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EU’s Proposed CHIPS Act

The European Commission announced the European CHIPS Act earlier this year. Semiconductors/chips are central to the digital economy and are used in numerous everyday products including smartphones and cars. They have critical applications for health, energy, communications, and automation and as such, are central to the European Union’s digital and green transitions. However, the world is currently facing a shortage of semiconductor chips and the recent crisis in the European supply chain has revealed structural vulnerabilities in the European value chain and the semiconductor manufacturing landscape within Europe is virtually non-existent and has suffered from two decades of a lack of investment.

The European CHIPS Act is the European Commission’s response to this shortage of supply and proposes a suite of measures to bolster Europe’s semiconductor industry. The measures included in the Act will increase Europe’s production of semiconductor chips, build the capacity and skills to innovate the design, manufacture, and packing of chips, and strengthen Europe’s research and development capabilities in this sector. These semiconductors will support the delivery of clean, efficient, sustainable, and fully automated manufacturing at scale. They will also support leading EU companies working to improve the smart technology that lowers energy emissions from electric vehicles, supports the delivery of digital healthcare, and underpins next‑generation 5G telecommunications, among other challenges. The European Commission also launched a targeted stakeholder consultation earlier this year which ran until 20 March 2022.

Under Article 1 of the CHIPS Act, we find the Subject matter and objectives which are interalia to:

Establish a framework for strengthening the semiconductor sector ecosystem at Union level, in particular through the following measures:

  • establishment of the CHIPS for Europe Initiative (the ‘Initiative’);
  • setting the criteria to recognise and support first-of-a-kind Integrated Production Facilities and Open EU Foundries that foster the security of supply and the resilience of the semiconductor ecosystem in the Union;
  • setting up a coordination mechanism between the Member States and the Commission for monitoring the supply of semiconductors and crisis response to semiconductor shortages.

To achieve the above objectives the CHIPS Act is built on three distinct pillars:

  1. A CHIPS for Europe Initiative.
  2. A framework to ensure the security of supply.
  3. A coordination mechanism between Member States.

Pillar 1: A CHIPS for Europe Initiative to develop Europe’s tech leadership by ensuring that infrastructure and industry are harmonized with EU research and development. This will strengthen capacity by bringing innovation from the lab right through to the design and manufacture of chips. The Initiative will include an open-access virtual design platform to stimulate cooperation among users at every stage of development. The Initiative will also support pilot lines to enable third parties to test, validate, and further develop their product design. Furthermore, it will support a network of competence centres across the EU that will provide expertise to stakeholders. The Initiative will be implemented by means of the CHIPS Joint Undertaking, a Joint Undertaking under Horizon Europe. A ‘CHIPS Fund’ will provide increased availability of funds to support the growth of startups, scale-ups, and SMEs.

Pillar 2: A Framework to ensure the security of supply and strengthen the security of supply by introducing guiding rules for investment and enhancing production capacities in semiconductor manufacturing. It will promote integrated production facilities and open foundries as well as advanced packaging, testing, and assembly as part of integrated production facilities. The framework will lay down criteria for State Aid and assess the impact of investments on the EU economy.

Pillar 3 : A Coordination mechanism between member states and the commission to monitor supply and anticipate shortages of the supply of semiconductor chips. It will facilitate a crisis coordination mechanism between Member States and strong Commission powers during times of crisis. A Semiconductor Board will be established to monitor the semiconductor value chain. Taking advice from this Board, the Commission may trigger a crisis stage, via an implementing act, that would enable an emergency toolbox. This toolbox would also include export control mechanisms.

In response to the increasing need for cyber-resilient supply chains, the Commission will also work with Member States and private actors to identify sectorial requirements for trusted chips with a view to establishing common standards and certification, as well as common requirements for procurement, to be developed with the support of the European standardisation organisations where appropriate and bearing in mind the principles of the New Legislative Framework for conformity assessment and market surveillance.

Member states under the proposed CHIPS Act will need to designate one or more national competent authorities for the purpose of ensuring the application and implementation of this Regulation at national level as well as candidate competence centres.

When the CHIPS Act comes into play member states should also have policies and procedures as well as Laws in place to treat applications related to the planning, construction and operation of Integrated Production Facilities and Open EU Foundries in the most rapid manner possible and according to the CHIPS Act , even in this instance, appoint an authority which will facilitate and coordinate the permit granting processes and appoint a coordinator, serving as a single point of contact for the project.

According to Article 36 of the proposed CHIPS Act, the Act will become applicable on the twentieth day following that of its publication in the Official Journal of the European Union.

For more information please contact Dr Ian Gauci.

Disclaimer: This article is not intended to impart legal advice and readers are asked to seek verification of statements before acting on them.