The European Commission announced on Wednesday that it has begun work on a draft to set up a chip production system within the European Union. The plan was launched by the Commission after a shortage of chips caused by the coronavirus resulted in a temporary suspension of production or a reduction in the production rate of many European groups
Hong Kong, China, Taiwan, South Korea, Singapore, Malaysia take the top six, and in addition to the seventh U.S., Japan, Vietnam and the Philippines are still in the top ten. The EU’s capacity is very limited, so any disruption of the global supply chain could lead to catastrophic effects.
According to Ursula von der Leyen, President of the European Commission, the draft therefore aims to create an ecosystem within the EU’s borders.
Given that digitization is no longer an extra but a basic requirement, the production of a large number of products is unthinkable without chip production and related software developments.
It is enough to think only about car production; there are plenty of systems in a modern vehicle, all of which require some sort of control unit. The importance of chip manufacturing is well illustrated by the fact that the US is wearing similar shoes (where the CHIPS for America Act was adopted last year); but on a smaller scale, the example of Apple or Huawei can also be mentioned.
Both manufacturers have switched to processors of their own design, inter alia in order to reduce their dependence on other manufacturers. The importance of digital tools is further illustrated by the fact that the European Commission is allocating one fifth of the 750 billion envelope of the COVID-17 Recovery Fund to projects related to this area.
European chip production will initially serve the needs of the internal market, but in the medium term it would compete with Asia and the USA. The EU currently owns 10 percent of global chip manufacturing capacity, and by 2030 I want to do so significantly, 20 percent higher. It may be very helpful that Intel, according to a recent ten-day announcement, wants to increase its production capacity in Europe by $ 80 billion over the next ten years.
The Chip Act and will share the sub-tasks of chip manufacturing (R&D, manufacturing, international coordination) between Member States. In order to achieve the fastest possible outcome, it is possible that the EU will also review the system of coupled support, leaving room for EU-level and / or national-level support.
European Semiconductor Fund, which will play a role in the efficient allocation of EU funds
Although the EU its plans undoubtedly serve an important purpose, it should also be borne in mind that it is not enough to have a plan and a production line for production: raw materials are also needed. There is a serious problem with this.
The rare earths needed for chip production are mostly found in Asia.
Among the 17 rare earths, 87% are mined by China and 8.8% by Japan, and a crisis like COVID-19 could be a problem for mining. China, for example, reduced its exports by 20% during the pandemic, which of course also had a major impact on the industry’s productivity.
In light of all this, this will be a challenging innovation, we will see where it leads.
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