(1)

Semiconductors are at the core of any digital device and the Union’s digital transition: from smartphones and cars, through critical applications and infrastructures in health, energy, communications and automation to most other industry sectors. As semiconductors are central to the digital economy, they are powerful enablers for the sustainability and green transition, contributing thus to the objectives of the Commission communication of 11 December 2019 on ‘The European Green Deal’. While semiconductors are essential to the functioning of today’s economy and society as well as defence and security, the Union has witnessed unprecedented disruptions in their supply, the consequences of which are significant. The current disruptions have exposed long-lasting vulnerabilities in this respect, in particular a strong third-country dependency in manufacturing and design of chips. Member States are primarily responsible for maintaining a strong industrial, competitive, sustainable base in the Union promoting innovation across a full range of chips.

(2)

A framework for increasing the Union’s resilience in the field of semiconductor technologies should be established, reinforcing the Union’s semiconductor ecosystem by reducing dependencies, enhancing digital sovereignty, stimulating investment, strengthening the capabilities, security, adaptability and resilience of the Union’s semiconductor supply chain, and increasing cooperation among the Member States, the Commission and international strategic partners.

(3)

This framework pursues two general objectives. The first objective is to ensure the conditions necessary for the competitiveness and innovation capacity of the Union, to ensure the adjustment of the industry to structural changes due to fast innovation cycles and the need for sustainability, and to strengthen the Union-wide semiconductor ecosystem with pooled knowledge, expertise, resources and common strengths. The second objective, separate from and complementary to the first, is to improve the functioning of the internal market by laying down a uniform Union legal framework for increasing the Union’s long-term resilience and its ability to innovate and provide security of supply in the field of semiconductor technologies with a view to increasing robustness in order to counter disruptions.

(4)

It is necessary to take measures to build capacity and strengthen the Union’s semiconductor ecosystem in accordance with Article 173(3) of the Treaty on the Functioning of the European Union (TFEU). Those measures should not entail the harmonisation of national laws and regulations. In this regard, the Union should reinforce the competitiveness and resilience of the semiconductor technological and industrial base, whilst strengthening the innovation capacity of its semiconductor ecosystem across the Union, reducing dependence on a limited number of third-country companies and geographies, and strengthening its capacity to design and produce, package, reuse and recycle advanced semiconductors. The Chips for Europe Initiative (the ‘Initiative’) established by this Regulation should support those aims by bridging the gap between the Union’s advanced research and innovation capabilities and their sustainable industrial exploitation. The Initiative should promote capacity building to enable design, production and systems integration in next-generation semiconductor technologies, and should enhance collaboration among key players across the Union, strengthening the Union’s semiconductor supply and value chains, serving key industrial sectors and creating new markets.

(5)

Due to the ubiquity of semiconductors, the recent shortages have either directly or indirectly adversely affected businesses across the Union and induced strong economic repercussions. The economic and social impact has led to an increased consciousness of the public and of economic operators and a resulting pressure for Member States to address the strategic dependencies as regards semiconductors. At the same time, the semiconductor sector is characterised by interdependencies across the value chain, where no single geography dominates all steps of the value chain. This cross-border nature is further emphasised by the nature of semiconductor products as an enabler for downstream industries. While semiconductor manufacturing may be concentrated in some regions, user industries are spread out across the Union. Against this background, the security of supply of semiconductors and resilience of the semiconductor ecosystem can be best addressed through Union harmonising law on the basis of Article 114 TFEU. A single coherent regulatory framework harmonising certain conditions for operators to carry out specific projects that contribute to the security of supply and resilience of the Union’s semiconductor ecosystem is necessary. Additionally, a coordinated mechanism for monitoring, strategic mapping, crisis prevention and response should be established to address shortages of supply and prevent obstacles to the unity of the internal market, avoiding differences in response among Member States.

(6)

Strengthening the Union’s critical infrastructure and security as well as its technological leadership requires both leading-edge and mature chips, in particular for future-proofing strategic sectors.

(7)

The achievement of those objectives should be supported by a governance mechanism. At Union level, this Regulation should establish a European Semiconductor Board, composed of representatives of the Member States and chaired by the Commission, to facilitate a smooth, effective and harmonised implementation of this Regulation, cooperation and the exchange of information. The European Semiconductor Board should provide advice to and assist the Commission on specific questions, including the consistent implementation of this Regulation, facilitating cooperation among Member States and exchanging information on issues relating to this Regulation. The European Semiconductor Board should also advise the Commission on international cooperation related to semiconductors. The European Semiconductor Board should hold separate meetings for its tasks under the different chapters of this Regulation. The different meetings may include different compositions of the high-level representatives and the Commission may establish subgroups.

(8)

Given the globalised nature of the semiconductor supply chain, international cooperation with third countries is an important element to achieve resilience of the Union’s semiconductor ecosystem. The actions taken under this Regulation should also enable the Union to play a stronger role, as a centre of excellence, in a better functioning global, interdependent semiconductor ecosystem. To that end, the European Semiconductor Board should advise the Commission on matters concerning coordinating those efforts and enhancing cooperation along the global semiconductor value chain between the Union and third countries, consider, where relevant, the views of the Industrial Alliance on Processors and Semiconductor Technologies and of other stakeholders.

(9)

In accordance with international obligations and applicable procedural requirements the Union and Member States could engage, including diplomatically, with international strategic partners that have advantages in the semiconductor industry, with a view to seeking solutions to strengthen the security of supply and to address future supply-chain disruptions of semiconductors, such as those resulting from third-country export restrictions, and to identify the availability of raw materials and intermediate products. This may involve, where appropriate, coordination in relevant international fora, concluding investment and trade agreements or other diplomatic efforts in accordance with the applicable procedural requirements or engagement with relevant stakeholders.

(10)

In order to build upon the commitment of meeting workforce needs across the semiconductor supply chain, the Commission should ensure synergies with existing Union programmes and it should support and encourage Member States in setting up initiatives which contribute to the exchange of academic knowledge, with international strategic partners.

(11)

It is a clear objective of the Union to promote international cooperation and knowledge exchange on the basis of the Union’s interests, mutual benefits, international commitments, and, to the extent possible, reciprocity. Nevertheless, the infringement of intellectual property (IP) rights, the unauthorised disclosure of trade secrets, or the leakage of sensitive emerging technologies in the semiconductor sector could compromise the interests of the security of the Union. Against this background, the Commission is exploring concrete proposals to strengthen the Union’s investment and export control frameworks. In addition, the Union and the Member States should cooperate with strategic partners to strengthen the joint technological and industrial leadership in accordance with applicable procedural requirements.

