News on January 25, the Industry and Energy Committee of the European Parliament voted on the 24th local time to pass the legislative report on the draft of the European Chip Act and its amendments, including an amendment requiring the EU to carry out "chip diplomacy" and cooperate with strategic partners such as Taiwan, the United States, Japan, and South Korea to ensure supply chain security. At the same time, the meeting also adopted a joint initiative on chips to increase investment in the development of such European ecosystems.
News on January 25, the Industry and Energy Committee of the European Parliament voted on the 24th local time to pass the legislative report on the draft of the European Chip Act and its amendments, including an amendment requiring the EU to carry out "chip diplomacy" and cooperate with strategic partners such as Taiwan, the United States, Japan, and South Korea to ensure supply chain security. At the same time, the meeting also adopted a joint initiative on chips to increase investment in the development of such European ecosystems.
The draft European Chip Act and its amendments were adopted
Since the shortage of global semiconductor supply during the epidemic, there has been a continuous chip supply disruption, which has also directly affected the development of many industries and economies around the world. Including automotive, energy, communications and health, as well as strategic sectors such as defense, security and aerospace, are threatened by chip supply disruptions. To this day, the aftermath of the chip shortage remains. For example, Volvo Cars' plant in Ghent, Belgium, announced on the 20th that it would stop work for a week due to chip shortages.
In this context, governments in Europe and the United States have also regarded chips as important strategic materials in recent years, and have proposed relevant bills to strengthen supply chain autonomy.
In February 2022, the European Commission published a draft Framework of measures for strengthening Europe's semiconductor ecosystem (EU Chips Act) and sent it to the European Parliament for review.
According to the bill, the EU will invest more than 45 billion euros in public and private funds to support chip manufacturing, pilot projects and start-ups in the EU, hoping to increase Europe's share of the global semiconductor market from less than 10% at present to 20%, reducing its dependence on Asia and the United States.
In November 2022, an agreement was reached within the EU to provide a matching €43 billion for the previously proposed European Chip Act, although it was somewhat reduced from the previous forecast of 45 billion euros, but representatives of member states agreed to the amendments to the proposal.
On January 24, 2023, in the voting of the Committee on Industry and Energy of the European Parliament, the draft European Chip Act and the amendments proposed by the parliamentary groups were adopted by an overwhelming vote of 67 votes in favor and 1 against.
According to the latest draft of the European Chip Act and its amendments, the European chip strategy is formulated around five strategic objectives:
(1) strengthening European research and technological leadership;
(2) Build and strengthen its own innovation capabilities in advanced chip design, manufacturing and packaging, and translate them into commercial products;
(3) develop an appropriate framework to significantly increase production capacity by 2030 (to 20% of global semiconductor capacity);
(4) address the acute skills shortage, attract new talent and support the emergence of skilled labour;
(5) In-depth understanding of the global semiconductor supply chain.
The latest draft of the European Chip Act and its amendments propose several key measures to strengthen the EU semiconductor industry:
(1) Establish the European Chip Initiative, which aims to strengthen the competitiveness, resilience and innovation capacity of the EU. The initiative aims to support large-scale technological capabilities in the establishment of an alliance of existing, advanced and next-generation semiconductor technologies. The initiative will:
– strengthen European design capacity by establishing an innovative virtual design platform that will be accessible in an open, non-discriminatory and transparent manner;
- Support pilot projects to provide third parties with the means to test, validate and further develop their designed products under open, transparent and non-discriminatory conditions;
- Promote the development of advanced technologies and engineering capabilities to accelerate the innovative development of quantum chips;
- Support the network of competence centres across the EU to provide expertise and enhance the skills of stakeholders;
- Support the activities of chip funds, which will facilitate access to financing for start-ups, help them mature and innovate and attract investors.
The Regulation provides a procedural framework to promote co-financing by Member States, investments without prejudice to State aid rules, EU budgets and private investment.
(2) A new framework for ensuring security of supply: Attract investment to increase production capacity in semiconductor manufacturing, advanced packaging, testing and assembly through state-of-the-art integrated circuit production facilities and open EU wafer foundries.
In particular, the proposal sets out criteria for promoting the implementation of specific projects that contribute to the security of supply of semiconductors in the EU. Facilities identified by the European Commission as EU Integrated Production Facility or EU Open Fab will be deemed to contribute to the security of EU semiconductor supply and thus serve the public interest.
(3) Establish coordination mechanisms between member states and committees to monitor semiconductor supply and respond to crisis situations in case of semiconductor shortages.
This mechanism will strengthen cooperation with member countries to monitor semiconductor supply, estimate demand, forecast shortages, trigger the initiation of crisis phases, and act through a dedicated toolbox of measures.
The crisis response mechanism will allow the Commission to assess risks to EU semiconductor supply and early warning indicators from member states that could trigger an EU-wide alert. This would enable the Committee to implement urgent measures, such as prioritizing the supply of particularly affected products or undertaking joint procurement for Member States.
