
            indispensable during the crisis stage with a view to addressing disruptions with the
            necessary coherence, resiliency and effectiveness. To this end, the European
            Semiconductor Board should hold extraordinary meetings as necessary. Any measures
            taken should be strictly limited to the duration period of the crisis stage.
   (45)     Appropriate, effective and proportionate measures should be identified and
            implemented when the crisis stage is activated without prejudice to possible continued
            international engagement with relevant partners with the view to mitigating the
            evolving crisis situation. Where appropriate, the Commission should request
            information from undertakings along the semiconductor supply chain. Furthermore,
            the Commission should be able to, where necessary and proportionate, oblige
            Integrated Production Facilities and Open EU Foundries to accept and prioritise an
            order of the production of crisis-relevant products, and to act as a central purchasing
            body when mandated by Member States. The Commission could limit the measures to
            certain critical sectors. In addition, the European Semiconductor Board may advise on
            the necessity of introducing an export control regime pursuant to Regulation (EU)
            2015/479 of the European Parliament and of the Council60. The European
            Semiconductor Board may also assess and advise on further appropriate and effective
            measures. The use of all these emergency measures should be proportionate and
            restricted to what is necessary to address the significant disturbances at stake insofar
            as this is in the best interest of the Union. The Commission should regularly inform
   60
      Regulation (EU) 2015/479 of the European Parliament and of the Council of 11 March 2015 on common
      rules for exports (OJ L 83, 27.3.2015, p. 34).
EN                                                    30                                                EN
 ---pagebreak---         the European Parliament and the Council of the measures taken and the underlying
        reasons. The Commission may, after consulting with the Board, issue further guidance
        on the implementation and use of the emergency measures.
   (46) A number of sectors are critical for the proper functioning of the internal market.
        Those critical sectors are the sectors listed in the Annex of the Commission proposal
        for a Directive of the European Parliament and of the Council on the resilience of
        critical entities61. For the purposes of this Regulation, defence and other activities that
        are relevant for public safety and security should be additionally considered as a
        critical sector. Certain measures should only be enacted fur the purpose of securing
        supply to critical sectors. The Commission may limit the emergency measures to
        certain of these sectors or to certain parts of them when the semiconductor crisis has
        disturbed or is threatening to disturb their operation.
   (47) The purpose of requests for information from undertakings along the semiconductor
        supply chain established in the Union in the crisis stage is an in-depth assessment of
        the semiconductor crisis in order to identify potential mitigation or emergency
        measures at Union or national level. Such information may include production
        capability, production capacity and current primary disruptions and bottlenecks. These
        aspects could include the typical and current actual stock of crisis-relevant products in
        its production facilities located in the Union and third country facilities which it
        operates or contracts or purchases supply from; the typical and current actual average
        lead time for the most common products produced; the expected production output for
        the following three months for each Union production facility; reasons that prevent the
        filling of production capacity; or other existing data necessary to assess the nature of
        the semiconductor crisis or potential mitigation or emergency measures at national or
        Union level. Any request should be proportionate, have regard for the legitimate aims
        of the undertaking and the cost and effort required to make the data available, as well
        as set out appropriate time limits for providing the requested information.
        Undertakings should be obliged to comply with the request and may be subject to
        penalties if they fail to comply or provide incorrect information. Any information
        acquired should be subject to confidentiality rules. Should an undertaking be subject to
        a request for information related to its semiconductor activities from a third country, it
        should inform the Commission so to enable an assessment whether an information
        request by the Commission is warranted.
   (48) In order to ensure that critical sectors can continue to operate in a time of crisis and
        when necessary and proportionate for this purpose, Integrated Production Facilities
        and Open EU Foundries could be obliged by the Commission to accept and prioritise
        orders of crisis-relevant products. This obligation may also be extended to
        semiconductor manufacturing facilities which have accepted such possibility in the
        context of receiving public support. The decision on a priority rated order should be
        taken in accordance with all applicable Union legal obligations, having regard to the
        circumstances of the case. The priority rating obligation should take precedence over
        any performance obligation under private or public law while it should have regard for
        the legitimate aims of the undertakings and the cost and effort required for any change
        in production sequence. Undertakings may be subject to penalties if they fail to
        comply with the obligation for priority rated orders.
   61
        COM(2020) 829. 16.12.2020.
EN                                               31                                                 EN
 ---pagebreak---    (49) The undertaking concerned should be obliged to accept and prioritise a priority rated
        order. In exceptional and duly justified cases, the undertaking could request the
        Commission to review the imposed obligation. This applies either where the facility is
        unable to fulfil the order even if prioritised, be it due to insufficient production
        capability or production capacity, or because this would place an unreasonable
        economic burden and entail particular hardship on the facility.
   (50) Under the exceptional circumstance that an undertaking operating along the
        semiconductor supply chain in the Union receives a priority rated order request from a
        third country, it should inform the Commission of this request, so as to inform an
        assessment of whether, if there is a significant impact on the security of supply to
        critical sectors, and the other requirements of necessity, proportionality and legality
        are satisfied in the circumstances of the case, the Commission should likewise enact a
        priority rated order obligation.
   (51) In light of the importance to ensure the security of supply to critical sectors that
        perform vital societal functions, compliance with the obligation to perform a priority
        rated order should not entail liability for damages towards third parties for any breach
        of contractual obligations that may result from the necessary temporary changes of the
        operational processes of the concerned manufacturer, limited to the extent the
        violation of contractual obligations was necessary for compliance with the mandated
        prioritisation. Undertakings potentially within scope of a priority rated order should
        anticipate this possibility in the conditions of their commercial contracts. Without
        prejudice to the applicability of other provisions, the liability for defective products, as
        provided for by Council Directive 85/374/EEC of 25 July 1985 62, is not affected by
        this liability exemption.
   (52) The obligation to prioritise the production of certain products respects the essence of
        and will not disproportionately affect the freedom to conduct a business and the
        freedom of contract laid down in Article 16 of the Charter of Fundamental Rights of
        the European Union (‘the Charter’) and the right to property laid down in Article 17 of
        the Charter. Any limitation of those rights in this Regulation will, in accordance with
        Article 52(1) of the Charter, be provided for by law, respect the essence of those rights
        and freedoms, and comply with the principle of proportionality.
   (53) When the crisis stage is activated, two or more Member States could mandate the
        Commission to aggregate demand and act on their behalf for their public procurement
        in the public interest, in accordance with existing Union rules and procedures,
        leveraging its purchasing power. The mandate could authorise the Commission to
        enter into agreements concerning the purchase of crisis-relevant products for certain
        critical sectors. The Commission should assess for each request the utility, necessity
        and proportionality in consultation with the Board. Where it intends to not follow the
        request, it should inform the concerned Member States and the Board and give its
        reasons. Furthermore, the participating Member States should be entitled to appoint
        representatives to provide guidance and advice during the procurement procedures and
        in the negotiation of the purchasing agreements. The deployment and use of purchased
        products should remain within the remit of the participating Member States.
   62
        Council Directive 85/374/EEC of 25 July 1985 on the approximation of the laws, regulations and
        administrative provisions of the Member States concerning liability for defective products
        (85/374/EEC) (OJ L 210, 7.8.1985, p. 29).
EN                                                32                                                   EN
 ---pagebreak---    (54) During a semiconductor shortage crisis, it might become necessary that the Union
        considers protective measures. The European Semiconductor Board may express its
        views to inform the Commission’s assessment of whether the market situation
        amounts to a significant shortage of essential products pursuant to Regulation (EU)
        2015/479.
   (55) In order to facilitate a smooth, effective and harmonised implementation of this
        Regulation, cooperation and the exchange of information, the European
        Semiconductor Board should be established. The European Semiconductor Board
        should provide advice to and assist the Commission on specific questions. These
        should include providing advice on the Chips for Europe Initiative to the Public
        Authorities Board of the Chips Joint Undertaking; exchanging information on the
        functioning of the Integrated Production Facilities and Open EU Foundries; discussing
        and preparing the identification of specific sectors and technologies with potential
        high social impact and respective security significance in need of certification for
        trusted products and addressing coordinated monitoring and crisis response.
        Furthermore, the European Semiconductor Board should ensure the consistent
        application of this Regulation, facilitate cooperation between Member States as well as
        exchange of information on issues relating to this Regulation. The European
        Semiconductor Board should support the Commission in international cooperation in
        line with international obligations, including in information gathering and crisis
        assessment. In addition, the European Semiconductor Board should coordinate,
        cooperate and exchange information with other Union crisis response and crisis
        preparedness structures with a view to ensure a coherent and coordinated Union
        approach as regards crisis response and crisis preparedness measures for
        semiconductor crises.
   (56) A representative of the Commission should chair the European Semiconductor Board.
        Each Member State’s national single point of contact should appoint at least one high-
        level representative to the European Semiconductor Board. They could also appoint
        different representatives in relation to different tasks of the European Semiconductor
        Board, for example, depending on which Chapter of this Regulation is discussed in the
        meetings of the European Semiconductor Board. The Commission may establish sub-
        groups and should be entitled to establish working arrangements by inviting experts to
        take part in the meetings on an ad hoc basis or by inviting organisations representing
        the interests of the Union semiconductors industry, such as the Industrial Alliance on
        Processors and Semiconductor Technologies, in its sub-groups as observers.
   (57) The European Semiconductor Board will hold separate meetings for its tasks under
        Chapter II and for its tasks under Chapter III and IV. Member States should endeavour
        to ensure effective and efficient cooperation in the European Semiconductor Board.
        The Commission should be able to facilitate exchanges between the European
        Semiconductor Board and other Union bodies, offices, agencies and advisory groups.
        In light of the importance of the supply of semiconductors for other sectors and the
        resulting need for coordination, the Commission should ensure participation by other
        Union institutions and bodies as observers in meetings of the European Semiconductor
        Board where relevant and appropriate in relation to the monitoring and crisis response
        mechanism established under Chapter IV. In order to continue and make use of the
        work following the implementation of Commission Recommendation on a common
        Union toolbox to address semiconductor shortages, the European Semiconductor
        Board should carry out the tasks of the European Semiconductor Expert Group. Once
EN                                               33                                             EN
 ---pagebreak---            the European Semiconductor Board is operational, this expert group should cease to
           exist.
   (58)    Member States hold a key role in the application and enforcement of this Regulation.
           In this respect, each Member State should designate one or more national competent
           authorities for the purpose of effective implementation of this Regulation and ensure
           that those authorities are adequately empowered and resourced. Member States could
           designate an existing authority or authorities. In order to increase organisation
           efficiency in the Member States and to set an official point of contact vis-a-vis the
           public and other counterparts at Member State and Union levels, including the
           Commission and the European Semiconductor Board, each Member State should
           designate, within one of the authorities it designated as competent authority under this
           Regulation, one national single point of contact responsible for coordinating issues
           related to this Regulation and cross-border cooperation with competent authorities of
           other Member States.
   (59)    In order to ensure trustful and constructive cooperation of competent authorities at
           Union and national level, all parties involved in the application of this Regulation
           should respect the confidentiality of information and data obtained in carrying out
           their tasks. The Commission and the national competent authorities, their officials,
           servants and other persons working under the supervision of these authorities as well
           as officials and civil servants of other authorities of the Member States should not
           disclose information acquired or exchanged by them pursuant to this Regulation and of
           the kind covered by the obligation of professional secrecy. This should also apply to
           the European Semiconductor Board and the Semiconductor Committee established in
           this Regulation. Where appropriate, the Commission should be able to adopt
           implementing acts to specify the practical arrangements for the treatment of
           confidential information in the context of information gathering.
   (60)    Compliance with the obligations imposed under this Regulation should be enforceable
           by means of fines and periodic penalty payments. To that end, appropriate levels of
           fines and periodic penalty payments should also be laid down for non-compliance with
           the obligations. Limitation periods should apply for the impositions of fines and
           periodic penalty payments, in addition to limitation periods for the enforcement of
           penalties. In addition, the Commission should give the concerned undertaking or
           representative organisations of undertakings the right to be heard.
   (61)    The power to adopt acts in accordance with Article 290 of the Treaty should be
           delegated to the Commission in order to amend Annex I to this Regulation to reflect
           technological change and market developments, with regard to the actions set out
           therein in a manner consistent with the objectives of this Regulation and to amend
           Annex II thereto with regard to the measurable indicators where considered to be
           necessary as well as to supplement this Regulation with provisions on the
           establishment of a monitoring and evaluation framework. It is of particular importance
           that the Commission carries out appropriate consultations during its preparatory work,
           including at expert level, and that those consultations be conducted in accordance with
           the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better
           Law-Making63. In particular, to ensure equal participation in the preparation of
           delegated acts, the European Parliament and the Council receive all documents at the
   63
      OJ L 123, 12.5.2016, p. 1.
EN                                                 34                                               EN
 ---pagebreak---         same time as Member States’ experts, and their experts systematically have access to
        meetings of Commission expert groups dealing with the preparation of delegated acts.
   (62) In order to ensure uniform conditions for the implementation of this Regulation,
        implementing powers should be conferred on the Commission as regards the selection
        of ECICs and as regards the procedure for establishing and defining the tasks of
        competence centres and the procedure for establishing the network, so that the
        objectives of the Initiative are achieved. Furthermore, implementing powers should be
        conferred on the Commission as regards activating the crisis stage in a semiconductor
        crisis, to allow a rapid and coordinated response, and for specifying the practical
        arrangements for the treatment of confidential information. Those powers should be
        exercised in accordance with Regulation (EU) No 182/2011 of the European
        Parliament and of the Council64 of the European Parliament and of the Council.
   (63) Since the objective of this Regulation cannot be sufficiently achieved by the Member
        States and can rather, by reason of the scale or effects of the action, be better achieved
        at Union level, the Union may adopt measures in accordance with the principle of
        subsidiarity as set out in Article 5 of the Treaty. In accordance with the principle of
        proportionality as set out in that Article, this Regulation does not go beyond what is
        necessary in order to achieve that objective.
   HAVE ADOPTED THIS REGULATION:
                                              CHAPTER I
                                      GENERAL PROVISIONS
                                                 Article 1
                                              Subject matter
   1.     This Regulation establishes a framework for strengthening the semiconductor sector
          at Union level, in particular through the following measures:
          (a)   establishment of the Chips for Europe Initiative (the ‘Initiative’);
          (b)   setting the criteria to recognise and to support first-of-a-kind Integrated
                Production Facilities and Open EU Foundries that foster the security of supply
                of semiconductors in the Union;
          (c)   setting up a coordination mechanism between the Member States and the
                Commission for monitoring the supply of semiconductors and crisis response
                to semiconductor shortages.
                                                 Article 2
                                                Definitions
   1.     For the purposes of this Regulation, the following definitions shall apply:
          (1)   ‘semiconductor’ means one of the following:
   64
        Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011
        laying down the rules and general principles concerning mechanisms for control by Member States of
        the Commission’s exercise of implementing powers, (OJ L 55, 28.2.2011, p. 13).
EN                                                   35                                                    EN
 ---pagebreak---                (a)    a material, either elemental, such as Silicon, or compound, such as
                      Silicon Carbide, whose electrical conductivity can be modified, or
               (b)    a component consisting of a series of layers of semiconducting,
                      insulating and conducting materials defined according to a predetermined
                      pattern, and intended to perform well-defined electronic or photonic
                      functions or both;
        (2)    ‘chip’ means an electronic device comprising various functional elements on a
               single piece of semiconductor material, typically taking the form of memory,
               logic, processor and analogue devices, also referred to as ‘integrated circuit’;
        (3)    ‘technology node’ means the structure on a semiconductor serving as transiting
               element and providing a measure for manufacturing method in nanometres;
        (4)    ‘semiconductor supply chain’ means the system of activities, organisations,
               actors, technology, information, resources and services involved in the
               production of semiconductors, including raw materials, manufacturing
               equipment, design, fabrication, assembly, testing and packaging;
        (5)    ‘semiconductor value chain’ means the set of activities in relation to a
               semiconductor product from its conception to its end use, including raw
               materials, manufacturing equipment, research, design, fabrication, testing,
               assembly and packaging to embedding and validation in end products;
        (6)    ‘pilot line’ means an experimental project or action addressing higher
               technology readiness levels from levels 3 to 8 to further develop an enabling
               infrastructure necessary to test, demonstrate and calibrate a product or system
               with the model assumptions;
        (7)    ‘coordinator’ means a legal entity which is a member of a European Chips
               Infrastructure Consortium created in accordance with Article 7 and has been
               appointed by all the members of that consortium to be the principal point of
               contact for the purpose of the consortium’s relations with the Commission;
        (8)    ‘small and medium-sized enterprises’ or ‘SMEs’ means small and medium-
               sized enterprises as defined in Article 2 of the Annex to Commission
               Recommendation 2003/361/EC65;
        (9)    ‘middle capitalisation company’ or ‘mid-cap’ means an enterprise that is not a
               SME and that employs a maximum of 1 500 persons, where the headcount of
               staff is calculated in accordance with Articles 3 to 6 of the Annex to
               Recommendation 2003/361/EC;
        (10) ‘first-of-a-kind facility’ means an industrial facility capable of semiconductor
               manufacturing, including front-end or back-end, or both, that is not
               substantively already present or committed to be built within the Union, for
               instance with regard to the technology node, substrate material, such as silicon
               carbide and gallium nitride, and other product innovation that can offer better
               performance, process innovation or energy and environmental performance;
        (11) ‘next generation chips’ and ‘next generation semiconductor technologies’
               means chips and semiconductor technologies that go beyond the state of the art
   65
      Commission Recommendation of 6 May 2003 concerning the definition of micro, small and medium-
      sized enterprises (OJ L 124, 20.5.2003, p. 36).
EN                                                   36                                             EN
 ---pagebreak---             in offering significant improvements in computing power or energy efficiency
            as well as other significant energy and environmental gains;
      (12) ‘front-end’ means the entire processing of a semiconductor wafer;
      (13) ‘back-end’ means the packaging, assembly and test of each individual
            integrated circuit;
      (14) ‘user of semiconductors’ means an undertaking that produces products in
            which semiconductors are incorporated;
      (15) ‘key market actors’ means undertakings in the Union semiconductor sector, the
            reliable functioning of which is essential for the semiconductor supply chain;
      (16) ‘critical sector’ means any sector referred to in the Annex of the Commission
            proposal for a Directive of the European Parliament and of the Council on the
            resilience of critical entities, the defence sector and other activities that are
            relevant for public safety and security;
      (17) ‘crisis-relevant product’ means semiconductors, intermediate products and raw
            materials required to produce semiconductors or intermediate products, that are
            affected by the semiconductor crisis or of strategic importance to remedy the
            semiconductor crisis or economic effects thereof;
      (18) ‘production capability’ means the potential output of a semiconductor
            manufacturing facility under optimal resources, typically the amount of wafers
            of a certain size that can be processed in a given time;
      (19) ‘production capacity’ means the output of a semiconductor manufacturing
            facility, typically the amount of wafers of a certain size that is usually
            processed in a given time.
