Brussels,

DIGITAL IN ECONOMY

Supporting Industry

EU support is aimed at strengthening the European microchip industry and supporting the introduction of digital technologies into the european manufacturing world.

​In Summer 2023, EU adopted the Chips Act Regulation, which establishes a framework of measures to strengthen Europe’s semiconductor ecosystem.

1. Strengthening Europe’s technological leadership: semiconductors

Chips play a vital role in various industrial value chains, and the digital transformation has led to the emergence of new markets for the chip industry.

These markets include highly automated cars, cloud computing, the Internet of Things (IoT), connectivity, space technology, defense applications, and supercomputers. The increasing demand for advanced technology in these sectors highlights the strategic importance of chips as essential components for powering and enabling innovation in a wide range of industries.

EU is currently facing challenges in the availability and production of microchips. The global chip shortage has impacted various industries, including automotive, electronics, and telecommunications, causing supply chain disruptions and delays.

The EU is working towards increasing its self-sufficiency in chip production and reducing dependency on foreign suppliers. Efforts are being made to enhance domestic chip manufacturing capabilities, promote research and innovation, and establish strategic partnerships with industry stakeholders. Today, Europe occupies the last places in the semicondictor supply chain.
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The global semiconductor industry experienced disruptions and challenges due to the COVID-19 pandemic. Initially, there were factory shutdowns in China and Taiwan, leading to a temporary decline in chip production. However, the industry recovered, and semiconductor revenue continued to grow from 2020 to 2022. Despite this recovery, the industry faced a global chip shortage in 2021 and 2022 due to increased demand and difficulties in allocating chip capacity. The shortage was driven by changing consumer habits and the growing number of semiconductor applications beyond smartphones, such as automotive and industrial sectors.

1.000 billion microchips were manufactures around the world in 2020. Only 10% in Europe.

The Commission proposes initiatives to invest in chip production facilities and develop advanced semiconductor technologies. EU aims also to strengthen cooperation with international partners to address the global chip shortage and ensure the resilience of its digital infrastructure.
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To help Europe overcome its structural weakness, in 2022 the Commission presented a Proposal for a Regulation ​establishing a framework of measures for strengthening Europe's semiconductor ecosystem (Chips Act), following its Communication COM(2022) 45 final.

A. The European Chips Act

The European Chips Act is a EU legislative text that establishes a framework of measures to strengthen Europe’s semiconductor ecosystem. See in the side the Proposal for Regulation. 

On July 25, 2023, the EU Council confirmed the agreement reached with the European Parliament on the contents of the Chips Act Regulation, which addresses the following issues:"
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  1. Capacity building - The EU framework programme for supporting large-scale technological capacity building and innovation is called "Chips for Europe Initiative". EU wants to strengthen the EU's capabilities in chip design, in manufacturing, and in advanced packaging. The related actions will pool resources from the Union budget, i.e. Horizon Europe and Connecting Europe Facility (CEF),  from Member States and third countries associated with the existing Union programmes. The aims is also to stimulate the private sector, through the “European Chips Joint Undertaking”, resulting from the strategic reorientation of the existing Key Digital Technologies Joint Undertaking through the Council Regulation (see proposal in the side).
  2. Security of supply - This is a framework to ensure security of supply by attracting investments and enhanced production capacities, much needed in order for innovation in advanced nodes, innovative and energy efficient chips to flourish. In addition, a Chips Fund will facilitate access to finance for start-ups to help them mature their innovations and attract investors. It will also include a dedicated semiconductor equity investment facility under InvestEU to support scale-ups and SMEsto ease their market expansion.
  3. EU coordination - The EU suggests a monitoring system to anticipate possible shortages of microchips and to coordinate joint response actions.. European coordination will therefore monitor the semiconductor value chain, gathering key information from companies to map key weaknesses and bottlenecks. It will carry out a joint assessment of crises if they arise and coordinate actions to be taken with emergency instruments, making full use of national and EU instruments.


The European Chips Act goals:
  • Strengthen Europe’s research and technology leadership towards smaller and faster chips
  • Put in place a framework to increase production capacity to 20% of the global market by 2030
  • Build and reinforce capacity to innovate in the design, manufacturing and packaging of advanced chips
  • Develop an in-depth understanding of the global semiconductor supply chains
  • Address the skills shortage, attract new talent and support the emergence of a skilled workforce

​The EU Regulation includes also measures to support the development of advanced chip technologies, such as 5G, artificial intelligence, and the Internet of Things.
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The Commission proposes  two innovative types of production facilities:

The first is "Open EU Foundries," which would allocate a substantial portion of their manufacturing capacity to produce chips for other industrial players.
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The second is "Integrated Production Facilities," which would focus on designing and manufacturing chips for their specific markets, such as a particular sector. These measures aim to enhance chip production within the EU and strengthen its self-sufficiency while fostering innovation and collaboration among different stakeholders.

