EU announces plan to reduce reliance on China for microchips

The European Union (EU) has announced a 42 billion euro plan to reduce the bloc’s reliance on China for microchips used in motorcars and other electronic devices. Known as the “Chips Act”, the plan is build Europe into a major semiconductor producer and in the process remove its reliance on the Far East.
Semiconductor chips are used in almost everything these days powering from cars to hospital ventilators to phones to game consoles. Chips have however been in short supply since the start of the pandemic holding back the economic recovery in many areas and of many companies.
The current issues around supply as well as the natural gas shortages, have highlighted the EU’s reliance on the Far East and Russia. With the political risks rising the union has acted to boost its economic independence in the critical semiconductor sector.
European Commission President Ursula von der Leyen said: “Chips are at the centre of the global technological race. They are, of course, also the bedrock of our modern economies.”
The plan is still to be approved by the EU parliament and the union’s 27 member states, however with all suffering from supply chain bottlenecks it is likely to receive the green light.
Van der Leyen continued saying: “The pandemic has also painfully exposed the vulnerability of its supply chains. We have seen that whole production lines came to a standstill. While the demand was increasing, we could not deliver as needed because of the lack of chips.
“Europe needs advanced production facilities, which come, of course, with a huge upfront cost. We are, therefore, adapting our state aid rules.”
The act if approved will see 42 billion euros sunk into research, design and testing, and in the process coordinate EU and national investment. It is also expected to bring in a further 15 billion euros in public and private investment.
The EU Commission promised that related projects will be carefully vetted on anticompetitive grounds, despite the sheer size of setting up production facilities demanding a push if the bloc is to become a global player.
EU member states current account for only nine percent of the global market share of semiconductors, though von der Leyen wants to increase this figure to 20 percent by 2030.
The announcement that EU plans to reduce reliance on China for microchips will be widely welcomed by the bloc’s business sector, with many of the region’s larger companies being held back by supply shortages.

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