European Union negotiators agreed on a plan to pump funding into the microchip industry on Tuesday, in a bid to secure local production of a crucial technology that is at the centre of a global scramble.
State aid rules are to be loosened to allow more government subsidies for advanced chip manufacturing, while €3.3 billion is to be earmarked for research and innovation related to the technology, under the provisional agreement reached between the European Parliament and member state negotiators.
The Irish Government is hopeful that increased investment will take place in Ireland, building on the existing skilled workforce and presence of companies such as Intel, but faces stiff competition from other EU member states which plan to invest heavily.
“We are in a very competitive situation,” the MEP leading parliament negotiations on the file, Dan Nica, told reporters, noting that the US also had a plan to boost chip manufacturing there.
“The European Union market is a very competitive market. We have a lot of skills, we have a lot of high technology, and don’t forget that the machinery used by the chips industry, they are made only in the European Union,” he continued.
The so-called Chips Act legislation aims to increase the percentage of the global microchip supply made in the EU to 20 per cent from its current 10 per cent.
Microchips, which are an essential component in all electronics, were hit by shortages during the Covid-19 pandemic, which revealed the vulnerability of supply chains and the concentration of the industry’s manufacturing sites in China and Taiwan.
Russia’s invasion of Ukraine has further spurred efforts to ensure reliable supply chains for strategically crucial goods, and the US has pressured countries to restrict exports of key semiconductor technology to China – including the Netherlands, where crucial chip manufacturing supplier ASML is located.
“The aim is to be sure that in the situation where there is a crisis like the one we experienced last year with the war in Ukraine, we will be able to ensure a minimum level of chips production in the EU, and be able to work closely with like-minded partners,” Mr Nica said.
The agreement reached between parliament and European Council negotiators marks a key moment in the legislative process, meaning that all three EU institutions have agreed on the package sooner than expected.
The Chips Act still requires approval from EU member states and in a European Parliament vote but the agreement suggests it should pass these hurdles.
The compromise set down how state aid rules could be loosened for small and medium enterprises, increased the proposed research budget to €3.3 billion, and laid out a “crisis response mechanism” that would kick in in case of shortages.
“Thanks to the new law, investors will benefit from a favourable environment for chip investments in Europe,” a parliament statement read.
“Small and medium-sized businesses will also benefit from increased support, especially in the area of chip design, in order to boost innovation,” it continued.
“The legislation will also support projects to reinforce the EU’s security of supply by attracting investment and building up production capacity.”
