The European Court of Auditors (ECA) has issued an interim opinion on the EU Chips Act. The conclusion: not only will the European Union fail to meet its own targets, but it is also questionable whether it will be able to keep pace with increasingly fierce competition.
Annemie Turtelboom, Member of the ECA, acknowledges that the express desire for the European Chips Act is based on sound reasoning. However, this law, which was drafted to increase Europe’s dependence on chip technology, contains targets that are far too ambitious.
20 percent? No, 11.7 percent
The European Commission already realizes that the target of 20 percent market share in chip production will be far from achieved by 2030. Instead, the current projection is 11.7 percent, barely an increase from the roughly 10 percent that the EU represented in 2020. It should be noted, however, that this market is growing, so stagnation in production capacity would have meant a decline in percentage terms.
That said, the EU is far from achieving its targets. According to Turtelboom, in order to actually get the EU figures to 20 percent of global production, a fourfold increase (!) in current capacity is needed. Given that it takes around four years to build a chip factory, many more billions of euros would have to be invested in construction projects.
Anyone who thinks, “Wait a minute, we’ve already spent tens of billions,” has a valid point. From 2022 to 2030, €86 billion would be made available for European chip production and other parts of the semiconductor value chain. However, this amount is a pittance on a global scale. Once again, it is Turtelboom who points out a salient detail from the report: between 2020 and 2023, global investment in chip production amounted to 425 billion euros. Sixty percent of this amount was spent on or by TSMC, Intel, and Samsung.
Where is this heading?
Turtelboom continues: there are four problems affecting the EU Chips Act. First, there is a data problem: after making a commitment, individual member states decide for themselves how the money will be spent. This brings us to the second point: this is not a level playing field. According to the ECA, a remarkable amount of money is going to a small number of large players, such as ASML and non-European players such as Intel and TSMC’s joint venture within Europe. Thirdly, the EU is in a poor starting position, with rare or untraceable raw materials and high energy costs. Fourthly, no impact assessment of previous (failed) policies has been carried out, making it clear what exactly is needed to strengthen the European chip sector.
All of this points to a systematic failure of EU policy. We ask Turtelboom whether the same fundamental sluggishness, inconsistency, and lack of clarity underlie other European initiatives that are currently up in the air. Think of battery production or the development of hydrogen. She acknowledges this. On top of that, competition is fierce, with the US, Taiwan, South Korea, Japan, and China as the main players.
Detached from reality
Turtelboom concludes that the promises are “disconnected from reality.” This means that the future of the European chip industry is on shaky ground. We dare to say that there is no solid ground at all, only quicksand. Perhaps the European chip sector would be better off retaining or developing certain competencies, ideally with an increasingly broad ecosystem around them. For example, there are numerous smaller chip players or manufacturers of specialist materials around ASML, Besi, and imec. Each of these forms an essential part of the global chip industry’s total supply chain.
To make this even clearer: there is no definition of a “European” chip. Essentially, every iPhone SoC and Nvidia GPU is a little bit European, as they are made on ASML machines using Zeiss lenses (to name just two examples). They’ll probably ship from Taiwan, often with an American vendor as the designer, and they will ship anywhere (even China, albeit illicitly and indirectly). The EU Chips Act is therefore a shot in the dark, or a directionless project, in which the only point of assessment, that 20 percent market share, was as realistic as wanting to make a fully American-built iPhone at a normal price. Like the US, China, and any other country or superstate, the EU is bound by this global reality.
Read also: The EU dream to build advanced chips has shattered, and rightly so