(12)

The semiconductor sector is characterised by very high development and innovation costs and very high costs for building state-of-the-art facilities for testing and validating to support the industrial production. This has direct impact on the competitiveness and innovation capacity of the Union industry, as well as on the security of the supply and the resilience of the Union’s semiconductor ecosystem. In light of the lessons learnt from recent shortages in the Union and worldwide and the rapid evolution of technology challenges and innovation cycles affecting the semiconductor value chain, it is necessary to reinforce the Union’s existing strengths, thus increasing its competitiveness, resilience, research and innovation capacity by setting up the Initiative.

(13)

Member States are primarily responsible for sustaining a strong Union industrial, competitive, sustainable and innovative base. However, the nature and scale of the research and innovation challenges in semiconductors requires action to be taken collaboratively at Union level.

(14)

In order to equip the Union with the semiconductor technology research and innovation capacities needed to maintain the leading role of its research and industrial investments at a leading edge, and bridge the current gap between research and development (R & D) and manufacturing, the Union and Member States should coordinate their efforts better and co-invest. The current challenges of the Union’s semiconductor ecosystem call for the achievement of large-scale capacity and require a collective effort by Member States, with the Union supporting the development and deployment of large-scale capacity. That collective effort includes providing financial resources in line with the ambition of the Initiative to support the development and widespread availability of innovative capacities and extensive digital infrastructures, comprising a virtual design platform, pilot lines, including for quantum chips, and the diffusion of knowledge, skills and competences for the benefit of the entire semiconductor ecosystem. To achieve this, the Union and Member States should take into consideration the twin green and digital transition goals. In this regard, semiconductor devices and manufacturing processes offer significant opportunities for decreasing the environmental, and, in particular, the carbon impact of industries, thereby contributing to the ambitions of, for instance, the Commission communication of 14 July 2021 entitled ‘Fit for 55’: delivering the EU’s 2030 Climate Target on the way to climate neutrality’, the Recovery and Resilience Facility established by Regulation (EU) 2021/241 of the European Parliament and of the Council (4) and the communication of the Commission of 18 May 2022 entitled ‘REPowerEU plan’. The Initiative should throughout all components and actions, to the extent possible, mainstream and maximise the benefits of application of semiconductor technologies as powerful enablers for the sustainability transition that can lead to new products and more efficient, effective, clean and durable use of resources, including energy and materials necessary for production and the whole lifecycle use of semiconductors.

(15)

In order to achieve its general objective, and address both the supply and demand side challenges of the current semiconductor ecosystem, the Initiative should include five operational objectives. First, to reinforce the Union’s design capacity, the Initiative should support actions to build a virtual design platform that is available across the Union. The virtual design platform should connect the communities of design houses, start-ups, SMEs and IP and tool suppliers and research and technology organisations to provide virtual prototype solutions based on co-development of technology.

(16)

Second, to provide the basis for strengthening the security of supply and the Union’s semiconductor ecosystem, the Initiative should support enhancement of existing and development of new advanced pilot lines to enable development and deployment of cutting-edge semiconductor technologies and next-generation semiconductor technologies. The pilot lines should provide for the industry a facility to test, experiment and validate semiconductor technologies and system design concepts at the higher technology readiness levels beyond level 3 but under level 8, while reducing environmental impacts as much as possible. Investments from the Union, alongside with Member States and the private sector, in pilot lines is necessary to address the existing structural challenge and market failure where such facilities are not available in the Union hindering innovation potential and global competitiveness of the Union.

(17)

Third, in order to accelerate the innovative development of quantum chips and associated semiconductor technologies, including those based on semiconductor material or integrated with photonics, conducive to the development of the semiconductor sector, the Initiative should support actions, including on design libraries for quantum chips, pilot lines for building quantum chips and facilities for testing and validating quantum chips produced by the pilot lines.

(18)

Fourth, in order to promote the use of semiconductor technologies, to provide access to design and pilot line facilities, and to address skills gaps across the Union, the Initiative should provide Member States with the possibility to establish at least one competence centre on semiconductors in each Member State, by enhancing existing centres or creating new facilities. Access to publicly funded infrastructure, such as pilot and testing facilities, and to the competence centres, should be open to a wide range of users and should be granted on a transparent and non-discriminatory basis and on market terms (or cost plus reasonable margin basis) for large undertakings, while SMEs and academic institutes can benefit from preferential access or reduced prices. Such access, including for international research and commercial partners, can lead to broader cross-fertilisation and gains in know-how and excellence, while contributing to cost recovery.

(19)

Fifth, the Commission should establish a dedicated semiconductor investment facility support, as part of the investment facilitation activities described collectively as the ‘Chips Fund’, proposing both equity and debt solutions, including a blending facility under the InvestEU Fund established by Regulation (EU) 2021/523 of the European Parliament and of the Council (5), in close cooperation with the European Investment Bank Group and together with other implementing partners such as national promotional banks and institutions. The Chips Fund activities should support the development of a dynamic and resilient semiconductor ecosystem by providing opportunities for increased availability of funds to support the growth of start-ups and SMEs as well as investments across the value chain, including for other companies in the semiconductor value chain. In this regard, support and clear guidance should be provided, in particular to SMEs, with the aim of assisting them in the application process. In this context, the European Innovation Council is expected to provide further dedicated support through grants and equity investments to high risk, market creating innovators.

(20)

In order to overcome the limitations of the current fragmented public and private investment efforts, to facilitate integration, cross-fertilisation, and return on investment on the ongoing programmes and to pursue a common strategic Union vision on semiconductors as a means to realising the ambition of the Union and of Member States to ensure a leading role in the digital economy, the Initiative should facilitate better coordination and closer synergies between the existing funding programmes at Union and national levels, better coordination and collaboration with industry and key private sector stakeholders and additional joint investments with Member States. The implementation of the Initiative is designed to pool resources from the Union, Member States and third countries associated with the existing Union Programmes, as well as the private sector. The success of the Initiative can therefore only be built on a collective effort of Member States and the Union to support both the significant capital costs and the wide availability of virtual design, testing and piloting resources and diffusion of knowledge, skills and competences. Where appropriate, in view of the specificities of the actions concerned, the objectives of the Initiative, in particular the Chips Fund activities, should also be supported through a blending facility under the InvestEU Fund.

(21)

Support from the Initiative should be used to address market failures or sub-optimal investment situations as a consequence of high capital intensity, high risk, and complex landscape of the semiconductor ecosystem in a proportionate cost-effective manner, and actions should not duplicate or crowd out private financing or distort competition in the internal market. Actions should have a clear added value throughout the Union.