B. How EU finances its Microchip Strategy


The EU typically utilizes various funding mechanisms to support its policies and initiatives. Concerning this topic, EU mechanisms include:

1. Digital Europe Programme (2021-2027)

The financial envelope of this programme is €8.168 billion, as amended by European Parliament and Council by the agreement reached in April 2023 on the Regulation on European Chips Act. The indicative distribution is:
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  • €2.0 billion for High Performance Computing
  • € 1.6 billion for Artificial Intelligence
  • €1.4 billion for Cybersecurity and Trust
  • €0.5 billion forAdvanced Digital Skills
  • €1.0 billion for Deployment and Best Use of Digital Capacities and Interoperability
  • €1.5 billion for Semiconductors


2. Connecting Europe Facility (CEF)

The Connecting Europe Facility (CEF) is a financial instrument of the European Union (EU) aimed at supporting the development of interconnected and sustainable trans-European networks in transport, energy, and digital infrastructure. It provides funding for projects that enhance cross-border connectivity, promote the efficient functioning of the EU's internal market, and contribute to key infrastructure networks. The CEF's objectives include improving infrastructure connectivity, strengthening energy security and sustainability, and fostering the digital transformation of the EU economy. It offers financial assistance through grants, equity investments, and innovative financial instruments, playing a crucial role in advancing the EU's economic, social, and territorial cohesion.

The financial envelope for 2021-2027 is €33.7 billion. Indicative breakdown of financial resources:

  •  €25.8 billion on Transport
  •  €5.8 billion on Energy
  •  €2.0 billion​ on Digital


3. European Structural and Investment Funds

The EU has structural and investment funds designed to support regional development, innovation, and competitiveness. These funds, such as the European Regional Development Fund (ERDF) and the European Fund for Strategic Investments (EFSI), could  be used to finance the European Chips Act, especially if it aims to promote regional development and innovation in the semiconductor industry.


4. Horizon Europe

Horizon Europe is the EU's research and innovation funding program for the period 2021-2027. It provides financial support for research and innovation activities across various sectors. The European Chips Act will tap into the Horizon Europe program to support chip technology research and development, providing €1.65 billion for 2021-2027.


5. Public-Private Partnerships (PPPs)

The EU often collaborates with private sector entities through PPPs to fund and promote specific initiatives. PPPs bring together public and private resources to achieve common goals. In the case of the European Chips Act, the EU might establish PPPs with semiconductor companies or industry associations to provide financial support and promote collaboration.
EU aims to stimulate at least €43 billion in investments through close collaboration between industry, institutions, and research centers to foster skill development and the creation of an innovative ecosystem in the semiconductor sector.


​6. Other initiatives and investments

The European Chips Act works in conjunction with existing EU initiatives related to semiconductors, including:
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  1. Alliance on Processors and Semiconductor Technologies: A collaborative effort to advance processor and semiconductor technologies within the EU.
  2. Research and Development Programs: Joint Undertakings, Horizon Europe, and the Digital Europe Programme are initiatives supporting research and development in the semiconductor field.
  3. Important Project of Common European Interest (IPCEI): Focuses on microelectronics and communication technologies, aiming to enhance Europe's competitiveness in these areas.

Additionally, in 2022 the European Commission has approved the construction of a STMicroelectronics semiconductor value chain plant in Catania, Sicily, with €292.5 million in funding provided under EU State rules, further supporting the development of the semiconductor industry in Europe.

2. Diffusion of digital technologies


EU is working to reduce disparities among businesses in adopting digital technologies. Smaller businesses, including those in the food and drink, crafts, construction, and publishing sectors, are lagging behind in utilizing digital tools to serve their customers and manage their operations. While some industries have made significant progress in embracing digital transformation, others are struggling to keep up with the advancements.

​Digital technologies offer numerous benefits, such as improved efficiency, customer engagement, and competitiveness. However, smaller businesses in specific sectors face challenges in fully embracing these technologies. They may lack the resources, technical expertise, or awareness to leverage digital tools effectively. As a result, they may not be able to fully capitalize on the opportunities presented by the digital economy.

Efforts are being made to address this issue and support these businesses in their digital journey. EU recognizes the importance of digitalization for all sectors and is working on initiatives to bridge the digital divide. This includes providing resources, guidance, and funding programs to help smaller businesses embrace digital technologies, enhance their digital skills, and overcome barriers to digital adoption.

By encouraging and supporting these businesses in utilizing digital technologies, the EU aims to promote their growth, competitiveness, and resilience in an increasingly digitalized world.
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The EU plan to support digitalisation in industry is working on:

  1. establishing a European platform of national initiatives on digitising industry
  2. creating Digital Innovation Hubs
  3. strengthening leadership through partnerships and industrial platforms
  4. introducing a regulatory framework for the digital age
  5. preparing Europeans for the digital future​​

3. Digital Industrial platforms and large-scale pilots

​Digital industrial platforms are essential in many areas.
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​In the realm of connected smart factories, data from machinery is collected and made accessible to monitoring and controlling applications. This enables third parties to develop applications based on the gathered data. These digital industrial platforms also hold value for energy service providers, as they can offer data services to consumers, allowing them to optimize energy consumption across appliances, electric vehicles, and heating. This contributes to the utilization of renewable energy and the decarbonization of the energy sector.

Moreover, these platforms have potential applications in agriculture by supporting farmers in crop management. By integrating location data with information from field sensors, these platforms can facilitate seed planting and optimize water usage in individual fields.

Digital industrial platforms, with appropriate business models, can establish ecosystems of market actors within a multi-sided marketplace. This fosters the creation of innovative products and services and accelerates the development of global standards.

To enhance European competitiveness in digital technologies, the Digitising European Industry (DEI) initiative supports the development and large-scale piloting of digital industrial platforms. The EU, Member States, and regions collaborate and co-invest under common priorities to advance these large-scale pilots. The DEI initiative has allocated substantial investments, including around €400 million in 2018-2020 and approximately €1 billion under Horizon 2020, to promote platform building, piloting, and related activities.
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