EU should be clear about why its chips plan needed

The European Union countries on Wednesday agreed on a €45 billion ($46.6 billion) plan to fund the production of microchips, putting the 27-country bloc a step closer to its goal of reducing its reliance on US and Asian manufacturers.

The European Chips Act is seen as a way to bolster the EU's greater self-sufficiency in the semiconductor sector, by easing state aid rules and strengthening research capacity in the bloc. Although it needs to be approved by European Union ministers when they meet on Dec 1 and then be debated in the European Parliament next year before it can become law, the act is a step toward the EU's goal of having 20 percent of the global market share of chips production by 2030. Its share of global chip production currently stands at about 8 percent, down from 24 percent in 2000.

One significant feature of the EU's plan is that it will allow state subsidies for a broader range of chips and not just the most advanced ones. The subsidies will cover chips that bring innovation in computing power, energy efficiency, environmental gains and artificial intelligence. So as well as 2-nanometer technology, which is clearly the focus, 3 nms and 7 nms chips, even 28 nms chips with advanced packaging technologies might all be eligible for subsidies.

Considering the global shortage of chips and the supply chain bottlenecks that have impacted European automobile manufacturers, medical care providers and telecom businesses, the EU's push for greater self-reliance is understandable.

The recognition that the bloc needs to foster its own innovation and become less reliant on foreign technology and foreign companies has gained more attention and support in European political circles in recent years because of the impacts of the COVID-19 pandemic on supply chains and the geopolitical tensions between China and the United States, which have led to the latter trying to reshape them.

For the EU's plan to be realistic, it should be clear that it is the US not China that is the cause of its chip woes. The US government's long-held position of excluding all competitors in the field to maintain its own chip hegemony has made it the No 1 cause of instability in the global industry chain. In the US, chip production is a highly politicized issue, with the government ready and willing to pull the trigger on an order forbidding its enterprises from supplying chips to others. China has already been a main victim and there is no reason to expect Europe to escape the same fate. It should join hands with China.