(22)

The primary implementation of the Initiative should be entrusted to the Chips Joint Undertaking established by Council Regulation (EU) 2021/2085 (6) (the ‘Chips Joint Undertaking’).

(23)

The Initiative should build upon the strong knowledge base and enhance synergies with actions currently supported by the Union and Member States through programmes and actions in research and innovation in semiconductors and in developments of part of the supply chain, in particular Horizon Europe – the Framework Programme for Research and Innovation established by Regulation (EU) 2021/695 of the European Parliament and of the Council (7) (Horizon Europe) and the Digital Europe Programme established by Regulation (EU) 2021/694 of the European Parliament and of the Council (8) with the aim by 2030, to reinforce the Union as global player in semiconductor technology and its applications, with a growing global share in manufacturing, in line with the Commission communication of 9 March 2021 entitled ‘2030 Digital Compass: the European way for the Digital Decade’. Furthermore, private investments are expected to be mobilised to complement the funding of the Initiative contributing to achieving its objectives. Complementing those activities, the Initiative would closely collaborate with other relevant stakeholders, including with the Industrial Alliance on Processors and Semiconductor Technologies.

(24)

In order to allow synergies between the Union and Member States’ programmes, the work programmes of the Chips Joint Undertaking under the Initiative should in accordance with Article 17(2), point (k), and Article 137, point (aa), of Regulation (EU) 2021/2085 clearly differentiate actions to support research and innovation in semiconductors from those aiming to develop parts of the supply chain, so as to ensure the appropriate participation of public and private entities.

(25)

With a view to facilitating the implementation of specific actions supported by the Initiative, such as the virtual design platform or pilot lines, it is necessary to provide as an option a new legal instrument, the European chips infrastructure consortium (ECIC). The ECIC should have legal personality. This means that when applying for specific actions to be funded by the Initiative, the ECIC itself, and not individual entities forming the ECIC, can be the applicant. Nevertheless, pursuant to Article 134(3) of Regulation (EU) 2021/2085, the work programme calls for proposals under the Initiative are open to different legal forms of cooperation and other participants, and the selection of proposals for funding is not based on a specific legal form of cooperation. The main aim of the ECIC should be to encourage effective and structural collaboration between legal entities, including research and technology organisations, industry and Member States. The ECIC should involve the participation of at least three members, namely Member States, or public or private legal entities from at least three Member States, or a combination thereof, with a view to achieving broad representation across the Union. By having legal personality, an ECIC would have sufficient autonomy to lay down its membership, governance, funding, budget, the arrangements for financial and in-kind contributions from its members, and coordination, management of IP and working methods. The members of the ECIC should be able to have full flexibility in determining the applicable law, statutory seat and voting rights. The selection of public and private legal entities implementing the work plan of the ECIC should be fair, transparent and open. To ensure fair and equal access to participation, an ECIC should be open to new members, namely Member States or public or private legal entities, over its lifetime. Member States in particular should be able to join an ECIC at any time either as full members or observers, whereas other public or private legal entities should be able to join at any time on fair and reasonable terms specified in the statutes of the ECIC. The Public Authorities Board of the Chips Joint Undertaking should be able to verify the openness of an ECIC and recommend for certain remedial measures to be taken where necessary. The establishment of an ECIC should not involve the actual establishment of a new Union body. It should address the gap in the Union’s toolbox to combine funding from Member States, the Union budget and private investment for the purpose of implementing specific actions supported by the Initiative. The Commission should not be a member of the ECIC.

(26)

An ECIC whose membership does not include private entities is to be recognised as an international body within the meaning of Article 143(1), point (g), and Article 151(1), point (b), of Council Directive 2006/112/EC (9) and as an international organisation within the meaning of Article 11(1), point (b), of Council Directive (EU) 2020/262 (10). An ECIC which includes private entities among its members should not be recognised as such an international body or such an international organisation.

(27)

R & D within the Union is increasingly exposed to practices aiming to misappropriate confidential information, trade secrets, and protected data, such as IP theft, forced technology transfers and economic espionage. In order to prevent adverse impacts on the interests of the Union and the objectives of the Initiative, it is necessary to adopt an approach to ensure that the access to and use of sensitive information or results, including data and know-how, security and transfer of ownership of results as well as content protected by IP rights generated in connection to or as a result of actions supported by the Initiative, are protected. To ensure that protection, any actions supported by the Initiative and funded by Horizon Europe and the Digital Europe Programme should follow the relevant provisions of those Programmes, such as on participation of entities established in third countries associated with the programme, grant agreements, ownership and protection, security, exploitation and dissemination, transfer and licensing and access rights. It is possible to set specific provisions when implementing those Programmes, in particular with regard to limitations to transfers and licensing in accordance with Article 40(4) of Regulation (EU) 2021/695, and limitation of participation of legal entities established in specified associated or other third countries due to reasons based on the Union’s and the Member States’ strategic assets, interests, autonomy or security, in accordance with Article 22(5) of Regulation (EU) 2021/695 and Article 12(6) of Regulation (EU) 2021/694. Additionally, the handling of sensitive information, security, confidentiality, protection of trade secrets and IP rights should be governed by Union law, including Directives (EU) 2016/943 (11) and 2004/48/EC (12) of the European Parliament and of the Council, and national law. It is possible for the Commission and the Member States to protect technology transfers for reasons related to Union and national security interests in relation to investments made in facilities falling within the scope of this Regulation in accordance with Regulation (EU) 2019/452 of the European Parliament and of the Council (13).

(28)

To facilitate access to technical expertise and ensure dissemination of knowledge across the Union, as well as support to diverse skills initiatives, a network of competence centres should be established. To that end, the Chips Joint Undertaking should establish the procedure for establishing competence centres, including the selection criteria, as well as further details on the implementation of the tasks and functions mentioned in this Regulation. The competence centres forming the network should be selected by the Chips Joint Undertaking and should have substantial overall autonomy to lay down their organisation, composition and working methods. However, their organisation, composition and working methods should comply with and contribute to the objectives of this Regulation and the Initiative.

(29)

Competence centres should contribute to maintaining the Union’s lead with regard to chip research, development and innovation and design capabilities by focusing on the promotion of research, development, innovation and design, together with a focus on manufacturing. The promotion of human potential and skills through education in science, technology, engineering and mathematics (STEM) subjects up to the postdoctoral level is crucial for achieving that objective. In particular, competence centres should provide services to the semiconductor stakeholders, including start-ups and SMEs. Examples include facilitating access to pilot lines and to the virtual design platform, providing training and skills development, support to finding investors, making use of existing local competencies or reaching out to the relevant verticals. The services should be provided on an open, transparent and non-discriminatory basis. Each competence centre should connect and be part of the European network of competence centres in semiconductors and should act as an access point to other nodes of the network. In this regard, synergies with existing similar structures, such as European Digital Innovation Hubs established under the Digital Europe Programme, should be maximised. For example, Member States could designate an existing European Digital Innovation Hub focused on semiconductors as a competence centre for the purposes of this Regulation, provided that the prohibition of double financing is not breached.