                                       CHAPTER II
                           CHIPS FOR EUROPE INITIATIVE
                                        SECTION 1
                                 GENERAL PROVISIONS
                                           Article 3
                               Establishment of the Initiative
   1. The Initiative is established for the duration of the Multiannual Financial Framework
      2021-2027.
   2. The Initiative shall be supported by funding from the Horizon Europe programme
      and the Digital Europe programme, and in particular Specific Objective 6 thereof, for
      a maximum indicative amount of EUR 1.65 billion and EUR 1.65 billion
      respectively. This funding shall be implemented in accordance with Regulation (EU)
      No 2021/695 and Regulation (EU) No 2021/694.
EN                                            37                                              EN
 ---pagebreak---                                           Article 4
                                 Objectives of the Initiative
   1. The general objective of the Initiative is to support large-scale technological capacity
      building and innovation throughout the Union to enable development and
      deployment of cutting-edge and next generation semiconductor and quantum
      technologies that will reinforce the Union advanced design, systems integration and
      chips production capabilities, as well as contribute to the achievement of the twin
      digital and green transition.
   2. The Initiative shall have the following five operational objectives:
      (a)   building up advanced large-scale design capacities for integrated
            semiconductor technologies. This operational objective shall be achieved
            through:
            (1)    building up an innovative virtual platform, available across the Union,
                   integrating existing and new design facilities with extended libraries and
                   Electronic Design Automation (EDA) tools;
            (2)    upgrading the design capacity with ongoing innovative developments,
                   such as processor architectures based on the open-source Reduced
                   Instruction Set Computer Architecture (RISC-V);
            (3)    enlarging the semiconductor ecosystem by integrating the vertical market
                   sectors, contributing to the green, digital and innovation agendas of the
                   Union.
      (b)   enhancing existing and developing new advanced pilot lines. This operational
            objective shall be achieved through:
            (1)    strengthening technological capabilities in next generation chips
                   production technologies, by integrating research and innovation activities
                   and preparing the development of future technology nodes, including
                   leading-edge nodes below two nanometres, Fully Depleted Silicon on
                   Insulator (FD-SOI) at 10 nanometres and below, and 3D heterogeneous
                   systems integration and advanced packaging;
            (2)    supporting large scale innovation through access to new or existing pilot
                   lines for experimentation, test, and validation of new design concepts
                   integrating key functionalities, such as novel materials and architectures
                   for power electronics fostering sustainable energy and electro mobility,
                   lower energy consumption, security, higher levels of computing
                   performance or integrating breakthrough technologies such as
                   neuromorphic and embedded artificial intelligence (AI) chips, integrated
                   photonics, graphene and other 2D material based technologies;
            (3)    providing support to Integrated Production Facilities and Open EU
                   Foundries through priority access to the new pilot lines.
      (c)   building advanced technology and engineering capacities for accelerating the
            innovative development of quantum chips.
      (d)   creating a network of competence centres across the Union, in order to
            (1)    strengthen capacities and offer a wide range of expertise to the
                   stakeholders, including end-user SMEs and start-ups, facilitating access
                   to and effective use of the above capacities and facilities;
EN                                            38                                               EN
 ---pagebreak---             (2)    address the skills shortage, attracting and mobilising new talent and
                   supporting the emergence of a suitably skilled workforce for
                   strengthening the semiconductor sector, including via reskilling and
                   upskilling of workers.
      (e)   undertaking activities, to be described collectively as a ‘Chips Fund’ activities
            to facilitate access to debt financing and equity by start-ups, scale-ups and
            SMEs and other companies in the semiconductor value chain, through a
            blending facility under the InvestEU Fund and via the European Innovation
            Council, with a view to:
            (1)    improving the leverage effect of the Union budget spending and
                   achieving a higher multiplier effect in terms of attracting private-sector
                   financing.
            (2)    providing support to companies facing difficulties in accessing finance,
                   and addressing the need to underpin the economic resilience of the Union
                   and its Member States;
            (3)    accelerating investment in the field of semiconductor manufacturing
                   technologies and chip design and to leveraging funding from both the
                   public and the private sectors, while increasing the security of supply for
                   the whole semiconductor value chain.
                                          Article 5
                                Components of the Initiative
   1. The Initiative shall have the following five components:
      (a)   design capacities for integrated semiconductor technologies;
      (b)   pilot lines for preparing innovative production, and testing and experimentation
            facilities;
      (c)   advanced technology and engineering capacities for quantum chips;
      (d)   a network of competence centres and skills development;
      (e)   ‘Chips Fund’ activities for access to debt financing and equity to start-ups,
            scale-ups, SMEs and other companies in the semiconductor value chain.
                                          Article 6
                             Synergies with Union programmes
   1. The Initiative shall enable synergies with Union programmes, as referred to in Annex
      III. The Commission shall ensure that the achievement of the objectives is not
      hampered when leveraging the complementary character of the Initiative with Union
      programmes.
                                          Article 7
                        European Chips Infrastructure Consortium
   1. For the purpose of implementing eligible actions and other related tasks funded
      under the Initiative a European Chips Infrastructure Consortium (‘ECIC’) may be
      established under the conditions set out in this Article.
EN                                           39                                                EN
 ---pagebreak---    2. The ECIC shall
      (a)   have legal personality from the date of entry into force of the Commission
            decision referred to in paragraph 6;
      (b)   have one or more statutory seats, which shall be located on the territory of one
            or more Member States;
      (c)   consist of at least three legal entities from at least three Member States and be
            operated as a public-private sector consortium with the participation of the
            Member States, and private legal entities;
      (d)   appoint the coordinator.
   3. The coordinator shall submit an application to the Commission in writing which shall
      contain the following:
      (a)   a request to the Commission to set up the ECIC, including a list of the
            proposed legal entities that are forming the ECIC consortium;
      (b)   the draft Statutes of the ECIC that shall include at least the provisions on: the
            procedure for setting-up, membership, budget, legal seat, applicable law and
            jurisdiction, ownership of the results, governance, including decision making
            procedure and specific role and if applicable voting rights of Member States
            and the Commission, winding-up, reporting and liability.
   4. The Commission shall review the application to set up the ECIC on the basis of all of
      the following criteria:
      (a)   the appropriate competences, know-how and capabilities of the proposed ECIC
            and of the legal entities forming it on the semiconductors;
      (b)   the appropriate management capacity, staff and infrastructure necessary to
            carry out the eligible actions under the Initiative;
      (c)   the operational and legal means to apply the administrative, contractual and
            financial management rules laid down at Union level;
      (d)   the appropriate financial viability corresponding to the level of Union funds it
            will be called upon to manage and demonstrated, where appropriate, through
            guarantees issued preferably by a public authority;
      (e)   the budget that would be made available by Member States and private sector
            participants for the financing of the ECIC, and related modalities;
      (f)   the appropriate ability of the ECIC to ensure coverage of the needs of industry.
   5. The Commission by means of an implementing act and based on the criteria set out
      in paragraph 4, shall adopt one of the following decisions:
      (a)   setting up the ECIC after it has concluded that the requirements laid down in
            paragraphs 3 and 4 are met;
      (b)   rejecting the application if it concludes that the requirements laid down in
            paragraphs 3 and 4 are not met.
      The implementing act shall be adopted in accordance with the examination procedure
      referred to in Article 33(2).
   6. The decision referred to in paragraph 5 shall be notified to the applicants.
EN                                           40                                               EN
 ---pagebreak---    7. The decision setting up the ECIC shall be published in the Official Journal of the
      European Union.
   8. The ECIC shall have substantial overall autonomy to lay down its membership,
      governance, funding, budget and the modalities by which the respective financial
      contributions from the members are called upon, voting rights and working methods.
      However, the organisation, composition and working methods of the ECIC,
      including any amendments to the Statutes, shall be in accordance with and contribute
      to the aims and objectives of this Regulation and the Chips for Europe Initiative and
      shall be notified to the Commission.
   9. The ECIC shall produce an annual activity report, containing a technical description
      of its activities and financial statement. The annual activity report shall be
      transmitted to the Commission and made publicly available. The Commission may
      provide recommendations regarding the matters covered in the annual activity report.
                                          Article 8
               European network of competence centres in semiconductors
   1. For the purpose of implementing actions under the Initiative’s component referred to
      in Article 5, point (d), a European network of competence centres in semiconductors
      (the ‘network’) may be established.
   2. With respect to the implementation of actions under the Initiative’s component
      referred to in Article 5, point (d), the network may perform all or some of the
      following activities to the benefit of the Union industry, in particular SMEs and mid-
      caps, as well as the public sector:
      (a)   providing access to design services and design tools under the Initiative’s
            component referred to in Article 5, point (a), as well as to the pilot lines
            supported under the Initiative’s component referred to in Article 5, point (b);
      (b)   raising awareness and providing the necessary knowhow, expertise and skills
            to the stakeholders for helping them accelerate the development and integration
            of new semiconductor technologies, design options and system concepts by
            using effectively the infrastructure;
      (c)   raising awareness and providing or ensuring access to expertise, knowhow and
            services, including system design readiness, new and existing pilot lines and
            supporting actions necessary to build skills and competences capacities
            supported by this Initiative;
      (d)   facilitating the transfer of expertise and knowhow between Member States and
            regions encouraging exchanges of skills, knowledge and good practices and
            encouraging joint programmes;
      (e)   developing and managing specific training actions on semiconductor
            technologies to support the development of the talent pool in the Union.
   3. Member States shall designate candidate competence centres in accordance with its
      national procedures, administrative and institutional structures through an open and
      competitive process. The Commission shall, by means of implementing acts, set the
      procedure for establishing competence centres, including selection criteria, and
      further tasks and functions of the centres with respect to the implementation of the
EN                                            41                                             EN
 ---pagebreak---       actions under the Initiative, the procedure for establishing the network as well to
      adopt decisions on the selection of entities forming the network. Those implementing
      acts shall be adopted in accordance with the examination procedure referred to in
      Article 33(2).
   4. The network shall have substantial overall autonomy to lay down its organisation,
      composition and working methods. However, the organisation, composition and
      working methods of the network shall be in accordance with and contribute to the
      aims and objectives of this Regulation and the Initiative.
                                            Article 9
                                        Implementation
   1. The components listed in points (a) to (d) of Article 5 under the Initiative may be
      entrusted to the Chips Joint Undertaking referred to in Council Regulation XX/XX
      amending Council Regulation (EU) 2021/2085 and implemented in the work
      programme of the Chips Joint Undertaking.
   2. In order to reflect technological change and market developments, the Commission is
      empowered to adopt delegated acts in accordance with Article 32 to amend Annex I
      with regard to the activities set out therein in a manner consistent with the objectives
      of the Initiative, as set out in Article 4.
   3. In order to ensure effective implementation and evaluation of the Initiative, the
      Commission is empowered to adopt delegated acts in accordance with Article 32 to
      amend Annex II with regard to the measurable indicators to monitor the
      implementation and to report on the Initiative towards the achievement of its
      objectives as set out in Article 4.
                                        CHAPTER III
                                   SECURITY OF SUPPLY
                                           Article 10
                               Integrated Production Facilities
   1. Integrated Production Facilities are first-of-a-kind semiconductor design and
      manufacturing facilities, including front-end or back-end, or both, in the Union that
      contribute to the security of supply for the internal market.
   2. An Integrated Production Facility shall meet the following criteria:
      (a)   it qualifies as a first-of-a-kind facility;
      (b)   its establishment and operation have a clear positive impact on the Union’s
            semiconductor value chain with regard to ensuring the security of supply and
            increasing qualified workforce;
      (c)   it guarantees not to be subject to the extraterritorial application of public
            service obligations of third countries in a way that may undermine the
            undertaking’s ability to comply with the obligations set out in Article 21(1) and
            commits to inform the Commission when such obligation arises;
      (d)   it commits to invest in the next generation of chips.
EN                                             42                                              EN
 ---pagebreak---    3. For the purpose of investing in the next generation of chips according to paragraph 2,
      point (d), the Integrated Production Facility shall have priority access to the pilot
      lines set up in accordance with Article 5, point (b). Any such priority access shall be
      without prejudice to effective access to the pilot lines by other interested
      undertakings.
                                           Article 11
                                      Open EU Foundries
   1. Open EU Foundries are first-of-a-kind semiconductor front-end or back-end, or both,
      manufacturing facilities in the Union that offer production capacity to unrelated
      undertakings and thereby contribute to the security of supply for the internal market.
   2. An Open EU Foundry shall meet the following criteria:
      (a)   it qualifies as a first-of-a-kind facility;
      (b)   its establishment and operation have a clear positive impact on the Union’s
            semiconductor value chain with regard to ensuring the security of supply and
            increasing qualified workforce, taking into account in particular the extent to
            which it offers front-end or back-end, or both, production capacity to
            undertakings not related to the facility, if there is sufficient demand;
      (c)   it guarantees not to be subject to the extraterritorial application of public
            service obligations of third countries in a way that may undermine the
            undertaking’s ability to comply with the obligations set out in Article 21(1) and
            commits to inform the Commission when such obligation arises;
      (d)   it commits to invest in the next generation of chips.
   3. Where an Open EU Foundry offers production capacity to undertakings not related to
      the operator of the facility, it shall establish and maintain adequate and effective
      functional separation of the design and manufacturing processes in order to ensure
      the protection of information gained at each stage.
   4. For the purpose of investing in the next generation of chips according to paragraph 2,
      point (d), the Open EU Foundry shall have priority access to the pilot lines set up in
      accordance with Article 5, point (b). Any such priority access shall be without
      prejudice to effective access to the pilot lines by other interested undertakings.
                                           Article 12
                                 Application and recognition
   1. Any undertaking or any consortium of undertakings (‘applicant’) may submit an
      application to the Commission to recognise the applicant’s planned facility as an
      Integrated Production Facility or Open EU Foundry.
   2. The Commission shall, in consultation with the European Semiconductor Board,
      assess the application through a fair and transparent process based on the following
      elements:
      (a)   compliance with the criteria set out in Article 10(2) or in Article 11(2)
            respectively;
      (b)   a business plan evaluating the financial viability of the project, including
            information on any planned public support;
EN                                             43                                             EN
 ---pagebreak---       (c)    proven experience of the applicant in installing and operating similar facilities;
      (d)    provision of an appropriate supporting document proving the readiness of the
             Member State or Member States where the applicant intends to establish its
             facility to facilitate the set-up of such a facility.
      The Commission shall process the application and adopt its decision in a timely
      manner and notify the applicant thereof.
   3. The Commission shall monitor the activities of the Integrated Production Facilities
      and the Open EU Foundries. Where the Commission finds that a facility no longer
      fulfils the criteria set out in Articles 10(2) or in Article 11(2) respectively, it shall
      notify the findings to the European Semiconductor Board. After consulting the
      European Semiconductor Board and after hearing the facility, the Commission may
      repeal the decision granting a facility the status of Integrated Production Facility or
      Open EU Foundry.
   4. The Commission may, after consulting the European Semiconductor Board, repeal a
      decision recognising the status of an Integrated Production Facility or an Open EU
      Foundry if the recognition was based on an application containing incorrect
      information.
   5. Facilities which are no longer Integrated Production Facilities and Open EU
      Foundries shall lose all rights linked to the recognition of this status arising from this
      Regulation.
                                            Article 13
                               Public interest and public support
   1. Integrated Production Facilities and Open EU Foundries shall be considered to
      contribute to the security of supply of semiconductors in the Union and therefore to
      be in the public interest.
   2. In order to reach security of supply in the Union, Member States may, without
      prejudice to Articles 107 and 108 of the Treaty, apply support schemes and provide
      for administrative support to Integrated Production Facilities and Open EU Foundries
      in accordance with Article 14.
                                            Article 14
                    National fast-tracking of permit granting procedures
   1. Member States shall ensure that administrative applications related to the planning,
      construction and operation of Integrated Production Facilities and Open EU
      Foundries are processed in an efficient and timely manner. To that end, all national
      authorities concerned shall ensure that the most rapid treatment legally possible is
      given to these applications.
   2. Where such status exists in national law, Integrated Production Facilities and Open
      EU Foundries shall be allocated the status of the highest national significance
      possible and be treated as such in permit granting processes, including those relating
      to environmental assessments and if national law so provides, in spatial planning.
   3. The security of supply of semiconductors may be considered an imperative reason of
      overriding public interest within the meaning of Article 6(4) and Article 16(1)(c) of
      Directive 92/43/EEC and of overriding public interest within the meaning of Article
      4(7) of Directive 2000/60. Therefore, the planning, construction and operation of
EN                                              44                                               EN
 ---pagebreak---       Integrated Production Facilities and Open EU Foundries may be considered of
      overriding public interest, provided that the remaining other conditions set out in
      these provisions are fulfilled.
   4. For each Integrated Production Facility and Open EU Foundry, the Member State
      concerned shall nominate an authority responsible for facilitating and coordinating
      administrative applications related to planning, construction and operation. The
      authority shall appoint a coordinator who shall serve as the single point of contact for
      the Integrated Production Facility or Open EU Foundry. The authority may establish
      a working group where all authorities involved in the administrative applications are
      represented in order to draw up a permit granting schedule and to monitor and
      coordinate its implementation. If the setting up of an Integrated Production Facility
      or an Open EU Foundry requires decisions to be taken in two or more Member
      States, the respective authorities shall take all necessary steps for efficient and
      effective cooperation and coordination among themselves.
                                      CHAPTER IV
                        MONITORING AND CRISIS RESPONSE
                                        SECTION 1
                                      MONITORING
                                         Article 15
                                  Monitoring and alerting
   1. Member States shall carry out regular monitoring of the semiconductor value chain.
      In particular, they shall:
      (a)    monitor early warning indicators identified pursuant to Article 16;
      (b)    monitor the availability and integrity of the services and goods provided by the
             key market actors identified pursuant to Article 17.
      Member States shall provide relevant findings to the European Semiconductor Board
      in the form of regular updates.
   2. Member States shall invite the main users of semiconductors and other relevant
      stakeholders to provide information regarding significant fluctuations in demand and
      known disruptions of their supply chain. To facilitate the exchange of information,
      Member States shall provide for a mechanism and administrative set-up for these
      updates.
