The 27 member states have backed an initiative led by the Netherlands to strengthen the European semiconductor plan and reorient it: moving away from the ambition of “recapturing” global market share en bloc and towards targeted action on weak points within Europe’s value chain. The idea, currently under political discussion, is presented as a kind of Chips Act 2.0 that would quadruple the investments mobilized — compared to the €43 billion allocated in 2022 — in response to the evidence that the continent is not on track to reach its goal of controlling 20% of global production by 2030.
The pivot comes in a context of global competition marked by massive subsidies from the U.S. (CHIPS and IRA) and the installed power of Asia, with Taiwan and South Korea leading. Cost inflation, long construction timelines for fabs, talent shortages, and energy and regulatory bottlenecks have slowed European execution speeds.
What Changes with “Chips Act 2.0”
Shifting from “doing everything at once” to targeting specific links. The proposed shift doesn’t abandon advanced manufacturing, but acknowledges that Europe will not develop enough cutting-edge nodes in time to meet initial goals. Instead, it prioritizes:
- More powerful and agile support packages for already announced flagship projects (mature high-tech nodes) and aligning new investments.
- Strengthening critical links: materials, equipment (Europe is already strong here), back-end/OSAT, advanced packaging (2.5D/3D), design IP, metrology, and competitive energy supply.
- Talent development: training and attracting engineers and specialized technicians, with specific mobility and upskilling programs.
- Procedures: accelerated permits, more flexible public co-financing, and a single-window approach for major investments.
More funding and coordination. The coalition advocates for a fourfold increase in funding — “x4” compared to the initial framework — and for aligning EU funds, state aid, and private capital without duplication. Unlike the 2022 approach, which spread efforts across design, manufacturing, and supply chain monitoring, the new package would concentrate resources where relatively has advantage or systemic risk.
Why a Reassessment Is Necessary
- Cost and time: building a vanguard fab can cost decades of billions and take 5–7 years to reach full capacity. Delays in flagship projects have strained the timeline.
- Asymmetric competition: the US makes bilateral deals and offers tax incentives and direct subsidies at large scale; Asia maintains integrated ecosystems and > installed capacity.
- Talent and energy costs: Europe faces a deficit of profiles and traditionally higher energy prices, impacting the TCO of manufacturing.
- Strategic demand: AI, electric vehicles, defense, and renewables are increasing the need for chips, including advanced and — most critically — mature nodes (28 nm–130 nm) for power and sensors.
Where Europe Stands Today (and the Projects Setting The Pace)
- Mature nodes: Europe has significant capacity (power, analogs, MEMS), with expansions in Germany, France, Italy, and Eastern Europe.
- High-end: Agreements for fabs at advanced nodes have been announced but face timing, costs, and complex conditions.
- Equipment: Europe leads in key segments (e.g., lithography and metrology), an asset that can scale with support and supplier diversification.
- Back-end: packaging and testing remain weak points; 2.5D/3D packaging is critical for AI and high-performance.
Legal Tools and Political Levers
A Chips Act 2.0 would require adjusting several levers:
- State aid: more predictable and swift rules for IPCEI and strategic projects, with performance clauses.
- Public procurement: an anchor demand for critical sectors (defense, healthcare, energy).
- Purchases and economic security: tools for monitoring and responding to disruptions in the supply chain.
- Simplification: licenses and permits with fast-track processes and unified criteria across Member States.
- Talent: visas, dual programs, and reskilling initiatives aimed at pipelines of fabs and OSAT.
Execution Risks
- Fragmentation: replicating identical capacities across numerous locations dilutes scale.
- “Eternal subsidy” effect: support without clear metrics may result in dependency becoming entrenched.
- Canibalization: incentivizing only high-end may neglect mature nodes that support current basic industries.
- Geopolitics: external regulatory tightening (export controls, national security) could alter project economics.
Implications for Companies and Legal Experts
For industry: opportunities for co-financing and access to a market with clear rules, but with requirements for localization, supply security, and resilience clauses. Supply chains, energy, and talent will be key decision parameters, as important as subsidies.
For legal counsel: increased due diligence on public aid, performance contracts, eligibility conditions (e.g., cybersecurity, sustainability), investment controls, and regulatory compliance. The rise of consortium agreements and IPCEI will raise legal complexity.
Next Steps
Brussels and member capitals will need to specify:
- How much new funding and through what tools (direct grants, loans, tax incentives, guarantees).
- The portfolio of priority projects (balancing high-end/mature, front-end/back-end, equipment, materials).
- Reforms for permits and energy that improve the TCO compared to other regions.
- A measurement framework: milestones, performance metrics, qualified jobs, manufactured volume, and value added retained within the EU.
Conclusion
Europe recognizes that, under the original design, it won’t reach its 20% global share in semiconductors on time. The Chips Act 2.0 is an attempt to ground ambitions: more funding, less dispersion, a focus on where the EU can be indispensable, and a realistic timeline aligned with industry realities. If it succeeds in mobilizing private capital, speeding up permitting, and aligning talent and energy, the region can anchor a stronger value chain. Otherwise, the risk is to remain in the middle: lacking the critical mass of high-end technology or distinctive strength in components underpinning the real economy.
Frequently Asked Questions
What is the “20% by 2030” goal, and why is it at risk?
This was the EU’s political goal to recapture global manufacturing share. Delays in fabs, rising costs, and competition from the US and Asia make reaching it on time difficult without increased investment and adjustments.
How does “Chips Act 2.0” differ from the 2022 plan?
More funding, prioritized critical links (including back-end), swifter help and permits, and a focus on measurable results rather than broad efforts.
Does the EU abandon advanced node projects?
No, but it recognizes that a single or a few fabs will not suffice. The new approach aims to combine flagship vanguard projects with a comprehensive value chain (materials, equipment, packaging, talent) to sustain ambition.
What should interested companies monitor?
Calls for proposals, eligibility criteria, national co-financing, conditionalities (energy, employment, security), and alignment with IPCEI or other state aid lines. Early project preparation will be key to accessing new funds.
via: tomshardware