(30)

Chip design is a crucial capability for implementing any innovation and functionality into electronic solutions adapted to different applications and the needs of users of semiconductors. As such, design is at the heart of the semiconductor value chain and supporting the expansion of design capabilities in the Union is of critical importance. To recognise the key role of design centres and their contribution to European excellence in advanced chip design through service offerings or strengthening of design skills and capabilities in the Union, the Commission should be able to award a label for ‘design centre of excellence’. In light of their importance for enabling a resilient semiconductor ecosystem, the design centres of excellence should be considered to be in the public interest. To contribute to the resilience of the Union’s semiconductor ecosystem, Member States should be able to apply support measures, in a proportional manner, if such design centres of excellence are SMEs. This is without prejudice to the competence of the Commission in the field of State aid under Articles 107 and 108 TFEU, where relevant, and to the Commission communication of 19 October 2022 entitled ‘Framework for State aid for research and development and innovation’ (the ‘R & D&I State aid framework’). The R & D&I State aid framework aims to facilitate research, development and innovation activities which, due to market failures, would not occur in the absence of public support. In this respect, on the basis of the R & D&I State aid framework, Member States, subject to certain conditions, could provide the necessary incentives to companies and the research community to carry out these important activities and investments in this field. Under the R & D&I State aid framework, maximum aid intensities up to the level of 80 % could be allowed for aid for R & D projects of medium-sized enterprises and up to 90 % could be allowed for those of small enterprises. Furthermore, in order to maximise synergies, competence centres established under the Initiative that focus on state-of-the-art chip design should be able to apply to receive the label of ‘design centre of excellence’. At the same time, Member States could designate a design centre of excellence as their candidate competence centre.

(31)

In order to encourage the establishment of the necessary manufacturing and related design capabilities, and thereby ensure the security of supply and strengthen the resilience of the Union’s semiconductor ecosystem, public support may be appropriate, provided that this does not lead to distortions in the internal market. In that respect, it is necessary to harmonise certain conditions for operators to carry out specific projects at Union level that contribute to achieving the objectives of this Regulation and distinguish between two types of facility, namely, integrated production facilities and open EU foundries. The distinguishing factor for qualification as either type of facility should be the business model. Open EU foundries offer production capacity to other undertakings. Integrated production facilities produce for their own commercial purposes and could integrate other steps of the supply chain in addition to manufacturing into their business model, such as designing and selling the products.

(32)

Integrated production facilities and open EU foundries should provide capabilities in semiconductor manufacturing or the production of equipment or key components for such equipment predominantly used in semiconductor manufacturing that are ‘first-of-a-kind’ in the Union and contribute to the security of supply and to the resilience of the semiconductor ecosystem in the internal market. The qualifying factor for being a ‘first-of-a-kind’ facility is to bring an innovative element to the internal market regarding the manufacturing processes or the final product, which could be based on new or existing technology nodes. Relevant innovation elements could be with regard to the technology node or substrate material, or approaches that lead to improvements in computing power or other performance attributes, energy efficiency, level of security, safety or reliability, as well as integration of new functionalities, such as artificial intelligence (AI), memory capacity or other. Integration of different processes leading to efficiency gains or packaging and assembly automation are also examples of innovation. With regard to environmental gains, innovation elements include the reduction in a quantifiable way of the amount of energy, water or chemicals used, or improving recyclability. Those innovation elements could apply to both mature and cutting-edge technology nodes. Such innovation should not yet substantively be present or committed to be built within the Union. For example, similar innovation in R & D or small-scale production would not necessarily exclude subsequent qualifying as a ‘first-of-a-kind’ facility. Both the installation of a new or substantially upgraded facility could lead to qualification as a ‘first-of-a-kind’ facility.

(33)

Where an open EU foundry offers production capacity to undertakings not related to the operator of the facility, the open EU foundry should establish, implement and maintain adequate and effective functional separation in order to prevent the exchange of confidential information between internal and external production. This should apply to any information obtained in the design and in the front-end or back-end manufacturing processes.

(34)

In order to qualify as integrated production facilities or open EU foundries, the establishment of the facility should have a clear positive impact with spill-over effects beyond the undertaking or the Member State concerned on the Union’s semiconductor value chain in the medium to long term with a view to ensuring the security of supply and resilience of the semiconductor ecosystem and contributing to the Union’s twin green and digital transitions. Various activities aiming to create positive spill-over effects may be considered for the purpose of qualifying as integrated production facilities or open EU foundries. Examples include giving access to manufacturing facilities against a market fee; giving process design kits to smaller design companies or to the virtual design platform; disseminating results from their R & D activities; engaging in research collaboration with European universities and research institutes; cooperating with national authorities or educational and vocational institutions to contribute to skills development; contributing to Union-wide research projects; or offering dedicated support opportunities for start-ups and SMEs. The impact on several Member States, including with regard to cohesion objectives, should be considered as one of the indicators of a clear positive impact of an integrated production facility or open EU foundry on the semiconductor value chain in the Union.

(35)

It is important that integrated production facilities and open EU foundries are not subject to extraterritorial application of public service obligations imposed by third countries that could undermine their ability to use their infrastructure, software, services, facilities, assets, resources, IP or know-how needed to fulfil the obligation on priority-rated orders under this Regulation, to which they would have to commit.

(36)

In light of the fast development of semiconductor technologies and to strengthen the future industrial competitiveness of the Union, integrated production facilities and open EU foundries should invest in the Union in continued innovation with a view to achieving concrete advances in semiconductor technology or preparing next-generation technologies. In light of this, integrated production facilities and open EU foundries should be able to test and experiment new developments through preferential access to the pilot lines established by the Initiative through fast-tracked applications for their services. Any such preferential access should neither exclude nor prevent effective access on fair terms to the pilot lines by other interested undertakings, in particular start-ups and SMEs.

(37)

Taking into account the importance of a qualified and skilled workforce to achieve the objectives of this Regulation, integrated production facilities and open EU foundries should support the Union talent pipeline by developing and deploying educational and skills training and by increasing the pool of qualified and skilled workforce.