   3. National competent authorities designated pursuant to Article 26(1) may request
      information from representative organisations of undertakings or individual
      undertakings operating along the semiconductor supply chain where necessary and
      proportionate for the purpose of paragraph 1. National competent authorities in such
      case will pay particular attention to SMEs to minimise administrative burden
      resulting from the request and will privilege digital solutions for obtaining such
      information. Any information obtained pursuant to this paragraph shall be treated in
      compliance with the confidentiality obligations set out in Article 27.
EN                                           45                                                EN
 ---pagebreak---    4.  Where a Member State becomes aware of a potential semiconductor crisis, a
       significant fluctuation in demand or has concrete and reliable information of any
       other risk factor or event materialising, it shall immediately alert the Commission
       (‘early warning’).
   5.  Where the Commission becomes aware of a potential semiconductor crisis, a
       significant fluctuation in demand or has concrete and reliable information of any
       other risk factor or event materialising, based on an alert by a Member State provided
       in accordance with paragraph 4, or through other sources, including information from
       international partners, it shall without undue delay:
       (a)    convene an extraordinary meeting of the European Semiconductor Board to
              coordinate the following actions:
              (1)    assessing whether the activation of the crisis stage referred to in Article
                     18 is warranted;
              (2)    discussing whether it may be appropriate, necessary and proportionate
                     for Member States to jointly purchase semiconductors, intermediate
                     products or raw materials affected or at threat of being affected by a
                     potential semiconductor crisis (‘coordinated procurement’);
       (b)    enter into consultations or cooperation, on behalf of the Union, with relevant
              third countries with a view to seeking cooperative solutions to address supply
              chain disruptions, in compliance with international obligations. This may
              involve, where appropriate, coordination in relevant international fora.
   6.  The coordinated procurement referred to in paragraph 5, point (a)(ii), shall be carried
       out by Member States in accordance with the rules set out in Article 38 of Directive
       2014/24/EU of the European Parliament and of the Council66.
   7.  National competent authorities designated pursuant to Article 26(1) shall map
       undertakings operating along the semiconductor supply chain in their national
       territory, including non-confidential information on the services or goods, and
       contact information. They shall notify this list and any subsequent update to the
       Commission. The Commission may issue guidance, after consulting the European
       Semiconductor Board, to further specify the information to be gathered and define
       the technical specifications and formats.
                                              Article 16
                      Union risk assessment and early warning indicators
   1.  The Commission shall, after consulting the European Semiconductor Board, assess
       risks that may disrupt, compromise or negatively affect the supply of semiconductors
       (Union risk assessment). In the Union risk assessment, the Commission shall identify
       early warning indicators.
   2.  The Commission shall review the Union risk assessment including the early warning
       indicators as necessary.
   3.  When monitoring the semiconductor value chain pursuant to Article 15, Member
       States shall monitor the early warning indicators identified by the Commission.
   66
      Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public
      procurement and repealing Directive 2004/18/EC (OJ L 94, 28.3.2014, p. 65).
EN                                                46                                                   EN
 ---pagebreak---                                            Article 17
                                      Key market actors
   1. Member States shall identify key market actors along the semiconductor supply
      chains in their national territory, taking into account the following elements:
      (a)   the number of other Union undertakings relying on the service or good
            provided by a market actor;
      (b)   the Union or global market share of the key market actor in the market for such
            services or goods;
      (c)   the importance of a market actor in maintaining a sufficient level of supply of a
            service or good in the Union, taking into account the availability of alternative
            means for the provision of that service or good;
      (d)   the impact a disruption of supply of the service or good provided by the market
            actor may have on the Union’s semiconductor supply chain and dependent
            markets.
   2. When monitoring the semiconductor value chain pursuant to Article 15, Member
      States shall, after consulting the European Semiconductor Board, monitor the
      availability and integrity of the services or goods which those key market actors
      provide.
                                         SECTION 2
                      SEMICONDUCTOR SUPPLY CRISIS STAGE
                                           Article 18
                                Activation of the crisis stage
   1. A semiconductor crisis shall be considered to occur when there are serious
      disruptions in the supply of semiconductors leading to significant shortages, which:
      (a)   entail significant delays or significant negative effects on one or more
            important economic sectors in the Union, or
      (b)   prevent the supply, repair and maintenance of essential products used by
            critical sectors.
   2. Where an assessment of the Commission provides concrete, serious, and reliable
      evidence of a semiconductor crisis, the Commission may activate the crisis stage by
      means of implementing acts in accordance with Article 33(2). The duration of the
      activation shall be specified in the implementing act. Where, in view of the scope
      and gravity of the semiconductor crisis, duly justified imperative grounds of urgency
      so require, the procedure provided for in Article 33(3) shall apply to implementing
      acts adopted pursuant to this Article.
   3. Before the expiry of the duration for which the crisis stage was activated, the
      Commission shall, after consulting the European Semiconductor Board, assess
      whether the activation of the crisis stage should be prolonged. Where the assessment
      concludes that a prolongation is appropriate, the Commission may prolong the
      activation by means of implementing acts. The duration of the prolongation shall be
      specified in the implementing acts adopted in accordance with Article 33(2). The
EN                                             47                                             EN
 ---pagebreak---       Commission may repeatedly decide to prolong the activation of the crisis stage
      where this is appropriate.
   4. During the crisis stage, the Commission shall, upon request from a Member State or
      on its own initiative, convene extraordinary meetings of the European Semiconductor
      Board as necessary. Member States shall work closely with the Commission and
      coordinate any national measures taken with regard to the semiconductor supply
      chain within the European Semiconductor Board.
   5. Upon expiry of the duration for which the crisis stage is activated, the measures
      taken in accordance with Articles 20, 21 and 22 shall cease to apply. The
      Commission shall review the Union risk assessment pursuant to Article 16(2) no
      later than six months after the expiry of the duration of the crisis stage.
                                          Article 19
                                     Emergency toolbox
   1. Where the crisis stage is activated and where appropriate in order to address the
      semiconductor crisis in the Union, the Commission shall take the measure provided
      for in Article 20 under the conditions laid down therein. In addition, the Commission
      may take the measures provided for in Article 21 or Article 22, or both, under the
      conditions laid down therein.
   2. The Commission may, after consulting the European Semiconductor Board, limit the
      measures provided for in Articles 21 and 22 to certain critical sectors the operation of
      which is disturbed or under threat of disturbance on account of the semiconductor
      crisis.
   3. Where the crisis stage is activated and where appropriate in order to address the
      semiconductor crisis in the Union, the European Semiconductor Board may:
      (a)     assess the impact of the possible imposition of protective measures, including
              in particular whether the market situation corresponds to a significant shortage
              of an essential product pursuant to Regulation 2015/479 and provide an
              opinion to the Commission;
      (b)     assess and advise on further appropriate and effective emergency measures.
   4. The use of the measures referred to in paragraph 1 shall be proportionate and
      restricted to what is necessary for addressing serious disruptions of vital societal
      functions or economic activities in the Union and must be in the best interest of the
      Union. The use of these measures shall avoid placing disproportionate administrative
      burden on SMEs.
   5. The Commission shall regularly inform the European Parliament and the Council of
      any measures taken in accordance with paragraph 1 and explain the reasons of its
      decision.
   6. The Commission may, after consulting the European Semiconductor Board, issue
      guidance on the implementation and the use of the emergency measures.
EN                                            48                                               EN
 ---pagebreak---                                          Article 20
                                   Information gathering
   1. The Commission shall, after consulting the European Semiconductor Board, request
      representative organisations of undertakings or, if necessary, individual undertakings
      operating along the semiconductor supply chain to inform the Commission about
      their production capabilities, production capacities, current primary disruptions and
      provide other existing data necessary to assess the nature of the semiconductor crisis
      or to identify and assess potential mitigation or emergency measures at national or
      Union level.
   2. The request for information shall state its legal basis, be proportionate in terms of the
      granularity and volume of the data and frequency of access to the data requested,
      have regard for the legitimate aims of the undertaking and the cost and effort
      required to make the data available, and set out the time limit within which the
      information is to be provided. It shall also indicate the penalties provided for in
      Article 28.
   3. The owners of the undertakings or their representatives and, in the case of legal
      persons, companies or firms, or associations having no legal personality, the persons
      authorised to represent them by law or by their constitution shall supply the
      information requested on behalf of the undertaking or the association of undertakings
      concerned. Lawyers duly authorised to act may supply the information on behalf of
      their clients. The latter shall remain fully responsible if the information supplied is
      incomplete, incorrect or misleading.
   4. Should an undertaking supply incorrect, incomplete or misleading information in
      response to a request made pursuant to this Article, or not supply the information
      within the prescribed time limit, it shall be subject to fines set in accordance with
      Article 28.
   5. Should an undertaking established in the Union be subject to a request for
      information related to its semiconductor activities from a third country, it shall
      inform the Commission in such a manner as to enable the Commission to request
      similar information. The Commission shall inform the European Semiconductor
      Board of the existence of such request from a third country.
                                         Article 21
                                    Priority rated orders
   1. Where necessary and proportionate to ensure the operation of all or certain critical
      sectors, the Commission may oblige Integrated Production Facilities and Open EU
      Foundries to accept and prioritise an order of crisis-relevant products (‘priority rated
      order’). The obligation shall take precedence over any performance obligation under
      private or public law.
   2. The obligation under paragraph 1 can also be imposed to other semiconductor
      undertakings which have accepted such possibility in the context of receiving public
      support.
   3. When a semiconductor undertaking established in the Union is subject to a third
      country priority rated order measure, it shall inform the Commission. Should that
      obligation significantly impact the operation of certain critical sectors, the
      Commission may oblige that undertaking to accept and prioritise orders of crisis
      relevant products in line with paragraph 4, 5 and 6.
EN                                            49                                                EN
 ---pagebreak---    4. The obligations under paragraph 1, 2 and 3 shall be enacted by the Commission via
      decision. The decision shall be taken in accordance with all applicable Union legal
      obligations, having regard to the circumstances of the case, including the principles
      of necessity and proportionality. The decision shall in particular have regard for the
      legitimate aims of the undertaking concerned and the cost and effort required for any
      change in production sequence. In its decision, the Commission shall state the legal
      basis of the priority rated order, fix the time-limit within which the order is to be
      performed, and, where applicable, specify the product and quantity, and state the
      penalties provided for in Article 28 for non-compliance with the obligation. The
      priority rated order shall be placed at fair and reasonable price.
   5. The undertaking concerned shall be obliged to accept and prioritise a priority rated
      order. The undertaking may request the Commission to review the priority rated
      order where it considers it to be duly justified based on one of the following grounds:
      (a)    if the undertaking is unable to perform the priority rated order on account of
             insufficient production capability or production capacity, even under
             preferential treatment of the order;
      (b)    if acceptance of the order would place an unreasonable economic burden and
             entail particular hardship for the undertaking.
   6. Where an undertaking is obliged to accept and prioritise a priority rated order, it shall
      not be liable for any breach of contractual obligations that is required to comply with
      the priority rated orders. The liability shall be excluded only to the extent the
      violation of contractual obligations was necessary for compliance with the mandated
      prioritisation.
                                          Article 22
                                    Common purchasing
   1. The Commission may, upon the request of two or more Member States, establish a
      mandate to act as a central purchasing body on behalf of the participating Member
      States (‘participating Member States’) for their public procurement of crisis-relevant
      products for certain critical sectors (‘common purchasing’).
   2. The Commission shall, in consultation with the European Semiconductor Board,
      assess the utility, necessity and proportionality of the request. Where the
      Commission intends not to follow the request, it shall inform the Member States
      concerned and the European Semiconductor Board and give reasons for its refusal.
   3. The Commission shall draw up a proposal for a framework agreement to be signed
      by the participating Member States. This framework agreement shall organise in
      detail the common purchasing referred to in paragraph 1.
   4. Procurement under this Regulation shall be carried out by the Commission in
      accordance with the rules set out in the Financial Regulation for its own
      procurement. The Commission may have the ability and responsibility, on behalf of
      all participating Member States, to enter into contracts with economic operators,
      including individual producers of crisis-relevant products, concerning the purchase
      of such products or concerning the advance financing of the production or the
      development of such products in exchange for a priority right to the result.
EN                                            50                                                EN
 ---pagebreak---    5. Where the procurement of crisis-relevant products includes financing from the Union
      budget, specific conditions may be set out in specific agreements with economic
      operators.
   6. The Commission shall carry out the procurement procedures and conclude the
      contracts with economic operators on behalf of the participating Member States. The
      Commission shall invite the participating Member States to appoint representatives
      to take part in the preparation of the procurement procedures. The deployment and
      use of the purchased products shall remain the responsibility of the participating
      Member States.
                                        CHAPTER V
                                       GOVERNANCE
                                        SECTION 1
                        EUROPEAN SEMICONDUCTOR BOARD
                                         Article 23
             Establishment and tasks of the European Semiconductor Board
   1. The European Semiconductor Board is established.
   2. The European Semiconductor Board shall provide the Commission with advice and
      assistance pursuant to this Regulation and, in particular, by:
      (a)   providing advice on the Initiative to the Public Authorities Board of the Chips
            Joint Undertaking;
      (b)   exchanging information on the functioning of the Integrated Production
            Facilities and Open EU Foundries;
      (c)   discussing and preparing the identification of specific sectors and technologies
            with potential high social impact and respective security significance in need of
            certification for trusted products;
      (d)   addressing monitoring and crisis response issues;
      (e)   providing advice regarding the consistent application of this Regulation,
            facilitate cooperation among Member States and exchange of information on
            issues relating to this Regulation.
   3. The European Semiconductor Board shall support the Commission in international
      cooperation, including information gathering and crisis assessment, in line with
      international obligations.
   4. The European Semiconductor Board shall ensure coordination, cooperation and
      information exchange, where appropriate, with the relevant crisis response and crisis
      preparedness structures established under Union law.
                                         Article 24
                      Structure of the European Semiconductor Board
   1. The European Semiconductor Board shall be composed of representatives of the
      Member States and shall be chaired by a representative of the Commission.
EN                                           51                                               EN
 ---pagebreak---    2. Each national single point of contact, referred to in Article 26(3), shall appoint a
      high-level representative to the European Semiconductor Board. Where relevant as
      regards the function and expertise, a Member State may have more than one
      representative in relation to different tasks of the European Semiconductor Board.
      Each member of the European Semiconductor Board shall have an alternate.
   3. On a proposal by and in agreement with the Commission, the European
      Semiconductor Board shall adopt its rules of procedure by a simple majority of its
      members.
   4. The Commission may establish standing or temporary sub-groups for the purpose of
      examining specific questions. Where appropriate, the Commission may invite
      organisations representing the interests of the semiconductor industry, including the
      Industrial Alliance on Processors and Semiconductor Technologies and users of
      semiconductors at Union level, to such sub-groups in the capacity of observers. A
      sub-group including Union Research and Technology Organisations shall be
      established for the purpose of examining specific aspects on strategic technology
      directions and reporting on this to the European Semiconductor Board.
                                         Article 25
                     Operation of the European Semiconductor Board
   1. The European Semiconductor Board shall hold ordinary meetings at least once a
      year. It may hold extraordinary meetings at the request of the Commission or a
      Member State and as referred to in Article 15 and Article 18.
   2. The European Semiconductor Board shall hold separate meetings for its tasks
      referred to in Article 23(2), point (a), and for its tasks referred to in Article 23(2),
      points (b), (c) and (d).
   3. The Chair shall convene the meetings and prepare the agenda in accordance with the
      tasks of the European Semiconductor Board pursuant to this Regulation and with its
      rules of procedure. The Commission shall provide administrative and analytical
      support for the activities of the European Semiconductor Board pursuant to Article
      23.
   4. The Commission may appoint observers to take part in the meetings, as appropriate.
      The Commission may invite experts with specific expertise, including from relevant
      stakeholder organisations, with respect to a subject matter on the agenda to take part
      in the meetings of the European Semiconductor Board on an ad hoc basis. The
      Commission may facilitate exchanges between the European Semiconductor Board
      and other Union bodies, offices, agencies and advisory groups. The Commission
      shall invite a representative from the European Parliament as an observer to the
      European Semiconductor Board. The Commission shall ensure the participation of
      relevant other Union institutions and bodies as observers to the European
      Semiconductor Board with respect to meetings concerning Chapter IV on monitoring
      and crisis response. Observers and experts shall not have voting rights and shall not
      participate in the formulation of opinions, recommendations or advice of the
      European Semiconductor Board and its sub-groups.
   5. The European Semiconductor Board shall take the necessary measures to ensure the
      safe handling and processing of confidential information.
EN                                           52                                                EN
 ---pagebreak---                                         SECTION 2
                      NATIONAL COMPETENT AUTHORITIES
                                         Article 26
        Designation of national competent authorities and single points of contact
   1. Each Member State shall designate one or more national competent authorities for
      the purpose of ensuring the application and implementation of this Regulation at
      national level.
   2. Where Member States designates more than one national competent authority, they
      shall clearly set out the respective responsibilities of the authorities concerned and
      ensure that they cooperate effectively and efficiently to fulfil their tasks under this
      Regulation, including with regard to the designation and activities of the national
      single point of contact referred to in paragraph 3.
   3. Each Member State shall designate one national single point of contact to exercise a
      liaison function to ensure cross-border cooperation with national competent
      authorities of other Member States, with the Commission and with the European
      Semiconductor Board (‘single point of contact’). Where a Member State designates
      only one competent authority, that competent authority shall also be the single point
      of contact.
   4. Each Member State shall notify the Commission of the designation of the national
      competent authority and, where applicable, the reasons for designating more than one
      national competent authority, and the national single point of contact, including their
      precise tasks and responsibilities under this Regulation, their contact information and
      any subsequent changes thereto.
   5. Member States shall ensure that national competent authorities, including the single
      point of contact designated, exercise their powers impartially, transparently and in a
      timely manner and that they are provided with the powers and the adequate technical,
      financial and human resources to fulfil their tasks under this Regulation.
   6. Member States shall ensure that national competent authorities, whenever
      appropriate, and in accordance with Union and national law, consult and cooperate
      with other relevant national authorities, as well as with relevant interested parties.
      The Commission shall facilitate the exchange of experience between national
      competent authorities.
EN                                           53                                               EN
 ---pagebreak---                                        CHAPTER VI
                         CONFIDENTIALITY AND PENALTIES
                                         Article 27
                           Treatment of confidential information
   1. The Commission and the national competent authorities, their officials, servants and
      other persons working under the supervision of these authorities as well as officials
      and civil servants of other authorities of the Member States shall not disclose
      information acquired or exchanged by them pursuant to this Regulation and of the
      kind covered by the obligation of professional secrecy. They shall respect the
      confidentiality of information and data obtained in carrying out their tasks and
      activities in such a manner as to protect in particular intellectual property rights and
      sensitive business information or trade secrets. This obligation shall apply to all
      representatives of Member States, observers, experts and other participants attending
      meetings of the European Semiconductor Board pursuant to Article 23 and the
      members of the Committee pursuant to Article 33(1).
