Brussels approves EUR8 billion in new subsidies for Made In Europe semiconductors

A new raft of European subsidies for microchips is on its way.

The European Commission approved on Thursday a tranche of EUR8.1 billion in state aid for the production of Made in Europe semiconductors.

56 companies of different sizes will tap into the financial pot to carry out 68 projects across 14 member states: Austria, the Czech Republic, Finland, France, Germany, Greece, Ireland, Italy, Malta, the Netherlands, Poland, Romania, Slovakia and Spain.

The Commission hopes the public money will bring EUR13.7 billion in private investments and thus mobilise a total of almost EUR22 billion between now and 2032, the date by which all projects are expected to reach the final stage.

The first products, however, could be available in the market as soon as 2025.

“This is a big thing. It’s a lot of funding that goes into these projects,” said Margrethe Vestager, the European Commission’s executive vice-president in charge of competition.

The projects will focus on the research and development of “resource-efficient technologies” like chips, processors and sensors, Vestager explained.

The approval was made under the framework of so-called “Important Projects of Common European Interest” (IPCEI), a type of undertaking that is supposed to benefit not only the countries that inject the aid but the entire European economy.

Because of this expected spill-over effect, IPCEIs enjoy easier access to taxpayers’ money.

As the main enforcer of competition rules, the European Commission has the mandate to examine and approve any subsidy that threatens to upset the economic balance between member states and trigger an unfair race.

The state-aid rulebook has been traditionally strict, angering larger countries with big pockets. But the increasingly fierce race for microchips, the tiny electronic circuits that power smartphones, computers, vehicles and daily appliances, has pushed Brussels to adopt a more lenient approach, carving exemptions to enable injections of public funds at a faster pace and larger scale.

The ultimate goal is to boost the production of Made In Europe microchips and achieve a 20% share of the global market by 2030, which, in theory, would ensure the bloc’s long-term competitiveness and sovereignty.

“We must increase Europe’s own chips research, development (and) production capabilities,” Vestager said. “We need to be pioneers. We need to develop truly innovative solutions and, of course, their first industrial deployment in Europe.”

The ambition, however, faces an uphill struggle against the technological prowess of China, Japan, South Korea and, most crucially, Taiwan, which dominates the market of advanced semiconductors in a nearly monopolistic manner.

The United States, which, like the EU, has found itself lagging behind Southeast Asia, has too become more forceful in its policies. Last year the country adopted the CHIPS and Science Act, which includes $39 billion in incentives for manufacturing and $13.2 billion in research and development.

Brussels is in the meantime wrapping up the legislation behind the European Chips Act, a three-pillar proposal that aims to mobile over EUR43 billion in public and private investments, with EUR3.3 billion coming straight from the EU budget.

The IPCEI is a separate instrument and the money raised under the state-aid scheme will not count towards the European Chips Act.