(38)

To allow for a uniform and transparent procedure to attain the status as an integrated production facility or open EU foundry, the decision to grant this status should be adopted by the Commission following the application by an individual undertaking or a consortium of several undertakings. The status should be open for both the installation of a new semiconductor manufacturing facility and the significant scale-up or innovative transformation of an existing semiconductor manufacturing facility. To account for the importance of a coordinated and cooperated implementation of the planned facility, the Commission should take into account in its assessment the readiness of one or more Member States where the applicant intends to establish its facilities to support the establishment of such facilities. Furthermore, when assessing the viability of the business plan, the Commission could take into account the overall record of the applicant.

(39)

In light of the rights attached to recognition as an integrated production facility or open EU foundry, the Commission should monitor whether facilities that have been granted that status continue to comply with the requirements set out in this Regulation. If this is no longer the case, the Commission should have the right to re-examine and, if necessary, repeal the status and, accordingly, the rights attached to this status. Any decision on the repeal of the status should be taken only after consulting the European Semiconductor Board and should be properly reasoned. Correspondingly, the undertaking operating an integrated production facility or open EU foundry should have the possibility to proactively request a review of the duration of the status or implementation plans where unforeseen external circumstances, such as serious disturbances with a direct economic impact on the recognised facility, could have an impact on its ability to comply with the criteria. To account for the fact that most rights are granted in the period of establishment, facilities should remain subject to the obligation to comply with priority-rated orders even in the event of a repeal of the status for the time remaining until the status would have expired.

(40)

In light of their importance for ensuring the security of supply and enabling a resilient semiconductor ecosystem, integrated production facilities and open EU foundries should be considered to be in the public interest. Ensuring the security of supply of semiconductors is also important for digitalisation, which enables the green transition of many other sectors. To attract investments to the Union’s semiconductor sector and contribute towards security of supply of semiconductors and resilience of the Union’s semiconductor ecosystem, Member States may apply support measures, including incentives, and provide for administrative support in national permit-granting procedures for integrated production facilities and open EU foundries. This is without prejudice to the competence of the Commission in the field of State aid under Articles 107 and 108 TFEU, where relevant. To ensure the correct and efficient application of the State aid rules, in its communication of 8 February 2022 entitled ‘A Chips Act for Europe’, the Commission has already recognised the need for a case-by-case assessment regarding State aid granted to advanced semiconductor production facilities with a view to safeguarding the Union’s security of supply and supply-chain resilience while generating significant positive impacts on the wider economy. Furthermore, the procedures for the recognition as integrated production facilities or open EU foundries and for the authorisation of State aid, where applicable, will be conducted in parallel in order to accelerate the decision-making process. Member States should support the establishment of integrated production facilities and open EU foundries in accordance with Union law. When providing support measures for integrated production facilities and open EU foundries, Member States should be able to consider setting non-discriminatory requirements related to intellectual protection and security, including cyber-security, and confidentiality and could recommend mitigation measures to address specific risks related to the interference, forced technology transfers, and IP theft by entities from third countries.

(41)

In order to encourage the establishment of the necessary related design capabilities, Member States may provide support for such activities in accordance with State aid rules on the basis of Articles 107 and 108 TFEU, including under the R & D&I State aid framework or Commission Regulation (EU) No 651/2014 (14).

(42)

It is necessary that integrated production facilities and open EU foundries are established as quickly as possible, while keeping the administrative burden to a minimum. For that reason, Member States should process applications related to the planning, construction and operation of integrated production facilities and open EU foundries in the most rapid manner possible. Member States should be able to appoint an authority to facilitate and coordinate the permit-granting processes which could appoint a coordinator, serving as a single point of contact for the project. Moreover, where necessary for granting a derogation under Council Directive 92/43/EEC (15) and Directive 2000/60/EC of the European Parliament and Council (16), the establishment and operation of these facilities may be considered to be of overriding public interest within the meaning of those Directives, provided that the remaining other conditions set out in those provisions are fulfilled. This is without prejudice to the applicability or implementation of other Union environmental law.

(43)

Innovative high-tech businesses are increasingly exposed to practices aiming to misappropriate confidential information, trade secrets and protected data, such as IP theft, unauthorised copying, forced technology transfers, economic espionage or the breach of confidentiality requirements, from within and in particular from outside the Union. Recent developments, such as increased outsourcing, longer global value chains, and the increased use of information and communication technology contribute to increasing the risk of those practices. The unlawful acquisition, use or disclosure of confidential information, trade secrets, and protected data compromises the ability to obtain first-mover returns from innovation-related efforts. In order to ensure the protection of confidential information, trade secrets, and protected data, this Regulation should be implemented in a manner that fully respects the Union and international framework of data and IP protection and enforcement, including Directive 2001/29/EC of the European Parliament and of the Council (17), Directives 2004/48/EC and (EU) 2016/943, and Directive (EU) 2019/790 of the European Parliament and of the Council (18). To further address key supply-chain risks, Member States may make use of the possibility provided for by Directive (EU) 2022/2555 of the European Parliament and of the Council (19) to carry out coordinated security risk assessments of critical supply chains, as carried out for 5G networks following Commission Recommendation (EU) 2019/534 (20), with the aim of identifying, per sector, relevant threats and vulnerabilities and to identify measures, mitigation plans and best practices to counter critical dependencies, potential single points of failure, threats, vulnerabilities and other risks associated with the supply chain.

(44)

The internal market would greatly benefit from common standards for green, sustainably manufactured, trusted and secure chips. Future smart devices, systems and connectivity platforms will have to rely on advanced semiconductor chips and they will have to meet green, trust and cybersecurity requirements which will largely depend on the features of the underlying technology. To that end, the Union should develop reference certification procedures and require the industry to jointly develop such procedures for specific sectors and technologies with potential high social impact.

(45)

In light of this, the Commission, in consultation with the European Semiconductor Board and with due involvement of stakeholders, should identify the sectors and products that rely on or make extensive use of semiconductor technologies and are in need of certified green, trusted and secure chips. The identification of such sectors and products could stimulate the take-up of European and international standards for risk management.

(46)

In light of the complexities of the semiconductor supply chain and the risk of future shortages, this Regulation should provide instruments for a coordinated approach to strategic mapping and monitoring of the semiconductor sector and effectively tackling possible market disruptions in a proportionate manner.

(47)

The objective of a strategic mapping of the semiconductor sector should be to provide an analysis of the Union’s strengths and weaknesses in the global semiconductor sectors with a view to providing a basis for measures to ensure security of supply and resilience of the Union’s semiconductor ecosystem. To that end, the strategic mapping should identify factors such as key products and critical infrastructures in the internal market that depend on the supply of semiconductors, main user industries and their current and expected needs, key segments of the Union’s semiconductor supply chain, technological characteristics, dependencies on third-country technology and providers, and bottlenecks of the Union’s semiconductor sector, current and expected needs for skills and access to qualified workforce and, where appropriate, the potential impact of the measures of the emergency toolbox. The strategic mapping should be based on publicly and commercially available data and, if necessary, on data obtained through voluntary information requests of undertakings, in consultation with the European Semiconductor Board.

