EU Still Working on Funds for the European Chips Act

A new deal could release the Euro 43 billion financing meant to stimulate research and development and create greater self-reliance in semiconductor supplies for European states that received the full support of EU ambassadors.

FREMONT, CA: The European Union is working to reach an agreement as representatives of member states agree on an altered version to give cash for its plan to revive the European semiconductor manufacturing industry.

A deal that could release the Euro 43 billion financing meant to stimulate research and development and create greater self-reliance in semiconductor supplies for European states received the full support of EU ambassadors.

The agreement is thought to pave the way for the ratification of the Chips Act. EU ministers are scheduled to meet on December 1st for a meeting of the Competitiveness Council, which is in charge of the internal market and industry. But before it can become legislation, it still needs to be discussed in the European Parliament.

The European Chips Act, presented earlier this year, intends to strengthen European competitiveness and resilience in semiconductors, to double the existing market share to around 20 per cent of global semiconductor production by 2030. Where the cash would come from had been one of the issues that had prevented an agreement. It is reported that the Czech government dropped the request to transfer Euro 400 million in financing from the flagship Horizon Europe research programme, which now holds the rotating EU Presidency.

The mechanism for financial allocation was also claimed to be a point of contention, with smaller EU member states complaining that such arrangements often benefit countries with larger economies and established sectors, like Germany.

The agreement also calls for enabling subsidies for a wider variety of chips rather than only the most sophisticated semiconductors. In a similar debate over the US CHIPS Act, respondents to a NIST poll noted that a dearth of less-essential parts like power management chips was the root of many supply chain problems affecting various businesses.

However, the CEO of the chipmaker NXP Semiconductors, based in the Netherlands, issued a warning in October that the cash allotted by the EU for the Chips Act was insufficient to achieve the goals it had set for 2030. Germany, rather than the Euro 43 billion planned, it would take somewhere in the neighbourhood of Euro 500 billion in investment for European chipmakers to achieve the required 20 per cent market share.

A few chip makers have already announced funding for new sites in Europe. Intel (NASDAQ: INTC) revealed intentions to erect a semiconductor manufacturing mega-fab at a location in eastern Germany's Magdeburg with support from the German government.

Additionally, Infineon stated that it plans to build a Euro 5 billion factory in Dresden to produce 300mm analogue/mixed-signal and power semiconductor wafers, subject to suitable public investment, in its most recent fiscal 2022 earnings reports.