Chip Act rapporteur Dan Nica (S&D, RO) SAID: "We hope that the European Chip Act will establish Europe as a significant player in the global semiconductor sector. Not only does the budget need to be commensurate with the challenges and funded with new funding, but we want to ensure that the EU is leading the way in research and innovation, with a business-friendly environment, a fast licensing process and investment in a skilled workforce in the semiconductor industry. Our goal is to ensure Europe's growth, prepare for future challenges and put the right mechanisms in place for future crises".
Eva Maydell (EPP, BG), Chip Joint Project Rapporteur, said: "Microchips are an integral part of the EU's digital and green transition and our geopolitical agenda. We are calling for new funding to reflect the strategic importance of the European chip industry. Partners and competitors in Europe are also investing heavily in their semiconductor facilities, skills and innovation. We may not have the financial resources of the United States, but the budget provided by the Commission and the Council needs to reflect the magnitude of the challenge."
"Chip diplomacy" with the United States, Japan, South Korea, and Taiwan
In addition to promoting semiconductor R&D and innovation, setting early warning indicators for supply chain crises, etc., the European Chip Act passed this time also has provisions on third-party cooperation.
Article 7 of the European Chip Act states that due to the global nature of the semiconductor supply chain, cooperation with third parties is an important condition for the EU to seek the resilience of the semiconductor ecosystem, so the Executive Committee should establish partnerships with third parties with the assistance of the European Semiconductor Board.
Several lawmakers, including Nicola Beer, vice president of the European Parliament, who visited Taiwan last year, have proposed similar amendments to the article to explicitly include "third-party cooperation", including Taiwan, the United States, Japan and South Korea.
The consolidated version of the amendments adopted by the Industry and Energy Commission adds Article 7(a), which states: "The Executive Board, on behalf of the EU, shall seek to cooperate with like-minded strategic partners, such as the United States, Japan, South Korea and Taiwan, which have advantages in the semiconductor industry, through the 'Chip Diplomacy Initiative' to strengthen security of supply, deal with chain disruptions, and cover dialogue and coordination in areas such as chip raw materials and third-country export controls." ”
The clause requires the EU to establish a mechanism for "chip diplomacy" and establish investment and trade agreements or other diplomatic measures with partners to strengthen relations to ensure chip security.
It is worth noting that the EU has been actively promoting TSMC to build fabs in Europe. At the recent TSMC legal conference, TSMC President Wei Zhejia also confirmed for the first time at the legal conference that TSMC is evaluating the possibility of building a fab for vehicles in Europe.
Wei Zhejia revealed, "In Europe, we are in contact with customers and partners to evaluate the possibility of establishing special process fabs focused on automotive technologies based on customer needs and the level of government support. ”
A delegation from TSMC traveled to Saxony, Germany, last October to discuss the possibility of building a fab there, and a few weeks later, TSMC said it had "no plans to build a factory in Europe at this time, but it does not rule out any possibility." Subsequently, TSMC also sent senior personnel to Dresden, Germany to understand the feasibility of building a factory there.
According to the Financial Times, TSMC will send an additional delegation to Germany this year to make a "final decision" on whether to spend billions of dollars to build a factory that is expected to begin construction "as early as 2024."
It is understood that Dresden is the capital of the eastern German state of Sachsen, which has the largest semiconductor cluster in Europe, so it has the alias of "Silicon Saxony". Infineon, NXP, Global Foundries, Bosch and other major wafer manufacturing fabs have local factories.
European Chip Initiative
In another vote on the 24th, MEPs passed the Chips Joint Undertaking proposal with 68 votes in favor, 0 against and 4 abstentions to implement the relevant foreseen measures.
Specifically, Chip Joint Undertaking builds on the Horizon Europe initiative, which will establish joint ventures under the program to support large-scale capacity building and promote the development of cutting-edge and next-generation semiconductor technologies by investing in EU-wide and publicly accessible research, development and innovation infrastructure.
Chip Joint Undertaking will bring together resources from the European Union, including the Horizon Europe and Digital Europe programs, member states and third countries and regions associated with existing alliance programs, and the private sector.
The overall goal focuses on increasing the mass manufacturing capabilities of the entire consortium in cutting-edge and next-generation semiconductor technologies, while the four specific goals focus on building large-scale design capabilities for integrated semiconductor technologies, strengthening existing and developing new pilot lines, building advanced technology and engineering capabilities to accelerate the development of quantum chips, and establishing a network of competence centers in Europe.
The EU budget will support the European Chip Initiative for a total of €3.3 billion, including €1.65 billion through the Horizon Europe program and €1.65 billion through the Digital Europe program. Of this total, EUR 2,875 million will be implemented through Chips Joint Undertaking.
The European Chips Act is nearing completion
The next step in the draft European Chip Act and its amendments is a caucus consultation in the European Parliament during the plenary session of Strasbourg from February 13 to 16, when if no proposal is required to be voted on by unanimity, the parliament will negotiate the entire set of bills with the Council of the European Union, which plays a similar role to the "upper house", that is, representatives of member states, and the two bodies will formally complete the legislation after reaching consensus.
Editor: Xinzhixun - Ronin Sword
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