   2. The Commission and Member States may exchange, where necessary, confidential
      information with competent authorities of third countries with which they have
      agreed on bilateral or multilateral confidentiality arrangements to provide an
      adequate level of confidentiality.
   3. The Commission may adopt implementing acts, as necessary following experience
      gained in information gathering, to specify the practical arrangements for the
      treatment of confidential information in the context of exchange of information
      pursuant to this Regulation. Those implementing acts shall be adopted in accordance
      with the examination procedure referred to in Article 33(2).
                                         Article 28
                                     Penalties and fines
   1. The Commission may, by decision, where deemed necessary and proportionate:
      (a)    impose fines, where a representative organisations of undertakings or an
             undertaking, intentionally or through gross negligence, supplies incorrect,
             incomplete or misleading information in response to a request made pursuant
             to Article 20, or does not supply the information within the prescribed time
             limit;
      (b)    impose fines, where an undertaking, intentionally or through gross negligence,
             does not comply with the obligation to inform the Commission of a third
             country obligation pursuant to Article 20(5) and Article 21(3);
      (c)    impose periodic penalty payments, where an undertaking, intentionally or
             through gross negligence, does not comply with an obligation to prioritise the
             production of crisis-relevant products pursuant to Article 21.
   2. Fines imposed in the cases referred to in paragraph 1 (a) and (b) shall not exceed 300
      000 EUR.
EN                                           54                                                EN
 ---pagebreak---    3. Periodic penalty payments imposed in the cases referred to in paragraph 1 (c) shall
      not exceed 1.5 % of the average daily turnover in the preceding business year for
      each working day of non-compliance with the obligation pursuant to Article 21
      calculated from the date established in the decision.
   4. In fixing the amount of the fine or periodic penalty payment, regard shall be had to
      the nature, gravity and duration of the infringement, taking due account of the
      principles of proportionality and appropriateness.
   5. Where the undertaking has satisfied the obligation which the periodic penalty
      payment was intended to enforce, the Commission may fix the definitive amount of
      the periodic penalty payment at a figure lower than that which would arise under the
      original decision.
   6. The Court of Justice of the European Union shall have unlimited jurisdiction to
      review decisions whereby the Commission has fixed a fine or a periodic penalty
      payment. It may cancel, reduce or increase the fine or periodic penalty payment
      imposed.
                                          Article 29
       Limitation period for the imposition of fines and periodic penalty payments
   1. The powers conferred on the Commission by Article 28 shall be subject to the
      following limitation periods:
      (a)    two years in the case of infringements of provisions concerning requests of
             information pursuant to Article 20;
      (b)    two years in the case of infringements of provisions concerning information
             obligation pursuant to Article 20(5) and Article 21(3);
      (c)    three years in the case infringements of provisions concerning the obligation to
             prioritise the production of crisis-relevant products pursuant to Article 21.
   2. The time shall begin to run on the day on which the infringement is committed.
      However, in case of continuous or repeated infringements, time shall begin to run on
      the day on which the infringement ceases.
   3. Any action taken by the Commission or the competent authorities of the Member
      States for the purposes of ensuring compliance with the provisions of this Regulation
      shall interrupt the limitation period.
   4. The interruption of the limitation period shall apply for all the parties which are held
      responsible for the participation in the infringement.
   5. Each interruption shall start the time running afresh. However, the limitation period
      shall expire at the latest on the day in which a period equal to twice the limitation
      period has elapsed without the Commission having imposed a fine or a periodic
      penalty payment. That period shall be extended by the time during which the
      limitation period is suspended because the decision of the Commission is the subject
      of proceedings pending before the Court of Justice of the European Union.
EN                                            55                                               EN
 ---pagebreak---                                          Article 30
                     Limitation period for the enforcement of penalties
   1. The power of the Commission to enforce decisions taken pursuant to Article 28 shall
      be subject to a limitation period of three years.
   2. Time shall begin to run on the day on which the decision becomes final.
   3. The limitation period for the enforcement of fines and periodic penalties payments
      shall be interrupted:
      (a)   by notification of a decision varying the original amount of the fine or periodic
            penalty payment or refusing an application for variation;
      (b)   by any action of the Commission or of a Member State, acting at the request of
            the Commission, designed to enforce payment of the fine or periodic penalty
            payment.
   4. Each interruption shall start time running afresh.
   5. The limitation period for the enforcement of fines and periodic penalty payments
      shall be suspended for so long as:
      (a)   time to pay is allowed;
      (b)   enforcement of payment is suspended pursuant to a decision of the Court of
            Justice.
                                         Article 31
        Right to be heard for the imposition of fines or periodic penalty payments
   1. Before adopting a decision pursuant to 28, the Commission shall give the
      undertaking or representative organisations of undertakings concerned the
      opportunity of being heard on:
      (a)   preliminary findings of the Commission, including any matter to which the
            Commission has taken objections;
      (b)   measures that the Commission may intend to take in view of the preliminary
            findings pursuant to point (a) of this paragraph.
   2. Undertakings and representative organisations of undertakings concerned may
      submit their observations to the Commission’s preliminary findings within a time
      limit which shall be fixed by the Commission in its preliminary findings and which
      may not be less than 14 days.
   3. The Commission shall base its decisions only on objections on which undertakings
      and representative organisations of undertakings concerned have been able to
      comment.
   4. The rights of defence of the undertaking or representative organisations of
      undertakings concerned shall be fully respected in any proceedings. The undertaking
      or representative organisations of undertakings concerned shall be entitled to have
      access to the Commission's file under the terms of a negotiated disclosure, subject to
      the legitimate interest of undertakings in the protection of their business secrets. The
      right of access to the file shall not extend to confidential information and internal
      documents of the Commission or the authorities of the Member States. In particular,
      the right of access shall not extend to correspondence between the Commission and
      the authorities of the Member States. Nothing in this paragraph shall prevent the
EN                                           56                                                EN
 ---pagebreak---       Commission from disclosing and using information necessary to prove an
      infringement.
                                       CHAPTER VII
            DELEGATION OF POWER AND COMMITTEE PROCEDURE
                                          Article 32
                                 Exercise of the delegation
   1. The power to adopt delegated acts is conferred on the Commission subject to the
      conditions laid down in this Article.
   2. The power to adopt delegated acts referred to in Article 9(2) and (3) shall be
      conferred on the Commission for an indeterminate period of time from the date of
      entry into force of the legislative act.
   3. The delegation of power referred to in Article 9(2) and (3) may be revoked at any
      time by the European Parliament or by the Council. A decision to revoke shall put an
      end to the delegation of the power specified in that decision. It shall take effect the
      day following the publication of the decision in the Official Journal of the European
      Union or at a later date specified therein it shall not affect the validity of any
      delegated acts already in force.
   4. Before adopting a delegated act the Commission shall consult experts designated by
      each Member State in accordance with the principles laid down in the
      Interinstitutional Agreement on Better Law-Making of 13 April 2016.
   5. As soon as it adopts a delegated act, the Commission shall notify it simultaneously to
      the European Parliament and to the Council.
   6. A delegated act adopted pursuant to Article 9(2) and (3) shall enter into force only if
      no objection has been expressed by either the European Parliament or the Council
      within a period of two months of notification of that act to the European Parliament
      or the Council or if, before the expiry of that period, the European Parliament and the
      Council have both informed the Commission that they will not object. That period
      shall be extended by two months at the initiative of the European Parliament or of the
      Council.
                                          Article 33
                                         Committee
   1. The Commission shall be assisted by a committee (‘the Semiconductor Committee’).
      That committee shall be a committee within the meaning of Regulation (EU) No
      182/2011.
   2. Where reference is made to this paragraph, Article 5 of Regulation (EU) No
      182/2011 shall apply.
   3. Where reference is made to this paragraph, Article 8 of Regulation (EU) No
      182/2011, in conjunction with Article 5 thereof, shall apply.
EN                                             57                                             EN
 ---pagebreak---                                          CHAPTER VIII
                                      FINAL PROVISIONS
                                             Article 34
    Amendments to Regulation (EU) 2021/694 establishing the Digital Europe Programme and
                                repealing Decision (EU) 2015/2240
   1.     Regulation (EU) No 2021/694 is amended as follows:
   (1)    in Article 3 (2) the following point (f) is added:
          ‘(f) Specific Objective 6 – Semiconductors’;
   (2)    the following Article 8a is inserted:
          ‘Article 8a
          Specific Objective 6 – Semiconductors
          The financial contribution from the Union under Specific Objective 6 –
          Semiconductors shall pursue the objectives laid down in points (a) to (d) of Article 4
          of Regulation XX/XX of the European Parliament and of the Council.’;
   (3) Article 9 (1) and (2) are amended as follows:
          ‘Article 9
          Budget
          1. The financial envelope for the implementation of the Programme for the period
          from 1 January 2021 to 31 December 2027 shall be EUR 8 638 000 000 EUR in
          current prices.
          2. The indicative distribution of the amount referred to in paragraph 1 shall be:
              EUR 2 076 914 000 for Specific Objective 1 – High Performance Computing;
              EUR 1 841 956 000 for Specific Objective 2 – Artificial Intelligence;
              EUR 1 529 566 000 for Specific Objective 3 – Cybersecurity and Trust;
              EUR 517 347 000 for Specific Objective 4 – Advanced Digital Skills;
              EUR 1 022 217 000 for Specific Objective 5 – Deployment and Best Use of
              Digital Capacities and Interoperability;
              EUR 1 650 000 000 billion for Specific Objective 6 – Semiconductors.’;
   (4)    in Article 11, paragraph 2 is replaced by the following:
        ‘2. Cooperation with third countries and organisations as referred to in paragraph 1 of
        this Article with respect to Specific Objectives 1, 2 , 3 and 6 shall be subject to Article
        12.’
EN                                               58                                                 EN
 ---pagebreak---    (5)  in Article 12, paragraph 6 replaced by the following:
        ‘6. If duly justified for security reasons, the work programme may also provide that
        legal entities established in associated countries and legal entities that are established
        in the Union but are controlled from third countries may be eligible to participate in all
        or some actions under Specific Objectives 1, 2 and 6 only if they comply with the
        requirements to be fulfilled by those legal entities to guarantee the protection of the
        essential security interests of the Union and the Member States and to ensure the
        protection of classified documents information. Those requirements shall be set out in
        the work programme.’;
   (6)    in Article 13 the following paragraph 3 is added:
          ‘3. The synergies of the Specific Objective 6 with other Union Programme, are
          described in Article 6 and Annex III of Regulation XX/XX.’;
   (7)    Article 14 is amended as follows:
          Paragraph 1 is replaced by the following
   (8)    ‘1. The Programme shall be implemented under direct management, in accordance
          with the Financial Regulation, or under indirect management by entrusting certain
          implementation tasks to the bodies referred to in point (c) of the first subparagraph of
          Article 62(1) of the Financial Regulation, in accordance with Articles 4 to 8a of this
          Regulation. Bodies entrusted with the implementation of the Programme may depart
          from the rules on participation and dissemination laid down in this Regulation only
          where such departure is provided for in the legal act that establishes those bodies or
          entrusts budget implementation tasks to them or, for the bodies referred to in point
          (c)(ii), (iii) or (v) of the first subparagraph of Article 62(1) of the Financial
          Regulation, where such departure is provided for in the contribution agreement and
          the specific operating needs of such bodies or the nature of the action so require.’;
   (9)    in Article 14, the following paragraph is added:
          ‘4. Where the conditions set in Article 22 of Regulation XX/XX are fulfilled, the
          provisions of that Article shall apply.’;
   (10)   in Article 17, paragraph 1 is replaced by the following:
          ‘1. Only actions contributing to the achievement of the objectives laid down in
          Articles 3 to 8a shall be eligible for funding.’;
   (11)   in Annex I the following paragraph is added:
          ‘Specific Objective 6 – Semiconductors
          Actions under Specific Objective 6 are provided in Annex I to Regulation XX/XX.’;
   (12)   in Annex II the following paragraph is added:
EN                                                59                                               EN
 ---pagebreak---             ‘Specific Objective 6 – Semiconductors
            Measurable indicators to monitor the implementation and to report on the progress of
            the Specific Objective 6 are provided Annex II of the Regulation XX/XX.’;
   (13)     in Annex III the following paragraph is added:
            ‘Specific Objective 6 – SemiconductorsSynergies with Union Programmes for the
            Specific Objective 6 are provided in Annex III of Regulation XX/XX.’
                                               Article 35
                                        Evaluation and review
   1.       By three years after the date of application of this Regulation and every four years
            thereafter, the Commission shall submit a report on the evaluation and review of this
            Regulation to the European Parliament and to the Council. The reports shall be made
            public.
   2.       For the purpose of the evaluation and review, the European Semiconductor Board,
            the Member States and national competent authorities shall provide the Commission
            with information on its request.
   3.       In carrying out the evaluation and review the Commission shall take into account the
            positions and findings of the European Semiconductor Board, of the European
            Parliament, of the Council, and of other relevant bodies or sources.
                                               Article 36
                                           Entry into force
   This Regulation shall enter into force on the twentieth day following that of its publication in
   the Official Journal of the European Union.
   This Regulation shall be binding in its entirety and directly applicable in all Member States.
   Done at Brussels,
   For the European Parliament                               For the Council
   The President                                             The President
EN                                                 60                                               EN
 ---pagebreak---                            LEGISLATIVE FINANCIAL STATEMENT
   1.      FRAMEWORK OF THE PROPOSAL/INITIATIVE
   1.1.    Title of the proposal/initiative
   1.2.    Policy area(s) concerned
   1.3.    The proposal/initiative relates to:
   1.4.    Objective(s)
   1.4.1. General objective(s)
   1.4.2. Specific objective(s)
   1.4.3. Expected result(s) and impact
   1.4.4. Indicators of performance
   1.5.    Grounds for the proposal/initiative
   1.5.1. Requirement(s) to be met in the short or long term including a detailed timeline for
   roll-out of the implementation of the initiative
   1.5.2. Added value of Union involvement (it may result from different factors, e.g.
   coordination gains, legal certainty, greater effectiveness or complementarities). For the
   purposes of this point 'added value of Union involvement' is the value resulting from Union
   intervention which is additional to the value that would have been otherwise created by
   Member States alone.
   1.5.3. Lessons learned from similar experiences in the past
   1.5.4. Compatibility with the Multiannual Financial Framework and possible synergies with
   other appropriate instruments
   1.5.5. Assessment of the different available financing options, including scope for
   redeployment
   1.6.    Duration and financial impact of the proposal/initiative
   1.7.    Management mode(s) planned
   2.      MANAGEMENT MEASURES
   2.1.    Monitoring and reporting rules
   2.2.    Management and control system(s)
   2.2.1. Justification of the management mode(s), the funding implementation mechanism(s),
   the payment modalities and the control strategy proposed
   2.2.2. Information concerning the risks identified and the internal control system(s) set up to
   mitigate them
   2.2.3. Estimation and justification of the cost-effectiveness of the controls (ratio of "control
   costs ÷ value of the related funds managed"), and assessment of the expected levels of risk of
   error (at payment & at closure)
   2.3.    Measures to prevent fraud and irregularities
   3.      ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE
EN                                                 61                                               EN
 ---pagebreak---    3.1. Heading(s) of the multiannual financial framework and expenditure budget line(s)
   affected
   3.2.     Estimated financial impact of the proposal on appropriations
   3.2.1. Summary of estimated impact on operational appropriations
   3.2.2. Estimated output funded with operational appropriations
   3.2.3. Summary of estimated impact on administrative appropriations
   3.2.4. Compatibility with the current multiannual financial framework
   3.2.5. Third-party contributions
   3.3.     Estimated impact on revenue
   This LFS introduces the budgetary consequences of the proposal for a Regulation of the
   European Parliament and of the Council establishing a framework of measures for
   strengthening Europe’s semiconductor ecosystem (Chips Act) and the proposal for a Council
   Regulation amending Council Regulation (EU) 2021/2085 establishing the Joint Undertakings
   under Horizon Europe. It comes in addition to the Legislative Financial Statement introduced
   for the Key Digital Technologies Joint Undertaking (KDT JU), which is part of the Proposal
   for a Council Regulation establishing the Joint Undertakings under Horizon Europe
   (COM(2021) 87, 23 February 2021.
   The budgetary consequences mentioned in this LFS are two-fold:
   Expenditure for the Chips for Europe Initiative (with the exception of the Chips Fund) and
   ongoing activities under the KDT JU, to be managed by the Chips JU. The total expenditure
   to be managed by the Chips Joint Undertaking, formerly known as the ‘Key Digital
   Technologies Joint Undertaking’, is EUR 4.175 billion, of which EUR 1.8 billion was
   committed under the KDT JU before.
   Expenditure for European Commission staff to cope with the new tasks entrusted to the
   Commission to supervise the Chips JU, to review and decide on European Chips
   Infrastructure Consortium applications, to review and decide on applications for an Integrated
   Production Facility or Open EU Foundry, to support the European Semiconductor Board, and
   – together with Member States – to monitor semiconductor supply chains and decide on
   actions, where appropriate. A total of 9 full time equivalent units is foreseen for these
   activities.
   1.        FRAMEWORK OF THE PROPOSAL/INITIATIVE
   1.1       Title of the proposal/initiative
             Regulation of the European Parliament and of the Council establishing a framework
             of measures for strengthening Europe’s semiconductor ecosystem (Chips Act)
   1.2       Policy area(s) concerned
             A Europe fit for the Digital Age
             European Strategic Investments
EN                                                62                                              EN
 ---pagebreak---              Activity: Shaping Europe’s digital future.
   1.1.      The proposal/initiative relates to:
              a new action
             ¨ a new action following a pilot project/preparatory action 67
              the extension of an existing action
              a merger or redirection of one or more actions towards another/a new action
   1.2.      Objective(s)
   1.2.1.    General objective(s)
             The European Chips Act aims to establish a coherent framework for strengthening
             the Union’s semiconductor ecosystem. It will enlarge the resilience of Europe’s
             semiconductor ecosystem and increase its global market share. It will facilitate early
             adoption of new chips by European industry and increase its competitiveness.
   1.2.2.    Specific objective(s)
   Set up the Chips for Europe Initiative, to support large-scale technological capacity building
   throughout investment into cross-border and openly accessible innovative infrastructures set
   up in the Union to enable the development of cutting-edge and next-generation semiconductor
   technologies that will reinforce the EU’s advanced design, systems integration, and chips
   production capabilities (pillar 1, “Chips for Europe Initiative”).
