The European Commission is expected to present, on 27 May, a proposal to review the Integrated Circuits Regulation, also known as the “Chips Act”.
Integrated circuits — or semiconductors — play a central role in the modern economy: they are present in virtually all electronic products and are essential to sectors such as the automotive industry, household appliances, space, defence, communications and digital technologies, including 5G, robotics and generative artificial intelligence.
The global shortage of semiconductors, felt particularly acutely at the beginning of the decade, exposed deep vulnerabilities in international supply chains. It was in this context that the first Chips Act was adopted, in September 2023, with the aim of strengthening Europe’s semiconductor ecosystem, increasing the resilience of supply chains and reducing external dependencies in strategic technologies.
The Regulation formed part of a broader industrial policy package, coordinated with other European instruments, such as the Horizon Europe and Digital Europe programmes, the Chips Joint Undertaking and the Alliance on Processors and Semiconductor Technologies.
The Chips Act is based on three strategic pillars:
- The Chips for Europe Initiative, aimed at encouraging research and innovation (R&I), which seeks to transfer technological innovations from universities and laboratories to industry — the so-called “lab-to-fab” approach — support the formation of consortia in the field of chip development and production, and help achieve scale, particularly for start-ups and SMEs;
- Security of supply, which includes measures to foster advanced production capacity through “first-of-a-kind” facilities, including Integrated Production Facilities (IPFs) and Open EU Foundries (OEFs);
- Monitoring and crisis response, through the European Semiconductor Board, which acts as a coordination mechanism to address shortages of integrated circuits.
Although the Regulation has given significant impetus to European semiconductor policy, its implementation has revealed limitations. In particular, difficulties have been identified in connection with the fragmentation of funding instruments, reliance on national initiatives and the slowness of the administrative and approval procedures applicable to strategic projects.
According to an analysis by the European Court of Auditors, Europe’s share of the overall semiconductor production market fell from 13% in 2010 to 7% in 2020, while China’s share increased from 11% to 18% over the same period.
This dependence is particularly sensitive in the case of next-generation semiconductors.
The model of the first Regulation has been criticised for excessive bureaucracy and delays in the application of measures under the second pillar, particularly as regards the approval of State aid and the qualification of strategic projects. In an industry with short innovation cycles, lengthy licensing periods may undermine the competitiveness of projects.
The review of the Chips Act is expected to bring the European Commission’s ambition for the EU to hold a 20% share of the global semiconductor production market closer to the reality of the industry, by expanding pre-existing funding instruments and reducing bureaucracy, with a view to fostering the competitiveness of the European semiconductor industry.
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