EU's Semiconductor Predicament: Strategies for Unification in Microchip Production
The Biden-era United States is not alone in its efforts to boost its domestic semiconductor industry. Across the Atlantic, the European Union (EU) is taking significant strides to bolster its competitiveness and strategic autonomy in this critical sector.
In March 2023, nine EU member states – Germany, France, Italy, the Netherlands, Belgium, Luxembourg, and more – launched the Semiconductor Coalition with a shared vision to shape the EU's future in semiconductors. This coalition, composed of European champions in R&D, equipment manufacturing, and materials and testing, aims to inform a Chips Act 2.0 by fostering open dialogues with the private sector.
One of the coalition's primary objectives is to build strong public-private partnerships, a strategy that the coalition believes could help Brussels overcome the hurdle of limited resources. These partnerships will enable co-investment in high-impact projects, supporting the chips industry's growth.
The EU's existing financing for critical technologies, such as the semiconductor sector, remains fragmented. While around €100bn has been announced from a combination of public and private sources, the EU budget only envisages covering €3.3bn, leaving member states to shoulder the majority of the financial burden.
The EU's 2023 Chips Act, while addressing supply chain vulnerability and risk, was criticised for lacking strategic depth. It did not provide a clear rationale for the EU's need to capitalise on its existing positions of strength, guidelines on where the bloc's technological edge lies, how to nurture and defend that edge, and where the bloc might find new levers.
To address these gaps, the Semiconductor Coalition proposes additional targeted support for chips as part of a broader semiconductor strategy. Such support, they argue, would help de-risk private investment and facilitate cross-border ventures.
However, the EU's 2030 target in the 2023 Chips Act to double its share in the world's semiconductor supply has been labelled "essentially aspirational" by the EU's court of auditors. The industry groups within the EU have also criticised the Act for excessive red tape and an overemphasis on manufacturing.
The Semiconductor Coalition's strategy is not without precedent. Japan, for instance, has implemented an economic security strategy based on maintaining, boosting, and obtaining strategic indispensability. In 2024, the Japan Investment Corporation even bought and delisted JSR Corp, the world's largest photoresist maker, to ensure this indispensable company remained in Japanese hands.
In the past, the US has also shown interest in this sector. Former President Donald Trump initially excluded chips from his 10% import tariff hikes but later announced potential tariffs on the electronics supply chain.
As the EU moves forward with its new Chips Act, the Semiconductor Coalition's influence could be pivotal. The coalition's members have the sway to help shape the EU's next seven-year budget negotiations, potentially steering the bloc towards a more competitive and autonomous semiconductor industry.
