Europe Announces its Own Semiconductor Manufacturing Program

The EU and its member states will spend $47 billion to help build chip fabs across the continent.

The European Union (EU) is getting into semiconductor chips. The European Parliament and the bloc’s 27 member states this week have okayed a $47 billion program meant to boost every part of the industry, with the goal of doubling the EU’s global semiconductor market share from 10% to 20% by 2030.

From the writeup in NBC News:

“Europe has been seeking to control more of its supply chain to reduce its reliance on foreign market players. The move is part of a push from the EU to achieve ‘digital sovereignty,’ which refers to the idea that they have more control over critical technologies.”

This European Chips Act is the continent’s answer to the CHIPS and Science Act in the United States, which puts a similar amount of money into subsidizing the construction of chip foundries here.

And both are responses to the major supply chain problems laid bare by the Covid-19 pandemic, when the world had to queue up to get its semiconductor chips – crucial to the function of everything from your refrigerator to weather modeling computers and missile systems – from an industry concentrated in Taiwan, a country which the Chinese government considers part of its own and which China is not unlikely to invade sometime soon. These problems are only growing worse after the U.S. government imposed export restrictions on semiconductors and high-end chip manufacturing equipment to China, and has cajoled allies that are home to these manufacturers to follow suit.

In sum, while economic globalization is by no means over, it is in retreat in specific industries like semiconductor chips – and even there it’s not in full retreat: Restrictions or not, multinational corporations that make semiconductors aren’t about to just walk away from the enormous and lucrative Chinese market.  

But they are being enticed to locate some of their production closer (if not directly in) the market they’re selling into. That’s not a bad thing! There is a serious case to be made for national economic resilience.

This approach has already generated billions of dollars of investment in Ohio, New York, Texas, Arizona, Idaho and other states, and those big, expensive semiconductor fabs will create ecosystems of supplier manufacturers and service industries that will feed into local economies. China, meanwhile, was already pumping tons of money into building up its chip industry before the export restrictions were set into place; it’s really getting after it with investments now.

That same effect that’s underway in the U.S. will be felt in Europe. Stronger manufacturing presences in Europe and the U.S. means less reliance on the authoritarian state that has grown wealthy selling westerners consumer goods for 20 years. Just like the EU’s attempt to support its own green industries instead of undercutting U.S. programs that bolster American manufacturing workers, more domestic investment is the way to go about this.