   Create a framework to ensure security of supply by attracting investments and enhanced
   production capacities in semiconductor manufacturing as well as advanced packaging, test,
   and assembly via first-of-a-kind Integrated Production Facilities and Open EU Foundries
   (pillar 2, “Security of supply”).
   Set up a coordination mechanism between the Member States and the Commission for
   strengthening collaboration with and across Member States, monitoring the supply of
   semiconductors, estimate demand, anticipate shortages, trigger situations of crisis and act
   through a dedicated toolbox of measures (pillar 3, “Preparedness and Monitoring”).
   1.2.3.    Expected result(s) and impact
             Specify the effects which the proposal/initiative should have on the beneficiaries/groups targeted.
             The Union’s semiconductor industry should benefit from support to large-scale
             technological capacity building in cutting-edge and next-generation semiconductor
             technologies that will reinforce the EU’s advanced design, systems integration, and
             chips production capabilities. Semiconductor facilities will benefit from more
             effective permit granting processes.
   67
      As referred to in Article 58(2)(a) or (b) of the Financial Regulation.
EN                                                          63                                                   EN
 ---pagebreak---           The Union’s semiconductor users in all sectors should benefit from increased
          security of supply of semiconductors without disruptions. In addition, critical sectors
          should benefit from enhanced security of supply of semiconductors.
          End-users of products with semiconductors should benefit from increased security of
          supply, against more attractive market prices.
          The competitiveness of the European semiconductor ecosystem will improve.
   1.2.4. Indicators of performance
          Specify the indicators for monitoring progress and achievements.
          Performance indicators are mostly relevant for the Chips for Europe Initiative.
          Annex II gives first versions of measurable indicators to monitor the implementation
          and to report on the progress of the Initiative towards the achievement of its
          objectives:
          1. The number of legal entities involved (subdivided by size, type and country of
               establishment) in the actions supported by the Initiative.
          2. The number of design tools developed or integrated under the Initiative.
          3. The total amount co-invested in design capacities and pilot lines under the
               Initiative.
          4. The number of users or user communities getting access to design capacities and
               pilot lines under the Initiative.
          5. The number of businesses, which have used the services of national competence
               centres supported by the Initiative.
          6. The number of persons who have received training to acquire advanced skills
               and training on semiconductor and quantum technologies supported by the
               Initiative.
          7. The number of start-ups, scale-ups and SMEs who have received venture capital
               from the Chips Fund and the total amount of capital investments made.
          8. The amount of investment by companies operating in the EU, taking into
               consideration the segment of the value chain in which they operate
   1.3.   Grounds for the proposal/initiative
   1.3.1. Requirement(s) to be met in the short or long term including a detailed timeline for
          roll-out of the implementation of the initiative
          The Regulation should be fully applicable shortly after its adoption, i.e. the day
          following that of its publication in the Official Journal of the European Union.
          However, initial elements should be in place before, supported by the
          Recommendation by the Commission, adopted at the same time as the proposed
          Regulation.
EN                                                    64                                          EN
 ---pagebreak---           The European Semiconductor Board should be set up and Member States should
          have appointed a point of contact to its meeting. By the time of applicability the
          European Semiconductor Board should be fully operative.
          Information gathering from representative organistions of semiconductor
          undertakings should alreay be on-going and Member States should have already
          discussed a number of possible measures in the crisis toolbox and carried out
          monitoring of the semiconductor value chain.
   1.3.2. Added value of Union involvement (it may result from different factors, e.g.
          coordination gains, legal certainty, greater effectiveness or complementarities). For
          the purposes of this point 'added value of Union involvement' is the value resulting
          from Union intervention which is additional to the value that would have been
          otherwise created by Member States alone.
          Semiconductor chips are central to the digital economy. The global semiconductor
          shortage has exposed Europe’s dependency on supply from a limited number of
          companies and geographies, and its vulnerability to third country export restrictions
          and other disruptions in the present geopolitical context. Furthermore, this
          dependency is exacerbated by the extremely high barriers to entry and capital
          intensity of the sector. For example, the most computationally powerful chips require
          manufacturing to a precision of a few nanometers (nm). Building such facilities
          entails an upfront investment of at least EUR 15 billion and requires three years to
          achieve production-readiness with adequate yields. The expenditures to design such
          chips can range from EUR 0.5 billion to well over EUR 1.0 billion. R&D intensity in
          the sector is high and more than 15%. No single Member State is capable of
          achieving this alone.
          Intervention at the level of the Union is best placed to address the challenges
          deriving from the complexity of the semiconductor ecosystem, from the Union’s
          structural dependencies and from far-reaching supply chain disruptions.
          The Chips for Europe Initiative, should be set as a Union-wide initiative for
          supporting an industrial sector across Europe. A Union level initiative can provide
          the necessary degree of uniformity needed for the effective operation of funding
          programmes aimed at strengthening the Europen semiconductor ecosystem.
          For the security of supply, Union level action is justified by the need for a uniform
          application of the new rules, in particular the definition of Integrated Production
          Facilities and Open EU Foundries, as well as a uniform procedure for their
          recognition and support.
          Furthermore, a key element of this proposal     is to provide for measures to address
          serious disruptions to vital societal functions or economic activities at Union level.
          Important coordination gains should arise        from setting up a mechanism for
          coordination between Member States and the      Commission for monitoring and crisis
          response to semiconductor shortages.
EN                                               65                                              EN
 ---pagebreak---    1.3.3.     Lessons learned from similar experiences in the past
              The Commission published a Communication in 2013 on “A European Strategy for
              Micro- and Nanoelectronic Components and Systems”68. It proposed an industrial
              strategy to ensure return to growth and reach, in a decade, a level of production in the
              EU that is closer to its share of world GDP. In more detail, it aimed to:
              -       Ensure the availability of micro- and nanoelectronics that are needed for the
              competitiveness of key industries in Europe.
              -       Attract higher investment in advanced manufacturing in Europe and reinforce
              industrial competitiveness across the value chain from design to manufacturing.
              -       Maintain leadership in equipment and material supply and in areas such as
              “more than Moore” and energy-efficient components.
              -       Build leadership in the design of chips in high growth markets, notably in the
              design of complex components.
              Clearly, the Union was not entirely successful in reaching the objectives of this
              industrial strategy.
              One reason is that EU actions following the Communication largely focused on
              supporting R&D, for example via the ECSEL Joint Undertaking. However, capacity
              building in the microelectronics sector was not well addressed.
              Furthermore, the Communication mentioned demand-side actions to be addressed.
              However, the actions undertaken did not adequately address such demand-side
              actions. More emphasis on demand-side actions, e.g. actions addressing design
              activities, is needed.
              Finally, related to the first point, the 2013 Communication had few instruments at its
              disposal. Currently, more instruments are available, an opening in the competition
              policy has been provided, and the political momentum is now clearer.
   1.3.4.     Compatibility with the Multiannual Financial Framework and possible synergies
              with other appropriate instruments
              In order to maximise its positive impacts, the Chips for Europe Initiative (pillar 1)
              will build upon the strong knowledge base and enhance synergies with actions
              currently supported by the Union and Member States through programmes and
              actions in research and innovation in semiconductors and in developments of part of
              the supply chain. These include, in particular, the Horizon Europe Framework
              Programme and the Digital Europe Programme, with the aim to reinforce Europe as
              global player in semiconductor technology and its applications, with a growing
              global share in manufacturing by 2030. Complementing those activities, the Chips
              for Europe Initiative would closely collaborate with the Industrial Alliance on
              Processors and Semiconductor Technologies.
   68
      https://ec.europa.eu/transparency/documents-
      register/api/files/COM(2013)298_0/de00000000485396?rendition=false
EN                                                     66                                              EN
 ---pagebreak---           Furthermore, the Regulation provides for a procedural framework to facilitate
          combined funding from Member States, the EU budget and private investment.
          The proposed initiative can be set in the context of a number of recently announced
          European policies and priorities:
          -       Industrial Strategy;
          -       Recovery Plan for Europe;
          -       Green Deal;
          -       Artificial Intelligence;
          -       Research and Innovation under the proposed Horizon Europe programme,
                  Pillar II Cluster “Digital, Industry and Space” aims to make concrete
                  contributions to three overarching EU policies: ‘A Europe fit for the Digital
                  Age’, ‘An economy that works for people’, and ‘A European Green Deal’.
          -       Recovery and Resilience Facility
          As regards possible synergies with other appropriate instruments, the role of
          competent authorities at national level can be performed by national authorities
          fulfilling similar functions under other Union law. See also Chapter 1 of the
          Explanatory Memorandum.
   1.3.5. Assessment of the different available financing options, including scope for
          redeployment
   1.4.   Duration and financial impact of the proposal/initiative
           limited duration
              in effect from date of adoption of the proposal for a Regulation of the
             European Parliament and of the Council establishing a framework of measures for
             strengthening Europe’s semiconductor ecosystem (Chips Act)
              Financial impact from 2023 to 2027 for commitment appropriations and from
             2023 to 2031 for payment appropriations.
              unlimited duration
             1 Implementation with a start-up period from YYYY to YYYY,
             2 followed by full-scale operation.
   1.5.   Management mode(s) planned
           Direct management by the Commission
              by its departments, including by its staff in the Union delegations;
              by the executive agencies
           Shared management with the Member States
           Indirect management by entrusting budget implementation tasks to:
              third countries or the bodies they have designated;
EN                                              67                                              EN
 ---pagebreak---                 international organisations and their agencies (to be specified);
                the EIB and the European Investment Fund;
                bodies referred to in Articles 70 and 71 of the Financial Regulation;
                public law bodies;
                bodies governed by private law with a public service mission to the extent that
               they provide adequate financial guarantees;
                bodies governed by the private law of a Member State that are entrusted with
               the implementation of a public-private partnership and that provide adequate
               financial guarantees;
                persons entrusted with the implementation of specific actions in the CFSP
               pursuant to Title V of the TEU, and identified in the relevant basic act.
               If more than one management mode is indicated, please provide details in the ‘Comments’ section.
   Comments
   With the exception of a) activities and budgets related to the Chips Fund and b) activities and
   budgets earmarked under the European Innovation Council, the Chips for Europe Initiative
   will be implemented under indirect management by entrusting the implementation of tasks to
   the Key Digital Technologies Joint Undertaking, to be renamed to ‘Chips Joint Undertaking’.
   Member States and other Participating States are co-funding indirect actions.
   Other parts, such as the activities under pillar 2 and 3, are under direct management. These
   concern tasks entrusted to the Commission to supervise the Chips JU, to review and decide on
   European Chips Infrastructure Consortium applications, to review and decide on applications
   for an Integrated Production Facility or Open EU Foundry, to support the European
   Semiconductor Board, and – together with Member States – to monitor semiconductor supply
   chains and decide on actions, where appropriate.
EN                                                        68                                                    EN
 ---pagebreak---    2.    MANAGEMENT MEASURES
   2.1.  Monitoring and reporting rules
         Specify frequency and conditions.
         As a Union body, the Chips Joint Undertaking functions under strict monitoring
         rules. Monitoring is performed through:
         -      its own internal audit capacity and the audit service of the Commission;
         -      the supervision of the Governing Board. The Executive Director will supervise
                the Joint Undertaking’s operations internally;
         -      a set of quantitative and qualitative performance indicators which will be
                established to monitor the implementation of the programme and to measure its
                impact;
         -      mid-term and final evaluations of the programme by external experts, under
                the supervision of the Commission;
         -      the Joint Undertaking’s Work Programme and its Annual Activity Report.
   2.2.  Management and control system(s)
   2.2.1 Justification of the management mode(s), the funding implementation mechanism(s),
         the payment modalities and the control strategy proposed
         The Regulation introduces a new policy framework with regard to attracting
         investment in and enhancing advanced semiconductor manufacturing in the Union
         and introduces harmonised rules for a coordinated approach to monitoring and
         preparedness for semiconductor shortages.
         These new rules require a consistency mechanism for the cross-border application of
         the obligations under this Regulation and coordination of the activities of national
         authorities and of the Commission through a new advisory group, the European
         Semiconductor Board.
         These tasks under direct management. In order to face these new tasks under pillar 2
         and 3 and related to the Chips Fund, it is necessary to appropriately resource the
         Commission’s services.
         For other parts, indirect management is justified because the Chips Joint Undertaking
         is a public private partnership with part of the co-financing brought in via
         contributions from Participating States and via in-kind contributions by private
         members.
         Each year, the decision on the EU contribution to the Chips Joint Undertaking will be
         taken by virtue of the EU Budget adopted for that year.
         A Framework Financial Partnership Agreement signed between the European
         Commission and the Chips Joint Undertaking will indicate that for the tasks to be
         carried out each year the Commission will pay a contribution upon conclusion of a
         Contribution agreement with the Chips Joint Undertaking, and the issuing, by the
         Joint Undertaking, of corresponding payment requests to the members other than the
         Union.
EN                                              69                                             EN
 ---pagebreak---           The Commission will ensure that the rules applicable to the Chips Joint Undertaking
          fully comply with the requirements of the Financial Regulation. In compliance with
          Article 71 of Regulation (EU, Euratom) 2018/1046 the Joint Undertaking will
          respect the principle of sound financial management. The Chips Joint Undertaking
          shall also comply with the provisions of the Model Financial Regulation applicable
          to the Joint Undertaking. Any departure from this Model Financial Regulation,
          required for the purpose of the Joint Undertaking’s specific needs, shall be subject to
          the Commission’s prior consent.
          Monitoring arrangements, including through the Union representation in the
          Governing Board and Public Authorities Board of the Chips Joint Undertaking, as
          well as reporting arrangements will ensure that the Commission services can meet
          the accountability requirements both to the College and to the Budgetary Authority.
          The internal control framework for the Chips Joint Undertaking is built on:
          -the implementation of the Internal Control Standards offering at least equivalent
          guarantees to those of the Commission;
          -procedures for selecting the best projects through independent evaluation, and for
          translating them into legal instruments;
          -project and contract management throughout the lifetime of every project;
          -ex-ante checks on 100% of claims, including receipt of audit certificates and ex-ante
          certification of cost methodologies;
          -ex-post audits on a sample of claims as part of the Horizon Europe ex-post audits;
          -scientific evaluation of project results.
   2.2.1. Information concerning the risks identified and the internal control system(s) set up
          to mitigate them
          Various measures have been established to mitigate the inherent risk of conflict of
          interest within the Chips Joint Undertaking, especially:
          -equal votes (one third) for the Commission, Participating States (collectively) and
          for private members (collectively) in the Governing Board; equal votes (one half) for
          the Commission and Participating States (collectively) in the Public Authorities
          Board;
          -high-level decisions on the activities/budgets dedicated to the activities of the chips
          initiative (capacity building in upcoming work programmes) are taken by the Public
          Authorities Board with Member States only,
          -the part of the work programme dealing with capacity building activities is adopted
          by the Public Authorities Board with Member States only,
          -selection of the Executive Director by the Governing Board based on a proposal by
          the Commission,
          -independence of staff,
          -evaluations by independent experts based on published evaluation criteria together
          with appeal mechanisms and full declarations of any interests,
EN                                                70                                               EN
 ---pagebreak---          -a requirement for the Governing Board to adopt rules for the prevention, avoidance
         and management of conflicts of interest in the Joint Undertaking in accordance with
         the financial rules of the Joint Undertaking and with the Staff Regulations in respect
         of staff.
         The establishment of ethical and organisational values will be one of the key roles of
         the Joint Undertaking, and will be monitored by the Commission.
         The Executive Director of the Chips Joint Undertaking, as Authorising Officer, will
         be required to introduce a cost-effective system of internal control and management.
         They will be required to report to the Commission on the internal control framework
         adopted.
         The Commission will monitor the risk of non-compliance through the reporting
         system that it will develop, as well as by following the results of ex post audits on the
         recipients of EU funds from the Chips Joint Undertaking, as part of ex post audits
         covering the whole of the Horizon Europe.
         There is a clear need to manage the budget in an efficient and effective manner, and
         to prevent fraud and waste. However, the control system needs to strike a fair
         balance between attaining an acceptable error rate and the control burden required
         and avoid lowering the attractiveness of the Union's Research programme.
   2.2.3 Estimation and justification of the cost-effectiveness of the controls (ratio of "control
         costs ÷ value of the related funds managed"), and assessment of the expected levels
         of risk of error (at payment & at closure)
         As the rules for participation of Horizon Europe and the Digital Europe programme
         applicable to the Chips Joint Undertaking are similar to those that the Commission
         will use in its work programmes, and with a population of beneficiaries with a
         similar risk profile to those of programmes under direct management, it can be
         expected that the error margin will be similar to that foreseen by the Commission for
         Horizon Europe and the Digital Europe programme, i.e. to give reasonable assurance
         that the risk of error over the course of the multiannual expenditure period is, on an
         annual basis, within a range of 2-5 %, with the ultimate aim to achieve a residual
         error rate as close as possible to 2 % at the closure of the multi-annual programmes,
         once the financial impact of all audits, correction and recovery measures have been
         taken into account.
   2.3.  Measures to prevent fraud and irregularities
         Specify existing or envisaged prevention and protection measures, e.g. from the Anti-Fraud Strategy.
         The Commission will ensure that procedures to fight against fraud at all stages of the
         management process are applied by the Chips Joint Undertaking.
         The Commission will ensure that appropriate measures are in place to ensure that,
         when actions financed under this Regulation are implemented, the financial interest
         of the Union is protected by the application of preventive measures against fraud,
         corruption and any other illegal activities, by effective checks and, if irregularities
         are detected, by the recovery of the amounts wrongly paid and, where appropriate, by
         effective, proportionate and deterrent penalties.
EN                                                   71                                                       EN
 ---pagebreak---    The Court of Auditors shall have the power of audit, on the basis of documents and
   on-the-spot checks, over all grant beneficiaries, contractors and subcontractors who
   have received Union funds under the Programme.
   The European Anti-fraud Office (OLAF) may carry out on-the-spot checks and
   inspections on economic operators concerned directly or indirectly by such funding
   in accordance with the procedures laid down in Regulation (Euratom, EC) No
   2185/96 with a view to establishing whether there has been fraud, corruption or any
   other illegal activity affecting the financial interests of the Union in connection with
   a grant agreement or grant decision or a contract concerning Union funding. The
   Joint Undertakings will also need to accede to the Interinstitutional Agreement of 25
   May 1999 between the European Parliament, the Council of the European Union and
   the Commission of the European Communities concerning internal investigations by
   the European Anti-fraud Office (OLAF).
