By Riccardo Masucci, Managing Director EU Affairs, Intel Corporation
The EU Chips Act provided “new impetus” to the European semiconductor industry, concluded the European Court of Auditors’ (ECA) recent report on the EU’s flagship semiconductor policy. Reacting to the audit, the Commission noted that the Chips Act has already catalysed investments worth over €80 billion in manufacturing capacity. However, the ECA also says that the EU Chips Act’s headline goal – 20% global market share in advanced semiconductor manufacturing by 2030 – is likely unattainable. Does this mean that the EU shouldn’t dream big about its chip ecosystem? Of course not. But industrial ambitions must be backed by the necessary and effective tools.
What can be done better, and how? The audit’s publication is timely, as debates about Chips Act 2.0 are intensifying. The ECA’s recommendations are clear: take necessary short-term measures to help achieve competitive goals while preparing the next long-term strategy that builds on past successes and failures. This year, the EC should assess immediate obstacles such as high energy costs and dependence on raw materials. Looking ahead, it should propose adequate actions and funding at the EU level for semiconductor projects, including interactions with other economies.
Need for a “reality check”
As the report rightly points out, multiple external factors hinder the European semiconductor industry’s global competitiveness. A crucial variable highlighted in the ECA report is the cost of energy, as today in Europe it is prohibitively higher compared to the US, China, and other regions. Alongside the Draghi report, this is yet another call to action for EU governments to lower energy costs for critical industries such as semiconductor manufacturing. In our view, government support should also be considered among the short-term relief mechanisms to tackle this issue.
The success of the Chips Act also depends on global competition and factors like geopolitical tensions, export controls, access to raw materials, environmental requirements and shortage of skilled workers. With this in mind, the ECA makes a welcome call for a ‘reality check’ to assess the strategic objectives. This aligns with European Commission President Ursula von der Leyen’s approach to make ‘competitiveness checks’ a cornerstone of EU policymaking. Addressing short-term challenges is critical for the Chips Act to deliver long-term results.
More EU budget backing a true European strategy
Overall, ECA supports long-term investments in the EU chips ecosystem. It finds that EU funding for R&D, pilot lines, and skills programs under the Chips for Europe Initiative was “well aligned” with EU goals. The audit also recommends making the Commission responsible for a larger portion of Chips Act funding to achieve its overall objectives faster. Indeed, the Draghi report’s call for a standalone semiconductor chapter under the EU’s next seven-year budget (the Multiannual Financial Framework) should be a key enabler of any “Chips Act 2.0” proposals. We believe a larger and centralised budget should be used to fund strategic industrial projects, allowing the EU to overcome the current fragmentation of national semiconductor strategies.
Stronger coordination between national and EU funding is also essential, according to the ECA report. We believe state aid rules could be modernized to provide long-term certainty on capital and operational costs for the semiconductor industry. For example, the use of tax credits in the Netherlands is listed as a best practice of the effective use of government incentives. We think that encouraging similar schemes and harmonizing their rules and objectives EU-wide would further support the Chips Act’s goals and long-term competitiveness of investments. In addition, a more agile, while still rigorous, state-aid evidence and clearance processes would potentially foster more investments in the EU ecosystem.
Innovating for the future of Europe
Lastly, ensuring the long-term success of the EU Chips Act requires a forward-looking approach. The report identifies “mainstream” nodes above 28nm as most sought-after and critical to today’s industrial base. But to remain competitive well into the future, we believe Europe should continue looking ahead to breakthrough technologies like AI, quantum, high-performance computing, and autonomous driving, which are all powered by more advanced chips. As Europe strives for technological leadership in these areas, research, development and innovation in leading-edge technologies are the best answers to its strategic autonomy ambitions.
The EU already has many strengths to build on in this regard, including fundamental research and fab equipment manufacturing. Perhaps even more than people think. For example, Taiwan and South Korea were not the only leaders in advanced semiconductor manufacturing at the start of this decade, as described by the ECA report. Our Fab24 manufacturing facility in Leixlip, Ireland, was producing 14nm nodes already back in 2014. And we invested billions of euros to make it even more competitive. In the last two years, our Fab34 manufacturing facility started to mass produce our most advanced Intel 4 and 3 technologies. This puts Europe firmly on the global map of leading-edge semiconductor manufacturing. It is important that the EU’s long-term strategy, which ECA calls for, builds on these achievements and keeps the development trajectory of future global demand for leading-edge tech in sight.
Conclusion
The ECA report offers a valuable perspective for the current policy debate. An honest ‘reality check’ is needed as the Commission reviews and prepares potential follow-up measures for the Chips Act. Global competition with other industrial policies, as well as other geopolitical and socio-economic factors, are relevant aspects to consider in the Chips Act assessment. To succeed, we believe the EU semiconductor ecosystem needs more coordination among Member States on long-term competitiveness and funding, but also immediate measures to eliminate what is currently holding industry back – high energy prices, slow permits and skills shortage at a national level. Along the way, Intel stands ready to contribute to Europe’s success.
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