European Parliament Approves Bills Supporting EU Chips Industry

Members of European Parliament have introduced legislation to protect the European Union’s supply of semiconductor chips. The Industry and Energy Committee adopted the new bills aimed at improving the production of chips and safeguard against shortages and supply-chain issues.

EU Chip Legislation

The European Parliament has issued a press release announcing plans to protect the EU’s supply of semiconductors.

The two bills aim to increase the capacity and innovation of semiconductors and create investment opportunities in the EU chip industry.

The first bill, named the Chips Act, proposes to bolster Europe’s semiconductor ecosystem and to increase its share in the global market. The bill outlines several strategies including strengthening technological research, improving production capacity, and addressing the talent shortage.

The Chips Act will also address risks to the EU’s chip supply by monitoring demand and supply to anticipate shortages and respond with “a dedicated toolbox of measures.”

The second bill, called the Chips Joint Undertaking, aims to advance semiconductor technology and innovation infrastructures. The legislation also focuses on improving investment opportunities for cross-border research.

Semiconductor Dependency

According to a 2022 European Parliament study, semiconductors are a vital component of electronic equipment, used in items such as computers, medical devices, and, of course, vehicles. The study declared that in 2021, the value and content of semiconductor use reached a record high, with products like hybrid electric cars containing up to 3500 chips per vehicle.

The study reported that the COVID-19 pandemic created unprecedented chip shortages, revealing “long-standing vulnerabilities in the semiconductor supply chain.”

The European Parliament aims for the Chips Act to rebuild the chips industry and reduce the threat to sectors including automotive and energy. The Parliament claims that the shortages have revealed Europe’s dependency on semiconductors, caused by limited supply options, export restrictions, and geopolitical tensions.

Dan Nica, the Rapporteur on the Chips Act, said: “our goal is to ensure growth in Europe, prepare for future challenges and have in place the right mechanisms for future crises.”

Complications for the Transport Industry

The 2022 European Parliament analysis highlighted the automotive industry as a victim of semiconductor shortages due to the COVID-19 pandemic. The car industry, which uses hundreds of chips to manufacture modern cars, anticipated a sharp decrease in sales at the start of the pandemic and decided to cancel chip orders. At the end of 2020 however, car sales increased sooner than predicted, leading to vehicle supply issues.

In the analysis, the European Parliament estimated that these issues resulted in a cost of $210 billion for the global automotive industry in 2021 and would continue to affect the industry until 2024.

The Semiconductor Industry Association’s (SIA) 2022 industry report declared that whilst the impact of the pandemic’s semiconductor shortage had started to improve, the automotive sector was still being affected by the increased demand. The SIA predicts that this demand will remain for the next decade.

The SIA also notes in the report that global reliance on semiconductors will persist with the increased production of electric vehicles.

Implications for Sustainability

According to the European Parliament’s analysis, a chip will cross international borders over 70 times for production due to a reliance on geographic specialisation. This creates additional issues for the supply chain, as chip production is more vulnerable to disruptions such as natural disasters and extreme weather events.

Part of the Chips Act’s initiative is to reduce Europe’s dependence on other geographies for chip production and strengthen its own design capacity.

The new bills passed by the European Parliament may not only improve semiconductor supply and investment but protect the industry against climate-change induced disruption.