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Clifford Chance

Clifford Chance


Talking Tech

The EU Chips Act, one year later

Emerging Tech Tech Antitrust 14 February 2023

On 8 February 2022, the European Commission announced an ambitious package of measures to address chips shortages [see our article: When the chips are down: The Butterfly Effect which is disrupting the supply chain in tech industries] and revitalise the European semiconductor industry: the goal to bring European share in global chips sector from the current 9% to 20% by 2030. It is time to see, one year later, what happened with this plan.

The package comprises four acts – a proposal for a Regulation of the European Parliament and Council (EU Chips Act), a proposal for a Regulation of the Council, a Recommendation of the Commission and the Communication of the Commission outlining the principles and the objectives of the initiative.

Over the course of the last year, the draft EU Chips Act has been debated by the European Parliament and Council. Both have proposed significant amendments to the text and are now ready to begin the "trilogue discussions" to try and reach a compromise final text. We expect this to take several months.

The EU Chips Act proposed by the Commission

The Commission's proposal for the EU Chips Act [see our article: The EU Calls in its Chips: 'Tech Sovereignty' and New Opportunities from the EU Chips Act ] is structured on three "pillars":

  • the "Chips for Europe Initiative", investments to reinforce the semiconductor ecosystem and address the most critical segments, such as talent shortages, IP protection, design platform, and pilot lines on the most advanced chips
  • the "Security of Supply", new legal framework to attract investments to build "first-of-a-kind" facilities, may be either Integrated Production Facilities (vertically integrated from design to manufacturing) or Open EU Foundries (fab that manufactures third-party's chips)
  • the "Emergency Toolbox", set of rules for the Member States to monitor and collect information in the value chain and react in case of shortages or disruptions. 

The Commission also proposed to set-up the European Semiconductor Board to govern the implementation of the Chips Act and advise on semiconductor related matters.

The EU Chips Act would entail direct investment from European budget up to € 3.3 billion, much of which coming from reallocation from existing Horizon and Digital Europe Programs. The Commission expects that the Chips Act, if implemented as proposed, would generate combined public-private investments of up to € 43 billion by 2030.

The Council's Statement

On 1 December 2022, the Council of the EU published its "general approach"  with regard to the Chips Act. While supporting the "political objectives" of the Commission's proposal, certain amendments have been proposed, among others, in relation to the definition of "first-of-a-kind" facilities (to broaden the scope) and the requirements for those facilities seeking to obtain this qualification, the role of the Member States in the European Semiconductor Board, and the "emergency toolbox". Most notably, the Council flags that, as far as the budget is concerned, decommitting from existing Horizon and Digital Europe Programs may not be ideal and calls for alternatives source of funding to be identified.

The Report from the Industry Committee in the European Parliament

The European Parliament the Committee on Industry, Research and Energy (ITRE), led the review of the Chips Act. It concluded its work with the approval of its resolution on 24 January 2023. The resolution broadly supports the Chips Act, but also proposes a number of amendments, including:

  • The request to focus in particular on quantum chips, encouraging regional coordination of national quantum programs to be effective, in order to “create scaling effects, rather than dispersing the resources in the creation of sub-critical players
  • Broadening the definition of “first-of-a-kind-facility” to include also “processing of raw materials, manufacturing materials or equipment needed in semiconductors manufacturing
  • Upfront coordination in mapping the supply chain to prevent disruption
  • Specific measures to reinforce the IP landscape in semiconductors, because “the industry fundamentally depends on knowledge, technology, and know-how, the international system must feature robust IP rights—including patents, trade secrets, and trademarks— because an extraordinary amount of the value is knowledge-based”.

On 15 February 2023, the Parliament was presented with ITRE's Resolution and gave its approval for the opening of the trilogue discussions with the Council of the EU and the European Commission to complete the adoption of the Chips Act.

What's Next

We expect the completion of the legislative process to go smoothly. The basic structure of the EU Chips Act is agreed by both the Council and the Parliament, and the proposed amendments only concern improvements of certain rules or definitions (e.g., the "first-of-a-kind" facilities).

The only real sticking point is related to the budget. Many are sceptical as to the effectiveness of the amount directly devoted by the Commission (particularly when compared with other countries), and neither the Council nor the Parliament are convinced by the proposal to fund the Chips Act through the removal of funds from existing programs. A call for "fresh money" is explicit from various stakeholders and this will likely be one of the most important topics to follow during the trilogue.


In conclusion, is the EU Chips Act for real? Will it be successful in pursuing its goals?

It is too early to say - especially considering that it has not yet been approved. This, in itself, may already be a relevant point. While other jurisdictions, such as the United States, China, Taiwan, Japan, have already passed their own versions of "Chips Acts", the more complex legislative procedure within the EU does not help Europe in acting rapidly in this chips race. Add to that the scepticism about the budget (in terms of overall magnitude and source of funding) and some may already seriously doubt that the EU Chips Act will have the sort of effect sought.

Another issue relates to the suggestion that the EU will still need to reinforce international cooperation with "like-minded" strategic partners. This makes it clear that even with the Chips Act co-operation with other counties, such as the United States, Japan, South Korea and Taiwan, that have advantages in the semiconductor industry will be key to strengthening the security of supply and to addressing supply chain disruptions, including on raw materials for chips and third country export restrictions. These alliances will also be important in terms of military defence and growing geopolitical tensions (see our article: New Bargaining Chips: US Department of Commerce Imposes New Export Controls on the Semiconductor Industry and Imposes Changes to the UVL and Entity List).

On the other hand, the mere announcement of the EU Chips Act has already attracted some huge investments: Intel's multibillion euro plan to be realized across Europe, including "first-of-a-kind" fabs ; the investments from STMicroeletronics in Italy ; and Wolfspeed in Germany This has encouraged Member States into engaging on negotiations for significant state aid to support those investments, that may open up a new wave of significant transactions in this field (see our articles: Semiconductor M&A Trends in 2022: Sustained Demand, Supply Chain Risk and Regulatory Scrutiny and Semiconductors - Increasing governmental and regulatory scrutiny).