Brussels bids to centralise control of EU microchip industry

Ursula von der Leyen is seeking to take command of a centralised European microchip industry and prevent competition between countries as Brussels extends its reach into tech manufacturing.

The European Commission president used her annual state of the union speech on Wednesday to outline plans for a coordinated strategy on chipmaking, while her officials have proposed the creation of a dedicated investment fund supported with billions of euros from member states.

European Union leaders want to make a fifth of the world's chips by 2030, but the bloc lacks factory capacity in a sector dominated by Taiwan, China and the US. It is scrambling to expand after a global shortage of chips hammered production at German carmakers.

Ms von der Leyen said: “The aim is to jointly create a state-of-the-art European chip ecosystem, including production. That ensures our security of supply and will develop new markets for ground-breaking European tech.”

She is planning to limit competition between countries on the Continent through a Chips Act, which would seek to ensure that European Union states collaborate on research and support a strategy set by the Commission rather than individual governments.

Thierry Breton, the European commissioner for the internal market, said in a blog post that the aim was to ensure that “national efforts can be integrated in a coherent European vision and strategy”.

Soaring demand for chips has resulted in bottlenecks at production facilities in a supply chain dominated by Taiwan's TSMC.

Europe’s car companies have borne the brunt of the shortages, with Mercedes Benz owner Daimler and Volkswagen admitting to shortfalls in production.

Officials across Europe are trying to woo producers including Intel to set up new chip plants after the US company promised to invest up to €80bn (£68bn) over the next decade.

Meanwhile US President Joe Biden earlier this year unveiled his Chips for America Act, a $50bn (£36bn) incentive scheme to bolster American chip manufacturing and research.

Ms von der Leyen said: “While global demand has exploded, Europe's share across the entire value chain, from design to manufacturing capacity has shrunk. We depend on state-of-the-art chips manufactured in Asia.

“So this is not just a matter of our competitiveness. This is also a matter of tech sovereignty.”

Mr Breton said: “The US are now discussing massive investment … Taiwan is positioning itself to ensure its primacy on semiconductor manufacturing. China, too, is trying to close the technological gap as it is constrained by export control rules. Europe cannot and will not lag behind.”

However, the EU still needs to find potentially tens of billions of euros from member states to fund a European rival to America’s plans.

The Commission is also investigating US graphics chip giant Nvidia’s proposed $40bn takeover of Britain’s Arm. While Arm does not make chips itself, it is viewed as a key supplier of designs to the whole industry.

In the UK, Britain’s largest semiconductor wafer manufacturing plant, Newport Wafer Fab, faces a takeover by Nexperia, a Dutch company owned by Chinese firm Wingtech. The deal is being investigated by the Government on national security grounds.