EU Chips Act: regional ecosystems vital for strategic autonomy

Semiconductors have become vital for every industry. With the EU Chips Act, we are treating it as such. Due to current economical and geopolitical realities, Europe must ensure its strategic autonomy, while remaining an open economy and cultivating innovation.

Martijn van Gruijthuijsen is the vice-governor for Economic Affairs, Finance, Knowledge and Talent Development for the Dutch province of Noord-Brabant, Renew Europe member in the European Committee of the Regions and shadow rapporteur on the EU Chips Act.

The semiconductor sector has been embroiled in quite some turmoil recently. Global supply chains are still impacted by the COVID-19 epidemic, the war in Ukraine is wreaking havoc on the supply and cost of raw materials, and new sanctions by the USA are directly hitting the semiconductor industry with export limitations to China, with severe economic effects.

With all this turmoil, Europe cannot remain on the sidelines. With the current economical and geopolitical realities being as they are, the EU Chips Act is an important piece of legislation and is vital to the EU’s future as an innovative and autonomous economic powerhouse. On Wednesday 12th of October, the European Committee of the Regions (CoR) will vote on the opinion concerning the EU Chips Act.

Semiconductors are crucial components of a wide range of technological products, from computers, smartphones and household appliances to cars, medical devices, and wind turbines. Chips make the world go round, and are essential for energy, medicine, transport, agriculture, and the environment. On this front, Europe is sorely falling behind in manufacturing: only around 10% of global semiconductor production comes from Europe.

Recent economical and geopolitical events have shown us that this vulnerability is a serious threat for the European economies. The COVID-19 pandemic has severely disrupted global value chains, causing products to become scarce. Semiconductors saw some of the largest shortage, since the majority of chips are manufactured in Asia.

Global supply chains still haven’t fully recovered, and the demand for chips continues to rise dramatically: the sector expects the demand for chips to be doubled in 2030. The shock this is causing to the system causes delays, price hikes, and thus inflation. And let’s not forget that current geopolitical events in Europe and Asia have shown that Europe needs to decrease its economic dependency.

Considering current global value chains, if Taiwan would become unable to produce and export semiconductors, we would see a supply shock which would disrupt nearly every industry. In other words: It is about time Europe stands on its own two feet and takes production of essential products on home soil seriously. The EU Chips Act does this and provides highly sensitive strategic input into EU industry as a whole.

Now, back to the opinion of the CoR. This opinion is led by rapporteur Staatsminister Thomas Schmidt of the German region of Saxony. I have the honour to act as shadow rapporteur and work closely with Mr. Schmidt. As shadow rapporteur for the CoR’s opinion, and as the vice governor for Economic Affairs for the Dutch province of Noord-Brabant, I can attest to the importance of this opinion.

The Dutch province of Noord-Brabant is home to some of the most important and innovative semiconductor companies in the world, with among others ASML and NXP, but also innovative regional ecosystems around new technology, such as PhotonDelta and SMART Photonics.

I see the opportunities and challenges this sector faces daily. Challenges such as a very tight labour market, shortage of international talent, but also providing enough and proper housing, amenities, and infrastructure. But also, the opportunities which come with the innovation this sector provides. Innovation such as photonic chips, which dramatically reduce the energy consumption of semiconductors, or the always increasing capabilities of the next generation of chips.

We should not forget that these chips are developed in Europe and that they provide the greatest added value for our economies and foster innovation. The EU should seize the opportunity to be a pioneer for the next generation of semiconductors.

Cooperation is needed to successfully implement the EU Chips Act. Between regions, member states, the EU, knowledge institutions and the industry itself. I have greatly enjoyed the cooperation on this opinion with rapporteur Schmidt, an important partner region with an impressive semiconductor cluster “Silicon Saxony”. Other regions with large semiconductor industries such as in Grenoble and Steiermark can function as jumping off points for the entire continent.

We must remember that strategic autonomy is not the same as isolation. We have seen a new wave of mercantilist policies around the globe in recent years, but Europe should not follow these examples. The semiconductor market is a global market, and it should stay that way. We cannot let Europe close itself off from the world out of fear for competition. While challenging, strategic autonomy and open competition can exist in harmony.

Luckily, the importance of the EU Chips Act is acknowledged by EU member states, the European Parliament and the CoR, and adoption is highly likely. The real challenge is the implementation of this act.

Therefore, with the CoR opinion, we call upon the EU institutions for more funding opportunities considering the high costs to establish both new production facilities and stimulate innovation for the next generation of chips. And of course, as we have a close relation with regional industrial clusters and are vital partners in the implementation of this act, with this opinion the European Committee of the Regions calls upon the EU institutions to involve the regions.

Semiconductors have become an indispensable part of nearly every economic sector and industry: from computers and mobile phones to cars and medical equipment. With the EU Chips Act, we will finally treat this small but powerful piece of technology as the vital product it is. This new strategic commitment will stimulate our economy while also increasing its robustness, and I am convinced the entire EU will reap the benefits.

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