EU joins China, US with semi-conductor spending spree

The European Commission unveiled a legislative package on Tuesday aimed at beefing up its 10% global market share of strategically important - and currently scarce - semi-conductors, pledging to shore up its supply in future crises.
"Chips are at the centre of the global technological race. They are also the bedrock of our modern economies," EU executive branch president Ursula von der Leyen told the press in a short statement.
The aim is to mobilize more than €45 billion ($51 billion) to help the European Union quadruple its production capacity and double its market share by the end of the decade, von der Leyen said.Of this, €30 billion is spending already planned from the EU budget or those of the 27 member states, according to the top EU official. The rest is fresh money to be drawn from a variety of public and private sources, she said.
The EU executive branch announced its plans for a "European Chips Act" to "put Europe back in the tech race" last year, prompted by a shortage crisis unleashed by Covid-19 lockdowns in early 2020 and expected to last for many months to come.
European car manufacturers have been particularly affected. Big names like Volkswagen repeatedly reduced working hours at plants due to the scarcity of electronic components. In some member states, car production fell by one third, the commission said in a press release.
The United States and China are also investing tens of billions of dollars in the production of chips, which are crucial for everything from consumer electronics to vehicles.
While a leader in research, the EU has a semiconductor global market share of only around 10%, according to the commission. The bloc is highly reliant on imports from third countries, particularly Asian states like Taiwan and South Korea.
To build up autonomy, the EU executive branch therefore wants to further consolidate the bloc's semi-conductor research industry, build up its own production capacity and diversify its supply by working with partners like the US and Japan.The lion's share of the investment should help establish huge manufacturing plants, with a significant tranche also going to research and development.
Much of this depends on significant state aid from the EU member states - possibly the most controversial part of the plan, and the most difficult to achieve.A key pillar of the proposal is the adaption of the bloc's strict state aid rules to help finance the construction of often extremely expensive large-scale production plants.To qualify, projects must be unviable without state support and be a "first of a kind" - meaning that such a facility does not yet exist in Europe. Big players in the industry like US Intel or the Taiwan Semiconductor Manufacturing Company could stand to benefit.The Centre for European Policy think tank said in a statement it believed this move was a "political misstep."
"By restricting competition and free trade, Brussels is heading down a dangerous industrial policy path that infringes basic EU principles," chairman Henning Voepel said.
German centre-right EU lawmaker Markus Ferber, of the European's People's Party faction, warned in a different vein that the money put on the table wasn't a "drop in the ocean." The Intel plant planned to be built in Germany is expected to cost some €20 billion, he said in a written statement.
Moreover, most of the total investment drive is planned spending and does not represent fresh cash, Ferber charged.
The legal package proposed on Tuesday is composed of a regulation, which must be approved by the European Parliament and the member states, and non-biding recommendations.