EU Joins in on Chip Race

There's a race.

And the target could best be described as a metaphorical, semiconductor moon. Reaching that moon first could result in semiconductor self-sufficiency and a greater share of the global chipmaking market.

The US and China have made their chip manufacturing intentions well known by now. Even Japan has stepped to the plate, in fear of losing industry.

Now, the EU has come into the mix as the European Commission recently announced plans for a new chipmaking "ecosystem." In this "ecosystem," the EU plans to remain competitive and self-sufficient. The Commission suggests their plans come as a result of the ongoing chip shortage, which has shed light on an overreliance on China and the US for advanced components.

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Commission President Ursula von der Leyen explained the new European Chips Act will create a state-of-the-art European chip ecosystem that involves production and ensures a secure semiconductor supply for the EU.

There's that word again—"ecosystem."

There's a nebulous nature to it. And that vagueness can be attributed to the fact that the EU is still in the early stages of its plans for chip production and specifics aren't quite there yet. An excerpt from a blogpost by Industry Commissioner Thierry Breton may shed more light on the intent of the EU's chip act:

"The race for the most advanced chips is a race about technological and industrial leadership."

Breton continued to say that the chip legislation would involve research, production capacity, and cooperation with international industry. With that said, he also pushed the idea that the EU should set up a dedicated European Semiconductor Fund.

A tough road ahead

But it's not all sunshine and lollipops. Even von der Leyen acknowledged their task to create a bustling chip "ecosystem" will be a daunting one.

And if you ponder a couple of points, it makes sense why the task is to be so daunting.

The EU will need to put together billions of euros to emulate what the US is currently doing with its semiconductor industry. Yet European investors have already voiced reluctance about investing in chipmaking if the production sites aren't going to be operating at full capacity at all times.

Additionally, the European bloc has said it wants to reach a 20% share in the global chips market by 2030. A claim criticized by many analysts who believe the bloc does not have a credible industrial policy nor enough public subsidies to match the efforts of the US or China.

And don't forget about the rare earth minerals and metal materials that are critical to advanced chipmaking. Industry analysts believe the EU will encounter plenty of hurdles in trying to access rare earths, especially due to China's ongoing monopoly of the critical materials (they account for over 70% of the global production).

No tech sovereignty for anyone, for now

Another buzzword—or buzz-term—for the European Chips Act that's been tossed around is "tech sovereignty." The bill proposed by the Commission aims to keep the EU safe from potential semiconductor supply chain disruptions involving the US or China.

But, for now, nobody is sovereign from advanced chip disruptions. Consumer electronics continue to experience delays, the automotive industry is still fighting for components, and record-level price increases are surfacing to take advantage of insane demand.

So, it's no wonder there's an ongoing chip race. Who will reach the moon first?