EU requires a ' Frank appraisal' of its imperfect microchip strategy: report
The European Commission Needs To Take A Long, Hard Look At Its Chips Act Ambitions
Got some harsh news for those betting on the EU's odds in the global microchip market. The European Court of Auditors (ECA) just dropped a report on Monday, stating that the EU's aim to grab a 20% global market share by 2030 through the Chips Act is a lofty pipedream, despite the billions poured into the sector.
The Chips Act, a response to the chaos caused by COVID-19's supply chain disruptions, did give the EU's microchip sector a much-needed boost. But the ECA found the investments driven by the Act won't make much of a dent in the EU's weak position in the industry.
So, what does the ECA recommend? Well, it's simple - the Commission needs to assess whether the Chips Act's ambitions are still realistic given the available resources, global competition, energy costs, and raw material dependence. They also suggest that the Commission should work with member states and industry to draft a fresh semiconductor strategy, as they are legally obligated to evaluate the Chips Act by September 2023.
In 2020, the EU's share of the global microchip market hovered around 9%. The EU executive is only budgeting €4.5 billion of the estimated €86 billion in funding for the Chips Act up to 2030, with the remainder expected to come from member states and industry. Compare that to the top global manufacturers, who spent a whopping €405 billion on chip production between 2020 and 2023.
"The EU desperately needs a dose of reality when it comes to its microchip strategy," said ECA member Annemie Turtelboom. "The field is moving at a breakneck pace, and we're currently worlds apart from where we need to be to meet our goals."
The Commission's spokesperson, Thomas Regnier, responded that they "take note" of the report but remain optimistic, stating that the Chips Act has put the EU back on the road to growth.
Related:- Billions for Tech Chips: Brussels' Push to Roll Out More Microchips in the EU- EU Leaders Agree to a €43 Billion Deal to Amplify Semiconductor Production in Europe
Ambitious goals, limited resources, and intense global competition - it's time for the EU to take a long, hard look at its Chips Act ambitions.
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* Enrichment Data:**The European Union's bid for a 20% global microchip market share by 2030, as defined in the Chips Act, faces numerous obstacles that might impede its achievement. Here's a rundown of the current challenges and potential solutions:
Challenge
- Tough Targets: The ECA flags the EU's target as overambitious, as current forecasts indicate only an 11.7% market share by 2030, just above the 2022 level of about 10%[1][3].
- Global Competitiveness: The EU is up against fierce competition from major players like TSMC, Intel, and Samsung, who command the global semiconductor market. Between 2020 and 2023, these companies invested heavily, with 60% of global chip production expenditure[4].
- Resource Barriers: Achieving a 20% share requires substantial increases in production capacity, necessitating significant investments and new infrastructure, with estimates suggesting a fourfold increase in capacity[4].
Solution
- Reassessment and Realism: The ECA advises the Commission to reassess the achieved targets and develop a more practical strategy considering available resources, global competition, and factors like energy costs and raw material dependence[1][3].
- Increased Investment and Cooperation: Boosting collaboration between member states and industry may help secure more substantial investments. The EU has allocated €86 billion from 2022 to 2030 for chip production, but this amount may not suffice[4].
- Strategic Focus: Focusing on niche or high-value segments of the semiconductor industry may allow the EU to concentrate resources effectively and develop competitive strengths that are less dependent on mass production capacity[5].
- Infrastructure Development: Efforts to build chip factories should be prioritized, but they must be timed and funded effectively to achieve tangible results within the given timeframe. Building a chip factory takes approximately four years, emphasizing the urgency of prompt action[4].
Implementing these solutions calls for a coordinated effort from EU member states, industry stakeholders, and government bodies to ensure that resources are employed efficiently and goals align with realistic capabilities.
- The European Commission needs to reassess its targets for a 20% global microchip market share by 2030, as defined in the Chips Act, considering the available resources, global competition, energy costs, and raw material dependence.
- To achieve a substantial increase in production capacity, the Commission should work collaboratively with member states and industry to invest more in the semiconductor sector and develop a more practical strategy.
- A strategic focus on niche or high-value segments of the semiconductor industry may allow the EU to direct resources effectively, creating competitive strengths less dependent on mass production capacity.
