Strengthening the EU’s semiconductor ecosystem – Chips Act

SUMMARY OF:

Regulation (EU) 2023/1781 establishing a framework of measures for strengthening Europe’s semiconductor ecosystem

WHAT IS THE AIM OF THE REGULATION?

The European Chips Act aims to strengthen the European Union’s (EU) semiconductor ecosystem, make supply chains more resilient, reduce dependency on external forces and contribute to the achievement of Europe’s Digital Decade target of increasing its global market share in advanced semiconductors to 20%.

KEY POINTS

The Chips Act has five strategic objectives:

strengthening research and technological leadership;
building and reinforcing innovation in designing, manufacturing and packaging advanced chips;
putting in place a framework to increase chip production by 2030;
addressing the skill shortage and attracting new talent;
developing a deeper understanding of global semiconductor supply chains.

There are three pillars of action to achieve the legislation’s aims.

1.
The chips for Europe initiative
The chips for Europe initiative supports building major technological capacity and innovation with the aim of developing and deploying cutting-edge, next-generation semiconductor and quantum technologies and bridging the gap between the EU’s advanced research and innovation capabilities and their industrial exploitation. To this end, the initiative has the following five operational objectives:
- setting up a design platform;
- enhancing existing and developing new advanced pilot lines;
- building capacities for accelerating the development of quantum chips and associated semiconductor technologies;
- establishing an EU-wide network of competence centres;
- setting up a Chips Fund to facilitate access to debt financing and equity, particularly for start-ups, scale-ups, small and medium-sized enterprises and small mid-caps (companies with fewer than 500 staff).
With the exception of the Chips Fund (which is implemented by the European Innovation Council and InvestEU), the initiative will mainly be implemented through the Chips Joint Undertaking – previously known as the Key Digital Technologies Joint Undertaking.

The initiative is supported by funding from the Horizon Europe and the digital Europe programmes.
2.
Incentivising investment in manufacturing facilities
The regulation introduces a framework for the security of supply of semiconductors, which will attract investment and enhance production capacities in semiconductor manufacturing, advanced packaging, testing and assembly. It also introduces the following.
- Integrated production facilities (IPFs). A status designation of vertically integrated manufacturing facilities, involved in front-end manufacturing, producing equipment or key components mostly used to manufacture integrated circuits and provide back-end services.
- Open EU foundries (OEFs). A status designation of manufacturing facilities with capacity to produce chips to other companies’ designs, in particular fabless companies.
IPF or OEF status streamlines administrative procedures and gives priority access to pilot lines set up under the chips for Europe initiative.

In addition, the regulation introduces the label of ‘Design centres of excellence’. The European Commission may award a label to design centres that significantly enhance the EU’s capabilities in innovative chip design through their service offerings, or through their design skills and capabilities.
3.
Monitoring and crisis response
This includes strengthening collaboration across EU Member States, and with the Commission, monitoring the supply of semiconductors, estimating demand, anticipating shortages and triggering the activation of a crisis stage.
- Governance mechanism. The European Semiconductor Board is introduced to govern the Chips Act, comprising representatives of the Member States and chaired by the Commission, and providing advice, assistance and recommendations across the three action pillars.
- Monitoring. Strategic mapping of the semiconductor sector, including key products, critical infrastructures, dependencies on non-EU countries, skill needs, early warning indicators, Member States’ reporting, risk mitigation and best practices.
- Crisis response. In crisis-stage situations activated after consulting the European Semiconductor Board, the Commission can ask IPFs or OEFs to prioritise relevant product orders for the benefit of critical sectors, in addition to offering an emergency toolbox, information gathering and common purchasing.

Evaluation and review

By 20 September 2026, and every 4 years thereafter, the Commission will evaluate and review the regulation, submitting a publicly available report to the European Parliament and to the Council of the European Union.

FROM WHEN DOES THE REGULATION APPLY?

The regulation has applied since 21 September 2023.

BACKGROUND

The regulation amends Regulation (EU) 2021/694 on the digital Europe programme (see summary).

For further information, see also:

European Chips Act (European Commission)
The EU chips industry (European Council and Council of the EU)
Application for status of integrated production facility and open EU foundry (European Commission).

MAIN DOCUMENT

Regulation (EU) 2023/1781 of the European Parliament and of the Council of 13 September 2023 establishing a framework of measures for strengthening Europe’s semiconductor ecosystem and amending Regulation (EU) 2021/694 (Chips Act) (OJ L 229, 18.9.2023, pp. 1–53).