EU lawmakers back chip-production plan

THE European Parliament on Tuesday (Jul 11) formally approved an EU plan to greatly boost its own supply of semiconductors, a strategic goal to reduce dependency on Asia.

An overwhelming majority of lawmakers – 587 to 10 – backed the EU Chips Act, which is meant to quadruple the EU’s chip production by 2030, to account for 20 per cent of global share.

Globalisation and the rise of Asian manufacturing has led to a dwindling of European activity in the sector in recent decades. The market is dominated by Taiwan – which makes 90 per cent of the most advanced chips – as well as South Korea and, increasingly, China.

The pandemic caused supply chains from Asia to seize up, dealing serious shortages to the European car industry in particular. Semiconductors are vital for many other everyday items, ranging from smartphones to household appliances. They are also needed for data storage, which is in full expansion, and in green tech to reduce carbon output.

To reach its ambitious goal in chip production, the EU will have to mobilise more than 43 billion euros (S$63.4 billion) in public and private investments.

The drive is part of a strategy of greater European self-sufficiency, championed by French President Emmanuel Macron, which has been galvanised by energy and food shocks caused by Russia’s war in Ukraine.

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The EU Chips Act calls for the EU to throw 3.3 billion euros at the goal from its budget, and for research and development to be reinforced.

A monitoring system to detect budding supply shortfalls is meant to alert the European Commission early enough, so it can act urgently to head them off, including by organising pooled purchases on behalf of the bloc, like it did for Covid vaccines.