The EU may allow state aid funding for semiconductor facilities

19 Nov 2021

Margrethe Vestager, EU commissioner for competition. Image: Stine Heilmann/European Union

Margrethe Vestager said safeguards will minimise ‘competition distortions’ in the EU semiconductor ecosystem.

The EU may approve state aid funding for semiconductor facilities across the bloc as it continues efforts to become a global leader in chip production.

Margrethe Vestager, the EU commissioner for competition, said yesterday (18 November) that the European Commission was considering approving support “to fill possible funding gaps” in the semiconductor ecosystem – especially for European “first-of-a-kind facilities”.

Future Human

This comes after a European Chips Act was proposed by Commission president Ursula von der Leyen to boost the design and manufacture of semiconductors in the EU. “The aim is to jointly create a state-of-the-art European chip ecosystem, including production,” she said in a State of the Union address in September.

Europe heavily relies on Asian markets for its chip demands and an ongoing global chip shortage has highlighted the bloc’s need to be self-reliant in the semiconductor space. “While global demand has exploded, Europe’s share across the entire value chain, from design to manufacturing capacity has shrunk,” von der Leyen added in the address.

If supports are given to help chip production, Vestager said there will be implications for fair competition. “There are strong safeguards to ensure such aid is necessary, appropriate and proportionate, and undue competition distortions are minimised,” she said yesterday.

“Benefits must be shared widely and without discrimination across the European economy. And each case for the supply of semiconductors will be rigorously assessed based on their own respective merits, so as to ensure that projects have a European nature and avoid a subsidy race within the Union and beyond.”

The US announced a similar act last year, called CHIPS for America, which aimed to boost chip production with incentives to help compete against Chinese counterparts.

‘Europe’s digital decade’

Earlier this year, the EU outlined a 10-year strategy to build 20pc of the world’s semiconductors by 2030.

“In the post-pandemic world, this is how we will shape together a resilient and digitally sovereign Europe. This is Europe’s Digital Decade,” internal market commissioner Thierry Breton said in March.

Breton went on in May to confirm that the EU was prepared to invest “significant” amounts in the semiconductor effort. If passed, the European Chips Act would be the first major legislative effort in the area.

Intel has been seeking significant EU financial support, as much as €8bn in subsidies, for bringing new semiconductor manufacturing capacity to Europe. The company is in negotiations with EU leaders over where to build two new chipmaking facilities – with Ireland on the shortlist.

“Self-sufficiency is an illusion,” Vestager added in her comments yesterday. “When you think about the scale of what is needed, it is clear that no country or company can do it alone. But we cannot rely on one country or company alone, either. That’s why the aim should be diversification among like-minded partners, to build resilient supply chains, and avoid single points of failure.”

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Vish Gain is a journalist with Silicon Republic

editorial@siliconrepublic.com