EU joins flea race with €42 billion bid to rival Asia

The production of semiconductors, also called chips, has become a strategic priority in Europe as in the United States, after the shock of the pandemic which stifled supply – Copyright AFP François WALSCHAERTS

Alex Pigman

The EU is launching a plan on Tuesday to raise tens of billions of euros to boost production of semiconductors in Europe and end the bloc’s digital dependence on Asia.

The production of semiconductors, also called chips, has become a strategic priority in Europe and the United States, after the shock of the pandemic stifled supplies, immobilized factories and emptied stores of products.

Chipmaking overwhelmingly takes place in Taiwan, China and South Korea and the 27 member states of the European Union want factories and companies inside the bloc to play a bigger role.

Thierry Breton, the EU’s industry commissioner, will urge Europeans on Tuesday to be as ambitious as possible and match similar plans in the United States, where the Biden administration is asking Congress to approve $52 billion.

Visiting the IMEC chip research center in Belgium on Monday, Breton boasted that the plan “will position Europe as an industry leader but also give us complete control of our semi -conductors”.

“The EU will equip itself with the means to guarantee its security of supply, as the United States does for example,” he declared, in a separate briefing to journalists.

“Europe will remain an open continent, but on its own terms,” ​​he said, referring to a “paradigm shift” in Europe’s approach to highly strategic supplies such as semiconductors.

If approved, the EU plans could generate a total of 42 billion euros ($48 billion) through existing EU budget funds as well as by relaxing existing rules on state subsidies for Member States.

The main goal of the chip crusade will be to double Europe’s semiconductor capacity from 10% of global value today to 20% by 2030.

The proposal will need to be approved by EU member states and the European Parliament, where opinions will vary between the ambitions of industrial heavyweights such as Germany, France and Italy and those of smaller states fearful of shutting down valuable supply chains with Asia.

– Race for subsidies –

Some member states, led by the Netherlands and the Nordics, will also resist any plans to widen the scope of state aid, with the commission set to make it easier for EU governments to inject cash to chip makers.

“We don’t want to end up in a situation where a huge US company gets a lot of money from the EU to open a factory in a big member state,” an EU diplomat said.

But the pressure on Europe to act quickly is strong, with South Korea also promising huge sums of subsidies to expand its chip business.

These payments will likely dwarf anything Europe has to offer. In Taiwan, chip behemoth TSMC plans to spend between $40 billion and $44 billion over the next 12 months on new factories.

With the new priority, it appears manufacturers are looking for the best deal as they seek locations for new factories.

Intel, the US-based chipmaker, is set to announce a major investment in Europe, with major destinations possible including Germany, France and Italy.

CEO Pat Gelsinger told German media that his decision hinged not just on issues of suitable locations and personnel “but also on the grants available to build the factories”.

“We have also secured considerable subsidies for our factories in Asia,” Gelsinger said.

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