(48)

In order to forecast and prepare for future disruptions of the different stages of the semiconductor value chain in the Union and of trade within the Union, the Commission should, assisted by the European Semiconductor Board and on the basis of the outcome of the strategic mapping, identify and develop a list of early warning indicators. Such indicators could include atypical increases in lead time, the availability of raw materials, intermediate products and human capital needed for manufacturing semiconductors, or appropriate manufacturing equipment, the forecasted demand for semiconductors on the Union and global markets, price surges exceeding normal price fluctuation, the effect of accidents, attacks, natural disasters or other serious events, the effect of trade policies, tariffs, export restrictions, trade barriers and other trade-related measures, and the effect of business closures, offshoring or acquisitions of key market actors. Monitoring activities of the Commission should focus on these early warning indicators.

(49)

Due to the complex, quickly evolving and interlinked semiconductor value chains with various actors, a coordinated approach to monitoring is necessary to increase the ability to mitigate risks that may negatively affect the supply of semiconductors and to enhance the understanding of the dynamics of the semiconductor value chain. The Commission, in consultation with the European Semiconductor Board, should monitor the semiconductor value chain focusing on early warning indicators and identifying best practices for risk mitigation and increased transparency in the semiconductor value chain, in such a way that it would not represent an excessive administrative burden for undertakings, in particular SMEs.

(50)

In order to minimise the burden for undertakings responding to the monitoring and to ensure that the acquired information can be compiled in a meaningful way, the Commission should provide for standardised and secure means for any information collection. These means should ensure that any collected information is treated confidentially, ensuring business secrecy and cybersecurity.

(51)

Relevant findings, including information provided by relevant stakeholders and industry associations, should be provided to the European Semiconductor Board to allow for a regular exchange of information and for integration of the information into a monitoring overview of the semiconductor value chains.

(52)

In order to enable those monitoring activities, the national competent authorities of Member States should establish a contact list of all relevant undertakings operating along the semiconductor supply chain established in their national territory. That list should allow for the identification of appropriate respondents to voluntary information requests. The list should not be required to be exhaustive. The list should be handled in a manner that fully respects the applicable confidentiality rules.

(53)

The availability of adequate human, financial and technical resources would allow for an efficient implementation of the tasks under this Regulation and would be conducive to the achievement of the objectives set out therein. Therefore, without prejudice to the budgetary procedure and to its administrative autonomy, the Commission should make optimal use of resources to ensure that it can effectively perform its duties and exercise its powers under this Regulation.

(54)

A number of undertakings providing semiconductor services or goods are assumed to be essential for an effective semiconductor supply chain in the Union’s semiconductor ecosystem, due to the number of Union undertakings relying on their products, their Union or global market share, their importance to ensure a sufficient level of supply or the possible impact of the disruption of supply of their products or services. The Member States, in cooperation with the Commission, should identify those key market actors in their territories.

(55)

Under Article 4 of Regulation (EU) 2019/452, in determining whether a foreign direct investment is likely to affect security or public order, Member States and the Commission may consider its potential effects on critical technologies and dual-use items as defined in Article 2, point (1), of Council Regulation (EC) No 428/2009 (21), including semiconductors.

(56)

As part of the monitoring, Member States should specifically consider integrity of the activities carried out by key markets actors. Such issues could be brought to the attention of the European Semiconductor Board by the Member State concerned.

(57)

To enable anticipation of potential shortages, national competent authorities should alert the Commission if they become aware of a risk of serious disruption in the supply of semiconductors or have concrete and reliable information of any other relevant risk factor or event materialising. In order to ensure a coordinated approach, the Commission should, where it learns of a risk of serious disruption in the supply of semiconductors or has concrete or reliable information of any other relevant risk factor or event materialising, upon alert or from international partners, convene an extraordinary meeting of the European Semiconductor Board to discuss the severity of the disruptions and possible initiating of the procedure for activating the crisis stage, and whether it may be appropriate, necessary and proportionate for Member States to carry out coordinated joint procurement as a preventive measure, as well as to enter into dialogue with stakeholders, with a view to identifying, preparing and possibly coordinating such preventive measures. The European Semiconductor Board and the Commission should, within that dialogue, take into account the views of stakeholders of the semiconductor value chain. The Commission should consult and cooperate with relevant third countries with a view to jointly addressing supply-chain disruptions, in compliance with international obligations and without prejudice to procedural requirements.

(58)

The semiconductor crisis stage should be activated in the presence of concrete, serious, and reliable evidence of such a crisis. A semiconductor crisis occurs where there are serious disruptions to the supply of semiconductors or serious obstacles to trade in semiconductors within the Union causing significant shortages of semiconductors, intermediate products or raw or processed materials, and such significant shortages prevent the supply, repair and maintenance of essential products used by critical sectors, for instance medical and diagnostic equipment, to the extent that it would have serious detrimental effects on the functioning of the critical sectors due to their impact on society, economy and security of the Union.

(59)

In order to ensure an agile and effective response to such a semiconductor crisis, where the Commission becomes aware of a potential semiconductor crisis, it should assess if the conditions for activating the crisis stage are met. If this assessment produces concrete, serious and reliable evidence of a semiconductor crisis, the Commission should be able to present to the Council a proposal to activate the crisis stage for a predetermined duration period of maximum 12 months, taking into account the opinion of the European Semiconductor Board. The Commission should assess the need for prolongation or early termination of the crisis stage and initiate such procedure, should such a necessity be ascertained, taking into account the opinion of the European Semiconductor Board.

(60)

Due to the sensitive nature of the crisis stage activation and of the potential measures that may be taken in response thereof, including the significant impact which such measures might have on private undertakings in the Union, the power to adopt an implementing act as regards activating, prolonging and terminating the crisis stage in a semiconductor crisis should be conferred on the Council.

(61)

Close cooperation between the Commission and the Member States and coordination of any national measures taken with regard to the semiconductor supply chain is indispensable during the crisis stage with a view to addressing disruptions with the necessary coherence, resiliency and effectiveness. To that end, the European Semiconductor Board should hold extraordinary meetings as necessary. Any measures taken should be strictly limited to the duration period of the crisis stage.