   The European Public Prosecutor’s Office (EPPO) may carry out investigations in
   accordance with the provisions and procedures laid down in Council Regulation
   (EU) 2017/193923, with a view to investigating criminal offences affecting the
   financial interests of the Union.
EN                                         72                                               EN
 ---pagebreak---      3.         ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE
     3.1.       Heading(s) of the multiannual financial framework and expenditure budget
                line(s) affected
                Existing budget lines
                In order of multiannual financial framework headings and budget lines.
                                                                    Type of
                                  Budget line                     expenditure
                                                                                                     Contribution
  Heading of
  multiannual                                                                      from                                  within the
                                                                                                from
   financial                                                                      EFTA                                  meaning of
                Number                                             Diff./Non-
                                                                                 countries
                                                                                             candidate    from third
  framework                                                               69                         71              Article 21(2)(b) of
                                                                    diff.            70     countries      countries   the Financial
                                                                                                                         Regulation
                01 02 02 30 – Cluster Civil Security for
       1        Society                                              Diff.        YES          YES          YES             NO
                01 02 02 40 - Cluster Digital, Industry
       1        and Space                                            Diff.        YES          YES          YES             NO
       1        01 02 02 42 Horizon Europe Programme
                — Key Digital Technologies joint                     Diff         YES          YES          YES             NO
                undertaking
       1        01 02 02 50 – Cluster Climate, Energy
                and Mobility                                         Diff         YES          YES          YES             NO
       1        01 02 03 01 - European Innovation
                Council                                              Diff.        YES          YES          YES             NO
       1        02 03 01 - Connecting Europe Facility
                (CEF) — Transport                                    Diff.         NO          YES          YES             NO
       1        02 03 03 01 - Connecting Europe Facility
                (CEF) — Digital                                      Diff.         NO          YES          YES             NO
       1        02 04 01 10 - Digital Europe programme -
                Cybersecurity                                        Diff.        YES          YES          YES             NO
       1        02 04 01 11 - Digital Europe programme -
                European        Cybersecurity       Industrial,
                Technology and Research Competence                   Diff         YES          YES          YES             NO
                Centre
       1        02 04 02 11 - Digital Europe programme -
                High-Performance         Computing         joint     Diff         YES          YES          YES             NO
                undertaking (EuroHPC)
       1        02 04 03 - Digital Europe programme -
                Artificial intelligence                              Diff.        YES          YES          YES             NO
     69
         Diff. = Differentiated appropriations / Non-diff. = Non-differentiated appropriations.
     70
         EFTA: European Free Trade Association.
     71
         Candidate countries and, where applicable, potential candidates from the Western Balkans.
EN                                                            73                                                           EN
 ---pagebreak---        1      02 04 04 - Digital Europe programme –
              Skills                                      Diff.     YES        YES         YES             NO
       1      02 04 05 01 - Digital Europe programme -
              Deployment                                  Diff.     YES        YES         YES             NO
       1      02 04 05 02 - Digital Europe programme -
              Deployment / Interoperability               Diff.     YES        YES         YES             NO
       1      Unallocated margin – Heading 1              Diff.      NO        NO           NO             NO
              New budget lines requested
              In order of multiannual financial framework headings and budget lines.
                                                         Type of
                             Budget line               expenditure
                                                                                    Contribution
  Heading of
  multiannual                                                                                           within the
   financial  Number                                                 from      from                    meaning of
                                                        Diff./Non-                       from third
  framework                                                         EFTA     candidate              Article 21(2)(b) of
                                                           diff.                          countries   the Financial
                                                                   countries countries
                                                                                                        Regulation
       1      02 04 06 10 - Digital Europe programme      Diff.     YES        YES         YES             NO
              – Chips
              02 04 06 11 - Digital Europe Programme
       1      — Chips joint undertaking                   Diff      YES        YES         YES             NO
EN                                                  74                                                    EN
 ---pagebreak---     3.2.       Estimated financial impact of the proposal on appropriations
    3.2.1.     Summary of estimated impact on operational appropriations
                   The proposal/initiative does not require the use of operational appropriations
                   The proposal/initiative requires the use of operational appropriations, as explained below:
                                                                                                                         EUR million (to three decimal places)
                 Heading of multiannual financial
                                                                 1    Single Market, Innovation and Digital
                            framework
    The proposal will not increase the total level of expenditure programmed under Heading 1 of the Multiannual Financial Framework 2021-2027.
    Indeed, the contribution from the EU Budget to the Chips for Europe Initiative will be pooled from the Horizon Europe Programme and the
    Digital Europe Programme and, with the exception of the action under the European Innovation Council, channelled to the Key Digital
    Technologies (future Chips) Joint Undertaking for implementation. To this end, a sixth specific objective will be created under the Digital
    Europe Programme.
    This sixth specific objective will be financed by
             i        an internal redeployment of the current envelope of the Digital Europe Programme,
             ii       a use of unallocated margin of Heading 1, and
             iii      a reduction from the envelopes of the Connecting Europe Facility – Transport and the Connecting Europe Facility – Digital.
    The summary table under section 3.2.4 provides a full overview of all sources of funding.
              Operational appropriations earmarked or reallocated within Horizon Europe for being used for the purpose of the Chips for Europe
               Initiative
  Operational appropriations under Horizon                                                                                        Post
                                                                    2021      2022      2023     2024    2025   2026    2027                       TOTAL
                    Europe                                                                                                        2027
 Operational appropriations earmarked under Horizon Europe
 01 02 02 42- Horizon Europe Programme —
                                             Commitments      (1a)                     108.850  112.609  97.470 91.781  89.290                            500.000
 Key Digital Technologies joint undertaking
EN                                                                                75                                                                              EN
 ---pagebreak---  01 02 03 01 - European Innovation Council72        Commitments           (1a)                             75.251      55.054       55.501      56.499    57.696                            300.000
 Operational appropriation reallocated within Horizon Europe
     01 02 02 30 – Cluster Civil Security for
                                                    Commitments           (1a)                             40.800      47.400       41.400      10.200    10.200                            150.000
                     Society
   01 02 02 40 - Cluster Digital, Industry and
                                                    Commitments           (1a)                            108.800     126.400      110.400      27.200    27.200                            400.000
                      Space
    01 02 02 50 Cluster Climate, Energy and
                                                    Commitments           (1a)                             81.600      94.800       82.800      20.400    20.400                            300.000
                     Mobility
 TOTAL appropriations under Horizon
                     Europe                         Commitments                                           415.302     436.263      387.570     206.080   204.785             -            1,650.000
              Operational appropriations to be pooled under a sixth specific objective of the Digital Europe Programme for the purpose of the Chips
               for Europe Initiative to be implemented by the future Chips Joint Undertaking:
    Operational appropriations under                                                                                                                                  Post
                                                                                   2021        2022        2023        2024         2025        2026      2027                         TOTAL
     Digital Europe – sixth objective                                                                                                                                 2027
 Operational appropriations redeployed from other programmes (Horizon Europe, Connecting Europe Facility)
 01 02 02 40 – Horizon Europe - Cluster
                                                    Commitments           (1a)                             80.000      80.000       80.000      80.000    80.000                            400.000
 Digital, Industry and Space
 02 03 01 - Connecting Europe Facility (CEF)
                                                    Commitments           (1a)                                         96.000       86.000      34.000    34.000                            250.000
 — Transport
    72
        Up to 300.000 EUR million will be earmarked under the EIC for being used for the purpose of the Chips Europe Initiative. The yearly programming of the envelope is indicative.
EN                                                                                                   76                                                                                             EN
 ---pagebreak---  02 03 03 01 - Connecting Europe Facility
                                              Commitments     (1a)                             57.600  51.600  20.400  20.400     150.000
 (CEF) — Digital
 Operational appropriation reallocated within the Digital Europe programme
 02 04 01 10 - Digital Europe programme –
                                              Commitments     (1a)                     16.320  18.960  16.560   4.080   4.080      60.000
 Cybersecurity
 02 04 01 11 - Digital Europe programme -
 European Cybersecurity Industrial,           Commitments     (1a)                     16.320  18.960  16.560   4.080   4.080      60.000
 Technology and Research Competence Centre
 02 04 02 11 - Digital Europe programme -
 High-Performance Computing joint             Commitments     (1a)                     40.800  47.400  41.400  10.200  10.200     150.000
 undertaking (EuroHPC)
 02 04 03 - Digital Europe programme -
                                              Commitments     (1a)                     59.840  69.520  60.720  14.960  14.960     220.000
 Artificial intelligence
 02 04 04 - Digital Europe programme - Skills Commitments     (1a)                     16.320  18.960  16.560   4.080   4.080      60.000
 02 04 05 01 - Digital Europe programme –
                                              Commitments     (1a)                     10.880  12.640  11.040   2.720   2.720      40.000
 Deployment
 02 04 05 02 - Digital Europe programme -
                                              Commitments     (1a)                      2.720   3.160   2.760   0.680   0.680      10.000
 Deployment / Interoperability
 Contribution from the available margin under Heading 1 of the Multiannual Financial Framework
 Unallocated margin Heading 1                 Commitments     (1a)                     50.000  50.000  50.000  50.000  50.000    250.000
     TOTAL appropriations pooled to           Commitments     =1a                     293.200 473.200 433.200 225.200 225.200 - 1,650.000
                  Digital Europe
EN                                                                               77                                                       EN
 ---pagebreak---      For information purposes: overview of the implementation by the European Innovation Council and the Chips Joint
                                                                                      Undertaking
    A          Horizon Europe
    Implementation by the European Innovation Council
   Operational appropriations “earmarked”                                                                                                                               Post
                                                                                  2021        2022        2023        2024         2025        2026         2027                         TOTAL
         under Horizon Europe - EIC                                                                                                                                     2027
                                                   Commitments           (1a)                             75.251      55.054        55.501      56.499       57.696                            300.000
 01 02 03 01 - European Innovation Council73
                                                   Payments              (2a)                             45.151      48.082        51.836      58.030       56.973     39.928                 300.000
    Implementation by the Chips Joint Undertaking
    EUR 500 million earmarked for the purposes of the Chips for Europe Initiative within the pre-existing financial envelope of the Key Digital
    Technologies Joint Undertaking will be implemented by the Chips joint undertaking:
   Operational appropriations “earmarked”                                                                                                                               Post
                                                                                  2021        2022        2023        2024         2025        2026         2027                         TOTAL
        under Horizon Europe - KDT                                                                                                                                      2027
 01 02 02 42- Horizon Europe Programme —           Commitments           (1a)                            108.850     112.609        97.470      91.781       89.290                            500.000
 Key Digital Technologies joint undertaking
                                                   Payments              (2a)                             60.897      74.926        83.997      83.126       79.271    117.783                 500.000
    The EUR 850 million reallocated under Horizon Europe –will be implemented by the Key Digital Technologies (future Chips) joint undertaking
    and split between operational and support expenditure as follows:
  Appropriations reallocated within Horizon                                                                                                                             Post
                                                                                  2021        2022        2023        2024         2025        2026         2027                         TOTAL
           Europe – to the Chips JU                                                                                                                                     2027
    73
       Up to 300.000 EUR million will be earmarked under the EIC for being used for the purpose of the Chips for Europe Initiative. The yearly profiling of the envelope is purely indicative.
EN                                                                                                  78                                                                                                 EN
 ---pagebreak---  Operational appropriations
 01 02 02 42        Horizon Europe Programme           Commitments          (1a)                            230.809   267.842     233.371      56.546       52.897                             841.465
 — Key Digital Technologies joint undertaking
 - Operational expenditure                             Payments             (2a)                            138.329   206.642     216.371     130.326       95.281       54.516                841.465
 Appropriations of an administrative nature financed from the envelope of specific programmes74
 01 02 02 42        Horizon Europe Programme           Commitments          (1b)                              0.391     0.758        1.229      1.254        4.903                               8.535
 — Key Digital Technologies joint undertaking
 - Support expenditure                                 Payments             (2b)                              0.391     0.758        1.229      1.254        1.279        3.624                  8.535
                                                                           =1a+1b
    TOTAL additional appropriations                    Commitments           +3                             231.200   268.600     234.600      57.800       57.800             -               850.000
  for the Chips Joint Undertaking under
                                                                           =2a+2b
               Horizon Europe                          Payments              +3                             138.720   207.400     217.600     131.580       96.560       58.140                850.000
    The consolidated appropriations of the Key Digital Technologies (future Chips) joint undertaking under the Horizon Europe, including
    appropriations covering former activities of the KDT Joint Undertaking that are not part of the Chips for Europe Initiative, will be as follows:
                                                                                                                                                                        Post
           Chips Joint Undertaking                                                     2021       2022       2023      2024        2025        2026         2027                          TOTAL
                                                                                                                                                                        2027
 Operational appropriations
 01 02 02 42        Horizon Europe Programme           Commitments           (1a)     207.637    247.490    518.207   565.170     490.661     298.788      287.185                           2,615.139
 — Key Digital Technologies joint undertaking
 - Operational expenditure                             Payments              (2a)      51.909    113.782    334.342   447.834     486.757     397.896      350.073     432.545               2,615.139
 Appropriations of an administrative nature financed from the
 envelope of specific programmes
 01 02 02 42        Horizon Europe Programme           Commitments           (1b)       2.363      2.510      2.993     3.430        3.939      4.012       15.615                              34.861
 — Key Digital Technologies joint undertaking          Payments              (2b)       2.363      2.510      2.993     3.430        3.939      4.012        4.076       11.539                 34.861
    74
        Technical and/or administrative assistance and expenditure in support of the implementation of EU programmes and/or actions (former ‘BA’ lines), indirect research, direct research.
EN                                                                                                     79                                                                                              EN
 ---pagebreak---  - Support expenditure
                                                                 =1a+1
          TOTAL appropriations                  Commitments       b +3  210.000     250.000 521.200 568.600 494.600 302.800 302.800            2,650.000
  for Chips Joint Undertaking under the
                                                                 =2a+2
       Horizon Europe programme                 Payments          b+3     54.272    116.292 337.335 451.264 490.696 401.908 354.149 444.083    2,650.000
    B          Digital Europe programme
    Under the Digital Europe Programme, except for EUR 125 million to be implemented under InvestEU, EUR 1 525 million will be implemented
    by the Key Digital Technologies (future Chips) joint undertaking and split between operational and support expenditure as follows:
                                                                                                                                     Post
           Chips Joint Undertaking                                       2021        2022    2023    2024    2025    2026    2027           TOTAL
                                                                                                                                     2027
 Operational appropriations
 02 04 06 11 - Digital Europe Programme —       Commitments      (1a)                       258.498 432.340 396.494 214.450 207.904            1,509.687
 Chips joint undertaking - Operational
 expenditure                                    Payments         (2a)                       154.818 310.700 349.674 276.800 254.305 163.389    1,509.687
 Appropriations of an administrative nature financed from the envelope of specific programmes
 02 04 06 11 - Digital Europe Programme —       Commitments      (1b)                         0.702   1.360   2.206   2.250   8.796               15.313
 Chips joint undertaking- Support expenditure
                                                Payments         (2b)                         0.702   1.360   2.206   2.250   2.295   6.501       15.313
                                                                =1a+1b
                                                Commitments       +3                        259.200 433.700 398.700 216.700 216.700            1,525.000
          TOTAL appropriations
       for Chips Joint Undertaking                              =2a+2b
                                                Payments          +3                        155.520 312.060 351.880 279.050 256.600 169.890    1,525.000
    The total additional appropriations pooled under Heading 1 to be implemented by the future Chips Joint Undertaking for the purpose of the
    Chips for Europe Initiative amounts to EUR 2 375 million, of which EUR 850 million under Horizon Europe and EUR 1 525 million under
    Digital Europe. It will split between operational (Title 3) and support (Title 1 and Title 2) expenditure as follows:
EN                                                                                       80                                                              EN
 ---pagebreak---                                                                                                                                  Post
                                                               2021     2022      2023      2024     2025      2026     2027                 TOTAL
                                                                                                                                 2027
                                       Commitments        (4)                       0.792    1.535    2.489     2.538     9.924                     17.277
 Title 1
                                       Payments           (5)                       0.792    1.535    2.489     2.538     2.589   7.335             17.277
                                       Commitments        (4)                       0.301    0.584    0.947     0.966     3.775                      6.572
 Title 2
                                       Payments           (5)                       0.301    0.584    0.947     0.966     0.985   2.790              6.572
                                       Commitments        (4)                    489.307   700.182  629.865   270.996  260.801                   2,351.152
 Title 3
                                       Payments           (5)                    293.147   517.342  566.045   407.126  349.586  217.905          2,351.152
                                       Commitments      =4+ 6                    490.400   702.300  633.300   274.500  274.500                   2,375.000
         TOTAL appropriations
                                       Payments         =5+ 6                    294.240   519.460  569.480   410.630  353.160  228.030          2,375.000
          The total appropriations to be implemented by the future Chips Joint Undertaking under Horizon Europe and Digital Europe,
           including appropriations covering former activities of the KDT Joint Undertaking that are not part of the Chips for Europe Initiative
           amount to EUR 4 175 million. It will be split between operational (Title 3) and support (Title 1 and Title 2) expenditure as follows:
                                                                                                                                 Post
                                                               2021     2022     2023       2024     2025      2026     2027                 TOTAL
                                                                                                                                 2027
                                       Commitments       (4)    1.804    1.861     2.732      3.516   4.508     4.595    18.011       -             37.027
 Title 1
                                       Payments          (5)    1.804    1.861     2.732      3.516   4.508     4.595     4.685  13.326             37.027
                                       Commitments       (4)    0.559    0.649     0.963      1.274   1.637     1.666     6.399       -             13.147
 Title 2
                                       Payments          (5)    0.559    0.649     0.963      1.274   1.637     1.666     1.685   4.714             13.147
                                       Commitments       (4)  207.637  247.490  776.705    997.510  887.155   513.238  495.090                   4,124.826
 Title 3
                                       Payments          (5)   51.909  113.782  489.161    758.534  836.432   674.696  604.378  595.933          4,124.826
EN                                                                           81                                                                            EN
 ---pagebreak---                         Commitments =4+ 6 210.000 250.000  780.400 1,002.300 893.300 519.500 519.500         4,175.000
   TOTAL appropriations
                        Payments    =5+ 6  54.272 116.292  492.855   763.324 842.576 680.958 610.749 613.973 4,175.000
EN                                                      82                                                             EN
 ---pagebreak---                Heading of multiannual financial
                                                              7      ‘Administrative expenditure’
                          framework
   This section should be filled in using the 'budget data of an administrative nature' to be firstly introduced in the Annex to the Legislative
   Financial Statement (Annex V to the internal rules), which is uploaded to DECIDE for interservice consultation purposes.
