What can we expect from the European Chips Act in 2024?

22nd February 2024
Sheryl Miles

A looming artefact of the pandemic, the global chip shortage, seems to be easing up; demand for consumer products like smartphones and games consoles has dropped and chip sales have slowed due to increased inflation. But are we out of the woods just yet?

As we head further into 2024, the remaining cracks in the chip ecosystem must be addressed to reinforce the EU’s semiconductor market and protect it against future challenges. Luckily, that is where the European Chips Act comes in …

Here, Phil Simmonds, CEO, EC Electronics examines: what is the purpose of this initiative, what are its key aims, and how will it impact electronics manufacturing in 2024 and beyond?

Understanding the European Chips Act

These recent shortages of semiconductors have highlighted Europe’s dependency on a limited number of suppliers abroad. In particular, Taiwan and Southeast Asia are relied on for the manufacturing of chips and the US for their design.

In response, the European parliament and 27 member states have reached a deal on legislation that aims to double the EU’s global market share in semiconductors from 10% to 20% by 2030 – strengthening manufacturing activities in the Union, stimulating the European design ecosystem and supporting scale-up and innovation across the whole value chain.

The European Chips Act is a €43 billion (£37.05 billion) package of public and private investments with three pillars…

1. The Chips for Europe Initiative

The Chips for Europe Initiative aims to build on the EU’s research and innovation capabilities, enabling the development and deployment of cutting-edge semiconductor technologies to reinforce Europe’s leadership in the technology sector.

This initiative will also support the upskilling and reskilling of the industry’s workforce, alongside a Chips Fund that will finance EU semiconductor manufacturing startups and allow them to progress their innovations and attract investors. With a dedicated equity investment facility under InvestEU, scale-ups and small-to-medium-sized enterprises will have better access to the competitive market.

A whopping total of €3.3 billion (£2.84 billion) will support this initiative – evolving pilot production lines, a cloud-based design platform, competence centres to develop apprenticeships, and more.

2. Investments in manufacturing facilities

The second pillar of the European Chips Act will incentivise public and private investments in manufacturing facilities for chipmakers and their suppliers, contributing to the overall public investments in the sector.

It will also create a framework for ‘first-of-a-kind’ integrated production facilities to produce semiconductor manufacturing equipment or key components in the Union, as well as Open EU foundries that will dedicate an extent of their production capacity to make chips in the EU’s interest.

3. A coordination mechanism with Member States

In its third pillar, the Commission will establish a coordination mechanism for strengthening collaboration with and across Member States – monitoring the supply of semiconductors, estimating demand, anticipating shortages and, if necessary, triggering the activation of a crisis stage.

What is to come in 2024?

Although the EU has a large market for electronic devices, it only holds a minority of the global market share on semiconductors (just 10%). The European Chips Act plans to change that in 2024…

Discussions between the Commission, the Member States and industry and research and technology organisations (RTOs) were sparked in 2023 to define the characteristics of the different components of the initiative (including the pilot lines, engineering capacities for developing quantum chips and competence centres) – with first calls on the other components of the initiative eagerly anticipated this year.

Furthermore, companies can now apply for the label that determines that their new or upgraded facilities are ‘first-of-a-kind’ facilities in the Union.

Any electronics manufacturing business with an integrated production facility (IPF) or open EU foundry (OEF) label can start benefitting from several advantages that come with it – like fast-tracking of permit granting procedures and priority access to the initiative’s pilot lines.

As an innovative and adaptive electronics manufacturing company, EC Electronics is thrilled to see these exciting developments coming to fruition. With access to advanced production capabilities thanks to the European Chips Act, the European industry can not only benefit from state-of-the-art chip manufacturing but could be better positioned to participate in the design of these systems.

Plus, the presence of a next-generation semiconductor fabrication plant in Europe, producing leading-edge chips, could present evolving opportunities for the manufacturing industry – from the development of advanced artificial intelligence technologies to autonomous vehicles.

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