(62)

For a rapid, efficient and coordinated Union response to a semiconductor crisis, it is necessary to provide timely and up-to-date information to the Commission and to the Member States through the European Semiconductor Board on the unfolding operational situation as well as to ensure that effective measures to secure the supply of semiconductors to affected critical sectors can be taken. Appropriate, effective and proportionate measures should be identified and implemented when the crisis stage is activated, without prejudice to possible continued international engagement with relevant partners with the view to mitigating the evolving crisis situation. Where appropriate, the Commission should request information from undertakings along the semiconductor supply chain. Furthermore, the Commission should be able to, where necessary and proportionate, require integrated production facilities and open EU foundries to accept and prioritise an order of the production of crisis-relevant products, and to act as a central purchasing body when mandated by Member States. The Commission should limit the measures to certain critical sectors. The European Semiconductor Board may also assess and advise on appropriate and effective measures. In addition, the European Semiconductor Board may advise on the necessity of introducing protective measures pursuant to Regulation (EU) 2015/479 of the European Parliament and of the Council (22). The use of all emergency measures should be proportionate and restricted to what is necessary to address the semiconductor crisis in the best interest of the Union. The Commission should regularly inform the European Parliament and the Council of the measures taken and the underlying reasons. The Commission may, after consulting the European Semiconductor Board, issue further guidance on the implementation and use of the emergency measures.

(63)

A number of sectors are critical for the proper functioning of the internal market. For the purposes of this Regulation, those critical sectors should be listed in an annex to this Regulation. That list should be limited to the sectors and subsectors listed in the Annex of Directive (EU) 2022/2557 of the European Parliament and of the Council (23), in the version in force on 19 September 2023, with the addition of the sectors of defence and security, on the basis of their important role in ensuring vital societal functions. Certain measures should be taken only for the purpose of securing supply to critical sectors. The Commission may limit the emergency measures to certain of those sectors or to certain parts of them when the semiconductor crisis has disturbed or is threatening to disturb their operation.

(64)

The purpose of requests for information from undertakings along the semiconductor supply chain established in the Union in the crisis stage is to enable precise assessments of the semiconductor crisis or to identify and prepare potential mitigation or emergency measures at Union or national level. Such information may include production capability, production capacity and current primary disruptions and bottlenecks. Those aspects could include the typical and current actual stock of crisis-relevant products in production facilities located in the Union as well as production facilities which are located in third countries where those undertakings operate, with which they contract or from which they purchase supplies; the typical and current actual average lead time for the most common products produced; the expected production output for the following three months for each Union production facility; or reasons that prevent the filling of production capacity. Such information should be limited to what is necessary to assess the nature of the semiconductor crisis or potential mitigation or emergency measures at Union or national level. Information requests should not entail the supply of information the disclosure of which is contrary to the Member States’ national security interests. The concrete information to be asked may be developed on the basis of prior advice from a representative number of relevant undertakings through voluntary consultation, in cooperation with the European Semiconductor Board. Any request should be proportionate, have regard for the legitimate aims of the undertaking and the cost and effort required to make the data available, as well as set out appropriate time limits for providing the requested information. Undertakings should be required to comply with the request and may be subject to penalties if they fail to comply or provide incorrect information. Any information acquired should be used only for the purposes of this Regulation and be subject to confidentiality rules. To ensure full involvement of the Member State where the undertaking has its production site, the Commission should forward, without delay, a copy of the information request to the national competent authority and, if the national competent authority so requests, share the acquired information with that national competent authority through secure means. If an undertaking receives a request for information related to its semiconductor activities from a third country, it should inform the Commission so as to enable the Commission to assess whether an information request by the Commission is warranted.

(65)

As an instrument of last resort to ensure that critical sectors can continue to operate in a time of crisis and only when necessary and proportionate for that purpose, integrated production facilities and open EU foundries could be required by the Commission to accept and prioritise orders of crisis-relevant products. Potential beneficiaries of priority-rated orders should be entities from critical sectors or undertakings supplying to critical sectors whose activities are disrupted or at risk of disruption on account of the shortage. To ensure that priority-rated orders are used only when necessary, they should be restricted to beneficiaries who, having implemented risk mitigation measures, were unable to avoid, for instance through their procurement practices, and to mitigate the impact of the shortage through other means, such as using existing stockpiles. That obligation may also be extended to semiconductor manufacturing facilities which have accepted such possibility in the context of receiving public support, if such public support aims to foster the ability to increase production capacity. The decision on a priority-rated order should be taken in accordance with all applicable Union legal obligations, having regard to the circumstances of the case. The priority rating obligation should take precedence over any performance obligation under private or public law while it should have regard for the legitimate aims of the undertakings and the cost and effort required for any change in production sequence. Each priority-rated order should be placed at a fair and reasonable price. The calculation of such price may be carried out on the basis of average market prices over recent years, subject to reasons being given for any increase, for example taking into account inflation or rise in energy costs. Undertakings may be subject to penalties if they fail to comply with the obligation for priority-rated orders.

(66)

For facilities carrying out a priority-rated order, it may be beneficial for the Commission, assisted by the European Semiconductor Board, and the Member States to exchange best practices concerning the execution of those orders, including best administrative practices.

(67)

The undertaking concerned should be required to accept and prioritise a priority-rated order. With a view to ensuring that priority-rated orders align to the capacities and the production portfolio of the facility, the Commission should provide the facility concerned with the opportunity to be heard on the feasibility and details of the priority-rated order. The Commission should not issue the priority-rated order where the facility is unable to fulfil the order even if prioritised, be it due to insufficient production capability or production capacity or on technical grounds, or where the product is not supplied or the service is not performed by the facility or because this would place an unreasonable economic burden and entail particular hardship on the undertaking, including substantial risk relating to business continuity.

(68)

To ensure a transparent and clear framework for the implementation of priority-rated orders, the Commission should be empowered to adopt an implementing act laying down the practical and operational arrangements. That implementing act should contain safeguards to ensure that priority-rated orders are implemented in compliance with the principles of necessity and proportionality, such as a mechanism that takes into account existing orders and a mechanism to ensure that volumes of priority-rated orders do not exceed what is necessary.

(69)

Under the exceptional circumstance that an undertaking operating along the semiconductor supply chain in the Union receives a priority-rated order request from a third country, it should inform the Commission of such a request, so as to inform an assessment of whether, if there is a significant impact on the security of supply to critical sectors, and the other requirements of necessity, proportionality and legality are satisfied in the circumstances of the case, the Commission should likewise impose a priority-rated order obligation.