                                                                                                                           EUR million (to three decimal places)
                                                                   2021     2022      2023      2024       2025    2026      2027          TOTAL
                DG CNECT
  Human resources                                                                     1.125     1.125      1.125    1.125    1.125                 5.625
  Other administrative expenditure
           TOTAL DG CNECT                                                              1.125     1.125      1.125    1.125    1.125                 5.625
          TOTAL appropriations
                                           (Total commitments =
            under HEADING 7                Total payments)
                                                                                       1.125     1.125      1.125    1.125    1.125                 5.625
  of the multiannual financial framework
                                                                                                                           EUR million (to three decimal places)
                                                                                                                                       Post
                                                                   2021     2022      2023      2024       2025    2026      2027      2027
                                                                                                                                                      TOTAL
          TOTAL appropriations             Commitments                               709.627   910.588    821.895 432.405   431.110          -             3,305.625
         under HEADINGS 1 to 7
  of the multiannual financial framework   Payments                                  421.813   674.093    738.438 572.261   504.728   394.291              3,305.625
EN                                                                              83                                                                                   EN
 ---pagebreak---  3.2.2.    Estimated output funded with operational appropriations
 The indicative objects and outputs in the table below are first drafts, largely based on the indicators provided in Annex II of the proposed
 Regulation. More refined definitions are expected to become available in a later stage.
                                                                                                            Commitment appropriations in EUR million (to three decimal places)
                                                               Year            Year             Year            Year            Year
              Indicate                                                                                                                                TOTAL
                                                               2023            2024             2025            2026            2027
             objectives
            and outputs
                                        75         Aver
                                 Type                                                                                                      Total
                                                   age    No     Cost     No     Cost     No     Cost      No    Cost      No     Cost                Total cost
                                                                                                                                            No
                                                  cost
           SPECIFIC OBJECTIVE No 1 “Chips for Europe Initiative”
                             Number of legal
              - Output      entities involved in                154.241         198.938          179.800          96.679          96.383                      726.041
                                   actions
                          Number of design tools
              - Output     developed/integrated                  76.811          99.070           89.539          48.145          47.998                      361.563
                          Amount co-invested in
              - Output    design capacities and                 117.984         152.174          137.534          73.953          73.726                      555.370
                               pilot lines
                             Number of users
              - Output       accessing design                    95.818         123.584          111.695          60.059          59.875                      451.030
                            capacities and pilot
                                   lines
 75
          Outputs are products and services to be supplied (e.g.: number of student exchanges financed, number of km of roads built, etc.).
EN                                                                                         84                                                                                    EN
 ---pagebreak---                    Number of businesses
     - Output          using services of              65.080  83.939     75.864  40.792  40.667   306.343
                    competence centres
                     Number of persons
     - Output         receiving training              43.914  56.639     51.191  27.525  27.441   206.710
                   Amount of investment
     - Output            in the EU by               120.654  155.618    140.648  75.627  75.395   567.942
                        semiconductor
                          companies
                   Amount of investment
     - Output            in the EU by                 34.000  39.500     34.500   8.500   8.500   125.000
                        semiconductor
                          companies
        Subtotal for specific objective No 1        708.502  909.463    820.770 431.280 429.985 3,300.000
   SPECIFIC OBJECTIVE No 2 “Security of supply”
     - Output     Number of applications               0.500   0.500      0.500   0.500   0.500     2.500
                   for IPF/OEF assessed
        Subtotal for specific objective No 2           0.500   0.500      0.500   0.500   0.500     2.500
   SPECIFIC OBJECTIVE No 3 “Preparedness and Monitoring”
                          Number of
     - Output     organisations for which              0.625   0.625      0.625   0.625   0.625     3.125
                    supply chain data is
                           gathered
        Subtotal for specific objective No 3           0.625   0.625      0.625   0.625   0.625     3.125
                     TOTALS                         709.627  910.588    821.895 432.405 431.110 3,305.625
EN                                                                   85                                   EN
 ---pagebreak---           3.2.3.       Summary of estimated impact on administrative appropriations
                            The proposal/initiative does not require the use of appropriations of an
                           administrative nature
                            The proposal/initiative requires the use of appropriations of an administrative
                           nature, as explained below:
                                                                                              EUR million (to three decimal places)
                                  2021          2022            2023            2024         2025        2026          2027         TOTAL
       HEADING 7
    of the multiannual
   financial framework
 Human resources                                                    1.125           1.125      1.125        1.125        1.125        5.625
 Other administrative
 expenditure
  Subtotal HEADING 7
    of the multiannual                                              1.125           1.125      1.125        1.125        1.125        5.625
   financial framework
                        76
 Outside HEADING 7
    of the multiannual
   financial framework
 Human resources
 Other expenditure
 of an administrative
 nature
         Subtotal
   outside HEADING 7
    of the multiannual
   financial framework
          TOTAL                                                     1.125           1.125      1.125        1.125        1.125        5.625
          As this is a new initiative, there are no staff from the DG who are already assigned to management of
          the action and who could therefore be redeployed within the DG. The human resources required
          should therefore be met with an additional allocation which should be granted to the managing DG
          under the annual allocation procedure and in the light of budgetary constraints.
          76
                     Technical and/or administrative assistance and expenditure in support of the implementation of EU programmes
                     and/or actions (former ‘BA’ lines), indirect research, direct research.
EN                                                                        86                                                          EN
 ---pagebreak---   3.2.3.1. Estimated requirements of human resources
                 The proposal/initiative does not require the use of human resources.
                 The proposal/initiative requires the use of human resources, as explained below:
            The table below is the additional staff for the Chips JU as a result of the proposed Regulation.
                                                                                                                              Estimate to be expressed in full time equivalent units
                                                                                  2021    2022      2023      2024 2025 2026 2027    2028      2029     2030      2031
                                                         Establishment plan posts (officials and temporary staff)
                Other budget lines (specify): JU staff (TA)                                          3          5   8    8    8        8        5        4          2
                                                                                                             77
                                                         External staff (in Full Time Equivalent unit: FTE)
                Other budget lines (specify): JU staff (CA)                                          3          7   10   10   10      10        10       10         4
                Other budget lines (specify): JU staff (END)                                         0          0   1    1    1        1        0        0          0
                TOTAL                                                                                6         12   19   19   19      19        15       14         6
            XX is the policy area or budget title concerned.
  As this is a new initiative, there are no staff from the DG who are already assigned to management of the action and who could therefore be redeployed within the
  DG. The human resources required should therefore be met with an additional allocation which should be granted to the managing DG under the annual allocation
  procedure and in the light of budgetary constraints.
            The table below is the total staff for the Chips JU as a result of the proposed Regulation.
  77
          AC= Contract Staff; AL = Local Staff; END= Seconded National Expert; INT = agency staff; JPD= Junior Professionals in Delegations.
EN                                                                                                87                                                                               EN
 ---pagebreak---                                                                                                                                              Estimate to be expressed in full time equivalent units
                                                                                   2021        2022      2023       2024      2025     2026 2027    2028      2029     2030      2031
                                                        Establishment plan posts (officials and temporary staff)
              Other budget lines (specify): JU staff (TA)                           14          14         14        17        19       22   22      22        22       13        10
                                                                                                                   78
                                                        External staff (in Full Time Equivalent unit: FTE)
              Other budget lines (specify): JU staff (CA)                           16          16         16        19        23       26   26      26        26       26        26
              Other budget lines (specify): JU staff (END)                           0           0         0          1        1        2    2        2        2        0          0
              TOTAL                                                                 30          30         30        37        43       50   50      50        50       39        36
  Additional Commission staff as a result of the proposed Regulation consists of 5 FTEs Officials and 4 FTEs Contractual Agents for every year of the period 2023-
  2027.
                                                                                                         2021       2022      2023     2024 2025    2026      2027
                                                                             Establishment plan posts (officials and temporary staff)
                                  20 01 02 01 (Headquarters and Commission’s Representation
                                                                                                                                5        5    5       5         5
                                  Offices)
                                                                                                                                 79
                                                                             External staff (in Full Time Equivalent unit: FTE)
                                  Other budget lines (specify): Commission staff (CA)                                           4        4    4       4         4
                                  TOTAL                                                                                         9        9    9       9         9
  78
         AC= Contract Staff; AL = Local Staff; END= Seconded National Expert; INT = agency staff; JPD= Junior Professionals in Delegations.
  79
         AC= Contract Staff; AL = Local Staff; END= Seconded National Expert; INT = agency staff; JPD= Junior Professionals in Delegations.
EN                                                                                                      88                                                                                        EN
 ---pagebreak---      As this is a new initiative, there are no staff from the DG who are already assigned to management of the action and who could therefore be redeployed within the
     DG. The human resources required should therefore be met with an additional allocation which should be granted to the managing DG under the annual allocation
     procedure and in the light of budgetary constraints.
     Description of tasks to be carried out:
Officials and temporary staff          Officials:
                                       -  Supervision of the Chips Joint Undertaking
                                       -  Supervision of the correct implementation of the obligations set by the Regulation
                                          for private companies and Member States
                                       -  Preparation and drafting of implementing and delegated acts, in compliance with
                                          this Regulation
                                       -  Conducting investigations, audits and other analysis, including data analytics
                                       -  Administrative support to the European Semiconductor Board and organisation of
                                          meetings, preparation of opinions and other support to the European
                                          Semiconductor Board
                                       Temporary agents are staff of the joint undertaking:
                                       -  See article 19 of the Council Regulation (EU) 2021/2085 establishing the Joint
                                          Undertakings under Horizon Europe
External staff                         External staff at the European Commission:
                                       -  Supervision of the Chips Joint Undertaking
                                       -  Conducting investigations, audits and other analysis
                                       -  Administrative support to the European Semiconductor Board and organisation of
                                          meetings, preparation of opinions and other support to the European
                                          Semiconductor Board
                                       External staff at the joint undertaking:
                                       -  See article 19 of the Council Regulation (EU) 2021/2085 establishing the Joint
                                          Undertakings under Horizon Europe
EN                                                                                           89                                                                      EN
 ---pagebreak---   3.2.4.    Compatibility with the current multiannual financial framework
            The proposal/initiative:
                 can be fully financed through redeployment within the relevant heading of the Multiannual
                Financial Framework (MFF).
                                                                                   Amount
   From line                                                                         (EUR         To Line
                                                                                   million)
   01 02 03 01      European Innovation Council                                     300.000       earmarked
   01 02 02 30      Cluster Civil Security for Society                              150.000      01 02 02 42
   01 02 02 40      Cluster Digital, Industry and Space                             400.000      01 02 02 42
   01 02 02 40      Cluster Digital, Industry and Space                             400.000      02 04 06 11
                    Horizon Europe Programme — Key Digital
   01 02 02 42                                                                      500.000       earmarked
                    Technologies joint undertaking
   01 02 02 50      Cluster Climate, Energy and mobility                            300.000      01 02 02 42
   Subtotal HE      Horizon Europe Programme                                      2,050.000
   02 03 01         Connecting Europe Facility (CEF) — Transport                    250.000      02 04 06 11
   02 03 03 01      Connecting Europe Facility (CEF) — Digital                      150.000      02 04 06 11
   Subtotal CEF     Connecting Europe Facility (CEF)                                400.000
   02 04 01 10      Digital Europe programme - Cybersecurity                         60.000      02 04 06 11
                    Digital Europe programme - European Cybersecurity
    02 04 01 11                                                                      60.000      02 04 06 11
                    Industrial, Technology and Research Competence Centre
                    Digital Europe programme - High-Performance
   02 04 02 11                                                                      150.000      02 04 06 11
                    Computing joint undertaking (EuroHPC)
   02 04 03         Digital Europe programme - Artificial intelligence              220.000      02 04 06 11
   02 04 04         Digital Europe programme - Skills                                60.000      02 04 06 11
   02 04 05         Digital Europe programme - Deployment                            50.000      02 04 06 11
   Subtotal DEP     Digital Europe programme                                        600.000
                    Total                                                         3,050.000
                 requires use of the unallocated margin under the relevant heading of the MFF and/or use of
                the special instruments as defined in the MFF Regulation.
            Explain what is required, specifying the headings and budget lines concerned, the corresponding amounts, and the
            instruments proposed to be used.
                                                                                   Amount To Line
                                                                                     (EUR
EN                                                                                       1
 ---pagebreak---                                                                                           million)
       -                Unallocated margin Heading 1                                        250.000   02 04 06 11
                      requires a revision of the MFF.
                 Explain what is required, specifying the headings and budget lines concerned and the corresponding amounts.
                                                                                                EUR million (to three decimal places)
      3.2.5.     Third-party contributions
                 The proposal/initiative:
                      does not provide for co-financing by third parties
                      provides for the co-financing by third parties estimated below:
                                                                             Appropriations in EUR million (to three decimal places)
                            2021        2022        2023       2024       2025        2026       2027      Total
Participating States                               489.307    700.182    629.865     270.996    260.801   2,351.152
TOTAL appropriations
                                                   489.307    700.182    629.865     270.996    260.801   2,351.152
co-financed
      Participating States are expected to contribute an amount to the additional operational expenditure that is
      commensurate to the Union contribution.
      Members other than the Union are not expected to contribute to the additional administrative costs of the
      JU.
EN                                                                                               2
 ---pagebreak---         3.3.       Estimated impact on revenue
                       The proposal/initiative has no financial impact on revenue.
                       The proposal/initiative has the following financial impact:
                           on own resources
                           on other revenue
                          please indicate, if the revenue is assigned to expenditure lines 
                                                                 EUR million (to three decimal places)
                                                                                                        80
                            Appropriations                             Impact of the proposal/initiative
                             available for
Budget revenue line:
                              the current      Year       Year        Year         Year       Enter as many years as necessary to show
                            financial year      N         N+1         N+2          N+3         the duration of the impact (see point 1.6)
Article ………….
                   For assigned revenue, specify the budget expenditure line(s) affected.
                   […]
                   Other remarks (e.g. method/formula used for calculating the impact on revenue or any other information).
                   […]
                                                               ANNEX
                      to the LEGISLATIVE FINANCIAL STATEMENT
                                                       Name of the proposal/initiative:
        Proposal for a Regulation of the European Parliament and of the Council establishing a framework of
        measures for strengthening Europe’s semiconductor ecosystem (Chips Act) and the proposal for a
        Council Regulation amending Council Regulation (EU) 2021/2085 establishing the Joint Undertakings
        under Horizon Europe
        1 NUMBER and COST of HUMAN RESOURCES CONSIDERED NECESSARY
        2.COST of OTHER ADMINISTRATIVE EXPENDITURE
        3 TOTAL ADMINISTRATIVE COSTS
        4 METHODS of CALCULATION USED for ESTIMATING COSTS
        80
                 As regards traditional own resources (customs duties, sugar levies), the amounts indicated must be net amounts, i.e.
                 gross amounts after deduction of 20 % for collection costs.
EN                                                                                                    3
 ---pagebreak---            4.1     Human resources
           4.2     Other administrative expenditure
  This annex must accompany the legislative financial statement when the inter-services consultation is launched.
  The data tables are used as a source for the tables contained in the legislative financial statement. They are strictly
  for internal use within the Commission.
EN                                                                                    4
 ---pagebreak---         1          COST OF HUMAN RESOURCES CONSIDERED NECESSARY
                                   The proposal/initiative does not require the use of human resources
                                   The proposal/initiative requires the use of human resources, as explained below:
                                                                                                                                                          EUR million (to three decimal places)
           HEADING 7                    Year 2021            Year 2022            Year 2023            Year 2024             Year 2025            Year 2026            Year 2027            TOTAL
   of the multiannual financial
                                    FTE   Appropriations FTE   Appropriations FTE   Appropriations FTE    Appropriations FTE   Appropriations FTE   Appropriations FTE   Appropriations FTE  Appropriations
            framework
 Establishment plan posts (officials and temporary staff)
20 01 02 01 -               AD                                                  5      0.785        5        0.785         5      0.785        5       0.785        5       0.785               3.925
Headquarters and
Representation offices     AST
20 01 02 03 - Union        AD
Delegations                AST
 External staff  81
20 02 01 and 20 02 02       AC                                                 4       0.340        4        0.340        4       0.340        4       0.340        4       0.340               1.700
– External personnel –
                           END
Headquarters       and
Representation offices     INT
                            AC
20 02 03 – External         AL
personnel - Union          END
Delegations                INT
                           JPD
Other HR related
budget lines (specify)
    Subtotal HR –
                                                                               9       1.125        9        1.125        9       1.125        9        1.125       9        1.125             5.625
      HEADING 7
The human resources required will be met by staff from the DG who are already assigned to management of the action and/or have been redeployed within the DG, together if necessary with any additional
allocation which may be granted to the managing DG under the annual allocation procedure and in the light of budgetary constraints.
        81
                 AC = Contract Staff; AL = Local Staff; END = Seconded National Expert; INT= agency staff; JPD= Junior Professionals in Delegations.
EN                                                                                                       5                                                                                                  E
 ---pagebreak---                                                                                                                                                                               Year 2027 and
        Outside HEADING 7                      Year 2021             Year 2022             Year 2023             Year 2024            Year 2025            Year 2026
                                                                                                                                                                               subsequent
                                                                                                                                                                                                      TOTAL
     of the multiannual financial
             framework                     FTE   Appropriations  FTE    Appropriations FTE    Appropriations FTE   Appropriations FTE   Appropriations FTE    Appropriations FTE   Appropriations FTE  Appropriations
 Establishment plan posts (officials and temporary staff)
01 01 01 01 Indirect AD
Research82
01 01 01 11 Direct Research        AST
Other (please specify)
 External staff 83
                                    AC
                  - at
                                   END
External staff    Headquarters
                                    INT
from
operational                         AC
appropriations                       AL
(former ‘BA’      - in Union
                                   END
lines).           delegations
                                    INT
                                   JPD
01 01 01 02 Indirect Research       AC
01 01 01 12 Direct research        END
Other (please specify)84            INT
Other budget lines HR related
(specify)
   Subtotal HR – Outside
          HEADING 7
          82
                    Please choose the relevant budget line, or specify another if necessary; in case more budget lines are concerned, staff should be differentiated by each budget line concerned
          83
                    AC = Contract Staff; AL = Local Staff; END = Seconded National Expert; INT= agency staff; JPD= Junior Professionals in Delegations.
          84
                    Please choose the relevant budget line, or specify another if necessary; in case more budget lines are concerned, staff should be differentiated by each budget line concerned
  EN                                                                                                             6                                                                                                    E
 ---pagebreak---  Total HR (all MFF
                                                                             9       1.125        9      1.125         9        1.125       9         1.125   9        1.125                5.625
    Headings)
   The human resources required will be met by staff from the DG who are already assigned to management of the action and/or have been redeployed within the DG, together if necessary with
   any additional allocation which may be granted to the managing DG under the annual allocation procedure and in the light of budgetary constraints.
EN                                                                                                  7                                                                                             E
 ---pagebreak---         2            COST OF OTHER ADMINISTRATIVE EXPENDITURE
                                      The proposal/initiative does not require the use of administrative appropriations
                                      The proposal/initiative requires the use of administrative appropriations, as explained below:
                                                                                                                                                         EUR million (to three decimal places)
                       HEADING 7
                                                                Year N85         Year N+1            Year N+2           Year N+3           Year N+4         Year N+5          Year N+7           Total
        of the multiannual financial framework
At headquarters or within EU territory:
20 02 06 01 - Mission and representation expenses
20 02 06 02 - Conference and meeting costs
20 02 06 03 - Committees86
20 02 06 04 Studies and consultations
20 04 – IT expenditure (corporate)87
Other budget lines non-HR related (specify where
necessary)
In Union delegations
20 02 07 01 - Missions, conferences and representation
expenses
20 02 07 02 - Further training of staff
20 03 05 – Infrastructure and logistics
Other budget lines non-HR related (specify where
necessary)
             Subtotal Other - HEADING 7
        of the multiannual financial framework
        85
                   Year N is the year in which implementation of the proposal/initiative starts. Please replace "N" by the expected first year of implementation (for instance: 2021). The same for
                   the following years
        86
                   Specify the type of committee and the group to which it belongs.
        87
                   The opinion of DG DIGIT – IT Investments Team is required (see the Guidelines on Financing of IT, C(2020)6126 final of 10.9.2020, page 7)
 EN                                                                                                            8
 ---pagebreak---                                                                                                                                                           EUR million (to three decimal places)
                  Outside HEADING 7
                                                               Year 2021       Year 2022         Year 2023        Year 2024        Year 2025         Year 2026         Year 2027          Total
         of the multiannual financial framework
Expenditure on technical and administrative assistance
(not including external staff) from operational
appropriations (former 'BA' lines):
   - at Headquarters
   - in Union delegations
Other management expenditure for research
Policy IT expenditure on operational programmes88
Corporate IT expenditure on operational programmes89
Other budget lines non-HR related (specify where
necessary)
        Sub-total Other – Outside HEADING 7
         of the multiannual financial framework
       Total Other admin expenditure (all MFF
                        Headings)
         88
                  The opinion of DG DIGIT – IT Investments Team is required (see the Guidelines on Financing of IT, C(2020)6126 final of 10.9.2020, page 7)
         89
                  This item includes local administrative systems and contributions to the co-financing of corporate IT systems (see the Guidelines on Financing of IT, C(2020)6126 final of
                  10.9.2020)
EN                                                                                                         9
 ---pagebreak---          3          TOTAL ADMINISTRATIVE COSTS (ALL HEADINGS MFF)
                                                                                                                                                                 EUR million (to three decimal places)
                       Summary                                 Year 2021        Year 2022         Year 2023         Year 2024       Year 2025         Year 2026         Year 2027           Total
Heading 7 - Human Resources                                                                          1.125            1.125           1.125              1.125            1.125             5.625
Heading 7 – Other administrative expenditure
                 Sub-total Heading 7                                                                 1.125            1.125           1.125              1.125            1.125             5.625
Outside Heading 7 – Human Resources (Title 1 JU)
Outside Heading 7 – Other administrative expenditure
(Title 2 JU)
              Sub-total Other Headings
                         TOTAL
                                                                                                     1.125            1.125           1.125             1.125             1.125              5.625
        HEADING 7 and Outside HEADING 7
           The administrative appropriations required will be met by the appropriations which are already assigned to management of the action and/or which have been redeployed, together if
               necessary with any additional allocation which may be granted to the managing DG under the annual allocation procedure and in the light of existing budgetary constraints.
EN                                                                                                          10
 ---pagebreak---    4            METHODS OF CALCULATION USED TO ESTIMATE COSTS
   4.1          Human resources
          This part sets out the method of calculation used to estimate the human resources considered necessary
    (workload assumptions, including specific jobs (Sysper 2 work profiles), staff categories and the corresponding
                                                             average costs)
   HEADING 7 of the multiannual financial framework
                         NB: The average costs for each category of staff at Headquarters are available on BudgWeb:
                     https://myintracomm.ec.europa.eu/budgweb/EN/pre/legalbasis/Pages/pre-040-020_preparation.aspx
    Officials and temporary staff
   Full-time equivalents multiplied by average costs (€ 157 000)
    External staff
   Full-time equivalents multiplied by average costs (€ 85 000)
   Outside HEADING 7 of the multiannual financial framework
    Only posts financed from the research budget
    External staff
   4.2          Other administrative expenditure
                                    Give details of the method of calculation used for each budget line
               and in particular the underlying assumptions (e.g. number of meetings per year, average costs, etc.)
   HEADING 7 of the multiannual financial framework
   Outside HEADING 7 of the multiannual financial framework
EN                                                                   11                                             EN
 ---documentbreak---                           EUROPEAN
                          COMMISSION
                                                  Brussels, 8.2.2022
                                                  COM(2022) 46 final
                                                  ANNEXES 1 to 3
                                      ANNEXES
                                         to the
   PROPOSAL FOR A REGULATION OF THE EUROPEAN PARLIAMENT AND OF
                                    THE COUNCIL
     establishing a framework of measures for strengthening Europe's semiconductor
                                       ecosystem
                                      (Chips Act)
EN                                                                                 EN
 ---pagebreak---                                       ANNEX I
                                     ACTIONS
                Technical description of the Initiative: scope of actions
The initial and, where appropriate, subsequent actions of the Initiative shall be
implemented in accordance with the following technical description:
1.      Design capacities for integrated semiconductor technologies
        The Initiative shall build up large-scale innovative design capacities for
        integrated semiconductor technologies through a virtual platform available
        across the Union. The platform will consist of new innovative design
        facilities with extended libraries and tools, integrating a large number of
        existing and new technologies (including emerging technologies such as
        integrated photonics, quantum and AI / neuromorphic). In combination with
        existing EDA design tools, it will allow to design innovative components and
        new system concepts and demonstrate key functionalities such as new
        approaches to high performance, low energy, security, new 3D and
        heterogeneous system architectures, etc.
        Working closely with the user industries from a variety of economic sectors,
        the platform will connect the communities of design houses, IP and tool
        suppliers, with RTOs to provide virtual prototype solutions based on co-
        development of technology. Risks and development costs will be shared and
        new web-based methods of accessing design tools, with flexible cost models
        (especially for prototyping) and common interface standards will be
        promoted.
        The platform shall be continuously upgraded with new design capabilities as
        it continuously integrates more and more technologies and designs for low-
        power processors (including open-source, such as RISC-V). It will offer its
        services via the cloud, maximising access and openness to the whole
        community by networking existing and new design centres across the
        Member States.
2.      Pilot Lines for preparing for innovative production, and testing and
        experimentation facilities
        The Initiative shall support pilot lines for production and testing and
        experimentation facilities bridging the gap from the lab to the fab of
        advanced semiconductor technologies. Focus areas include:
        (a) Pilot lines to experiment, test, and validate, including through Process
             Design Kits, the performance of IP blocks, virtual prototypes, new
             designs and novel integrated heterogeneous systems in an open and
             accessible way.
             The virtual platform above will allow design exploration of new IP
             blocks and new system concepts to be tested and validated on the pilot
             lines through early Process Design Kits, providing immediate feedback
 ---pagebreak---         to refine and improve the models before transfer to manufacturing. From
        the start, the Initiative will expand several existing pilot lines, in synergy
        with the design infrastructure, to enable access for design and (virtual)
        prototyping projects.
   (b) New pilot lines on semiconductor technologies such as FD-SOI down to
        10-7 nm, advanced Gate-All-Around and leading-edge nodes (e.g. below
        2 nm), complemented by pilot lines for 3D heterogeneous systems
        integration and advanced packaging. The pilot lines will be integrating
        the latest research and innovation activities and their results.
        The pilot lines will include a dedicated design infrastructure consisting
        for example of design models simulating the fabrication process for the
        design tools used to design circuits and systems-on-chip. This design
        infrastructure and a user-friendly virtualisation of the pilot lines will be
        set up that will make them directly accessible throughout Europe via the
        design platform above. Such link will enable the design community to
        test and validate technology options before these become commercially
        available. It will ensure that new chip and system design fully exploit the
        potential of new technologies and deliver cutting edge innovation.
        Together, these pilot lines will advance European IP, skills and
        innovation in semiconductor manufacturing technology and will
        reinforce and expand the European position in new manufacturing
        equipment and materials for advanced semiconductor technology
        modules, such as e.g. lithography and wafer technologies.
        Close concertation and collaboration with industry shall be organised to
        guide this capacity expansion and the critical inclusion from the start of
        selected qualified pilot lines involving for example advanced packaging,
        3D heterogeneous integration technology and important additional
        functionalities like e.g., silicon photonics, power electronics, sensing
        technologies, silicon graphene, quantum technologies, etc. This powerful
        extended pan-European pilot line infrastructure, intimately connected
        with the design enablement infrastructure, is fundamental for expanding
        Europe’s knowledge, capacity and capabilities to close the innovation
        gap from publicly funded research to commercially funded
        manufacturing, and to increase both demand and manufacturing in
        Europe by the end of the decade.
3. Advanced Technology and Engineering Capacities for quantum chips
   The Initiative shall address the specific needs of the future generation of
   information processing components exploiting non-classical principles,
   notably chips exploiting quantum effects (i.e. quantum chips) based on
   research activities. Focus areas include:
   (a)    Innovative design libraries for quantum chips building on the design
          and fabrication processes of the well-established processes of the
          classical semiconductor industry for semiconductor- and photonics-
          based qubit platforms; complemented by the development of
          innovative and advanced design libraries and fabrication processes for
 ---pagebreak---          the alternative qubit platforms that are not compatible with
         semiconductors.
   (b)   Pilot lines for the integration of quantum circuits and control
         electronics for building quantum chips building on and capitalising on
         ongoing research; and, for providing access to dedicated clean rooms
         and foundries for prototyping and production, reducing the entry-
         barrier for the development and production of small volumes of
         quantum components and accelerating the innovation cycles.
   (c)   Testing and experimentation facilities for testing and validating
         advanced quantum components produced by the pilot lines, closing the
         innovation feedback loop between designers, producers and users of
         quantum components.
4. A network of competence centres and skills development
   The Initiative shall support:
   (a)   The creation of a network of competence centres in each Member State
         to promote the use of these technologies, acting as interfaces to the
         above-mentioned advanced design platform and pilot lines, facilitating
         their effective use, and providing expertise and skills to the
         stakeholders, including end-user SMEs. Competence centres will
         provide innovative services to industry, with particular attention to
         SMEs, academia and public authorities delivering tailored solutions to
         a wide variety of users that will foster wider uptake of design and
         advanced technology in Europe. They will also assist in growing a
         highly skilled work force in Europe.
   (b)   On skills, specific training actions will be organised around design
         tools and semiconductor technologies at a local, regional or pan-
         European level. Scholarships for graduate studies will be supported.
         These actions will complement industrial commitments under the Pact
         for Skills, increasing the number of internships and apprenticeships, in
         collaboration with academia. Attention will also be paid to reskilling
         and upskilling programs for workers transferring from other sectors.
5. ‘Chips Fund’ activities for access to capital by start-ups, scale-ups, SMEs
   and other companies in the semiconductor value chain
   The Initiative shall support the creation of a thriving semiconductor and
   quantum innovation ecosystem by supporting wide access to venture capital
   for start-ups, scale-ups and SMEs to grow their business and expand their
   market presence in a sustainable manner.
 ---pagebreak---                                        ANNEX II
    MEASURABLE INDICATORS TO MONITOR THE IMPLEMENTATION
           AND TO REPORT ON THE PROGRESS OF THE INITIATIVE
              TOWARDS THE ACHIEVEMENT OF ITS OBJECTIVES
1. The number of legal entities involved (subdivided by size, type and country of
    establishment) in the actions supported by the Initiative.
2. The number of design tools developed or integrated under the Initiative.
3. The total amount co-invested in design capacities and pilot lines under the
    Initiative.
4. The number of users or user communities getting access to design capacities
    and pilot lines under the Initiative.
5. The number of businesses, which have used the services of national
    competence centres supported by the Initiative.
6. The number of persons who have received training to acquire advanced skills
    and training on semiconductor and quantum technologies supported by the
    Initiative.
7. The number of start-ups, scale-ups and SMEs who have received venture
    capital from the ‘Chips Fund’ activities and the total amount of capital
    investments made.
8. The amount of investment by companies operating in the EU, taking into
    consideration the segment of the value chain in which they operate.
 ---pagebreak---                                       ANNEX III
                  SYNERGIES WITH UNION PROGRAMMES
1. Synergies of the Initiative with the Specific Objectives 1 to 5 of the Digital
    Europe Programme shall ensure that:
    (a)  The targeted thematic focus of the Initiative on semiconductor and
         quantum technologies is complementary;
    (b)  Digital Europe Programme specific objectives 1 to 5 support digital
         capacity building in the advanced digital technologies including High
         Performance Computing, Artificial Intelligence, and cybersecurity;
         and, it also supports advanced digital skills;
    (c)  The Initiative will invest in capacity building to reinforce advanced
         design, production and systems integration capabilities in cutting-edge
         and next-generation semiconductor and quantum technologies for
         innovative       business     development,      strengthening    Europe's
         semiconductor supply and value chains, serving key industrial sectors
         and creating new markets.
2.  Synergies with the Horizon Europe shall ensure that:
    (a)  although thematic areas addressed by the Initiative and several areas of
         Horizon Europe converge, the type of actions to be supported, their
         expected outputs and their intervention logic are different and
         complementary;
    (b)  Horizon Europe provides extensive support for research, technological
         development, demonstration, piloting, proof-of-concept, testing and
         prototyping, including pre-commercial deployment of innovative
         digital technologies, in particular through:
         (i)    a dedicated budget in the pillar ‘Global Challenges and European
                Industrial Competitiveness’ for the cluster ‘Digital, Industry and
                Space’ to develop enabling technologies (AI and robotics, Next
                Generation internet, High Performance Computing and Big Data,
                key digital technologies (incl. microelectronics), combining
                digital with other technologies);
         (ii)   support to research infrastructures under the pillar ‘Excellent
                Science’;
         (iii) the integration of digital across all the Global Challenges (health,
                security, energy and mobility, climate, etc.); and
         (iv) support for scale-up breakthrough innovations under the pillar
                ‘Innovative Europe’ (many of which will combine digital and
                other technologies).
    (c)  the Initiative is exclusively focusing on building large-scale capacities
         in semiconductor and quantum technologies across Europe. It will
         invest in:
 ---pagebreak---          (i)    fostering innovation by supporting two closely interlinked
                technological capacities that enable designing novel system
                concepts and their testing and validation in pilot lines.
         (ii)   providing targeted support to build training capacity and enhance
                applied advanced digital competences and skills to support
                development and deployment of semiconductors by technology
                development and end-user industries; and
         (iii) a network of national competence centres, which facilitate access
                and provide expertise and innovation services to end-user
                communities and industries, to develop new products and
                applications and to address market failures.
   (d)   the technology capacities of the Initiative will be made available to the
         research and innovation community, including for actions supported
         through Horizon Europe;
   (e)   as the development of novel digital technologies in the area of
         semiconductors matures through Horizon Europe, those technologies
         where possible progressively will be taken up and deployed by the
         Initiative;
   (f)   Horizon Europe programmes for the development of skills and
         competencies curricula, including those delivered at the co-location
         centres of the EIT’s KICs, are complemented by capacity-building in
         advanced applied digital skills and competences in semiconductor and
         quantum technologies supported by the Initiative;
   (g)   strong coordination mechanisms for programming and implementation
         are put in place, aligning all procedures for both the Horizon Europe
         Programme and the Initiative to the extent possible. Their governance
         structures will involve all Commission concerned services.
3. Synergies with Union programmes under shared management, including the
   ERDF, ESF+, the European Agricultural Fund for Rural Development
   and the European Maritime, Fisheries and Aquaculture Fund, shall
   ensure the development and strengthening of regional and local innovation
   ecosystems, industrial transformation, as well as the digital transformation of
   society and of public administrations. This includes support for the digital
   transformation of industry and the take-up of results, as well as the rolling
   out of novel technologies and innovative solutions. The Initiative will
   complement and support the trans-national networking and mapping of
   capacities it will support and make them accessible to SMEs and end-user
   industries in all Union regions.
4. Synergies with the Connecting Europe Facility shall ensure that:
   (a)   the Initiative focuses on large-scale digital capacity and infrastructure
         building in the areas of semiconductors aiming at the wide uptake and
         deployment across Europe of critical existing or tested innovative
         digital solutions within a Union framework in areas of public interest
         or market failure. The Initiative is mainly to be implemented through
         coordinated and strategic investments with Member States, in building
         digital capacities in semiconductor technologies to be shared across
 ---pagebreak---           Europe and in Union-wide actions. This is particularly relevant in
          electrification and autonomous driving, and should benefit and
          facilitate the development of more competitive end-use industries,
          particularly in the mobility and transport sectors;
     (b) the capacities and infrastructures of the Initiative are to be made
         available to testing of innovative new technologies and solutions that
         can be taken up in the mobility and transport industries. The Connecting
         Europe Facility is to support the roll-out and deployment of innovative
         new technologies and solutions in the field of mobility and transport as
         well as in other domains;
   (c)    coordination mechanisms are to be established, in particular through
          appropriate governance structures.
5. Synergies with InvestEU Programme shall ensure that:
   (a)    support through market-based financing, including pursuing policy
          objectives under the Initiative is provided under Regulation (EU)
          2021/523; such market-based financing might be combined with the
          grant support;
     (b) a blending facility under the InvestEU Fund is supported by financing
         provided by the Horizon Europe Programme or the Digital Europe
         Programme in the form of financial instruments within blending
         operations.
6. Synergies with Erasmus+ shall ensure that:
   (a)    the Initiative supports the development and acquisition of the advanced
          digital skills needed for the development and deployment of cutting-
          edge semiconductor technologies in cooperation with relevant
          industries;
   (b)    the advanced skills part of Erasmus+ complements the interventions of
          the Initiative, addressing the acquisition of skills in all domains and at
          all levels through mobility experiences.
7. Synergies with other Union programmes and initiatives on competencies and
   skills shall be ensured.