(70)

In light of the importance to ensure the security of supply to critical sectors that perform vital societal functions, compliance with the obligation to perform a priority-rated order should not entail liability for damages towards third parties for any breach of contractual obligations that may result from the necessary temporary changes of the operational processes of the concerned manufacturer, limited to the extent the violation of contractual obligations was necessary for compliance with the mandated prioritisation. Undertakings potentially within scope of a priority-rated order should anticipate this possibility in the conditions of their commercial contracts. Without prejudice to the applicability of other provisions, the liability for defective products, provided for by Council Directive 85/374/EEC (24), is not affected by this liability exemption.

(71)

The obligation to prioritise the production of certain products respects the essence of and does not disproportionately affect the freedom to conduct a business and the freedom of contract laid down in Article 16 of the Charter of Fundamental Rights of the European Union (the ‘Charter’) and the right to property laid down in Article 17 of the Charter. Any limitation of those rights in this Regulation will, in accordance with Article 52(1) of the Charter, be provided for by law, respect the essence of those rights and freedoms, and comply with the principle of proportionality.

(72)

When the crisis stage is activated, two or more Member States could mandate the Commission to aggregate demand and act on their behalf for their public procurement in the public interest, in accordance with existing Union rules and procedures, leveraging its purchasing power. Common purchasing should be used only to address supply-chain disruptions of semiconductors during a crisis. The mandate could authorise the Commission to enter into agreements concerning the purchase of crisis-relevant products for certain critical sectors. The Commission should assess for each request the utility, necessity and proportionality in consultation with the European Semiconductor Board. Where it intends to not follow the request, it should inform the Member States concerned and the European Semiconductor Board and give its reasons. The procedural details should be set out in an agreement between the Commission and the participating Member States, including reasons for the use of the common purchasing mechanism and liabilities to be assumed. Such an agreement may include the number of contracts to be concluded and the conditions of the common purchasing, such as prices, delivery timeframes, quantities and opt-in or opt-out clauses. The common purchasing may result in the signature of one contract covering the needs of all Member States or several contracts each covering the needs of one or more Member States. Furthermore, the participating Member States should be entitled to appoint representatives to provide guidance and advice during the procurement procedures and in the negotiation of the purchasing agreements. The deployment, use or resale of purchased products should remain within the remit of the participating Member States.

(73)

During a semiconductor shortage crisis, it might become necessary that the Union considers protective measures. The European Semiconductor Board should be able to express its views to inform the Commission’s assessment of whether the market situation amounts to a significant shortage of essential products pursuant to Regulation (EU) 2015/479.

(74)

The institutional framework for expert groups, including the rules on transparency for the entity and its sub-groups, should apply to the European Semiconductor Board, without prejudice to this Regulation. The European Semiconductor Board should provide advice to and assist the Commission on specific questions. Those questions should include providing advice on the Initiative to the Public Authorities Board of the Chips Joint Undertaking; exchanging information on the functioning of integrated production facilities and open EU foundries; discussing and preparing the identification of specific sectors and technologies with potential high social impact and security significance in need of certification for trusted products and addressing coordinated monitoring and crisis response. Furthermore, the European Semiconductor Board should ensure the consistent application of this Regulation, facilitate cooperation between Member States as well as exchange of information on issues relating to this Regulation. The European Semiconductor Board should also exchange views with the Commission on the best ways to ensure effective protection and enforcement of IP rights, confidential information and trade secrets with due involvement of stakeholders in relation to the semiconductor sector. The European Semiconductor Board should support the Commission in international cooperation in line with international obligations. It should serve as a forum for discussion on, inter alia, how to enhance cooperation along the global semiconductor value chain without prejudice to the prerogatives of the European Parliament and of the Council in accordance with the Treaties. For this purpose, the European Semiconductor Board should take into account the views of the Industrial Alliance on Processors and Semiconductor Technologies and of other stakeholders. In addition, the European Semiconductor Board should coordinate, cooperate and exchange information with other Union crisis response and crisis preparedness structures with a view to ensuring a coherent and coordinated Union approach as regards crisis response and crisis preparedness measures for semiconductor crises.

(75)

A representative of the Commission should chair the European Semiconductor Board. Each Member State should appoint at least one high-level representative to the European Semiconductor Board. They could also appoint different representatives in relation to different tasks of the European Semiconductor Board, for example, depending on which part of this Regulation is discussed in the meetings of the European Semiconductor Board. To receive important advice on the activities of the European Semiconductor Board and allow appropriate participation of stakeholders, the Chair should be able to establish sub-groups and should be entitled to establish working arrangements by inviting experts and observers to take part in the meetings on an ad hoc basis or to invite stakeholders, in particular organisations representing the interests of the Union semiconductors industry, such as the Industrial Alliance on Processors and Semiconductor Technologies, to its sub-groups as observers.

(76)

The European Semiconductor Board should hold separate meetings for its tasks in relation to the Initiative and for its tasks in relation to security of supply and resilience as well as monitoring and crisis response. Member States should endeavour to ensure effective and efficient cooperation in the European Semiconductor Board. The Chair should be able to facilitate exchanges between the European Semiconductor Board and other Union bodies, offices, agencies and expert and advisory groups. In light of the importance of the supply of semiconductors for other sectors and the resulting need for coordination, the Chair should ensure participation by other Union institutions and bodies as observers in meetings of the European Semiconductor Board where relevant and appropriate in relation to the monitoring and crisis response mechanism established in this Regulation. In order to continue and make use of the work following the implementation of Commission Recommendation (EU) 2022/210 (25), the European Semiconductor Board should carry out the tasks of the European Semiconductor Expert Group. Once the European Semiconductor Board is operational, this expert group should cease to exist.

(77)

Member States hold a key role in the application and enforcement of this Regulation. In this respect, each Member State should designate one or more national competent authorities responsible for the effective implementation of this Regulation and ensure that those authorities are adequately empowered and resourced. Member States could designate an existing authority or authorities. In order to increase organisation efficiency in the Member States and to set an official point of contact vis-a-vis the public and other counterparts at Union and Member State level, including the Commission and the European Semiconductor Board, each Member State should designate, within one of the authorities it designates as competent authority under this Regulation, one national single point of contact responsible for coordinating issues related to this Regulation and cross-border cooperation with competent authorities of other Member States.

(78)

In order to ensure trustful and constructive cooperation of competent authorities at Union and national level, all parties involved in the application of this Regulation should respect the confidentiality of information and data obtained in carrying out their tasks to protect in particular IP rights, sensitive business information and trade secrets. Any information acquired in the application for recognition as an integrated production facility or open EU foundry, in the context of information requests or notification obligations under this Regulation, should be used only for the purposes of this Regulation and should be covered by the obligation of professional secrecy in accordance with Article 339 TFEU, as well as internal Commission rules on the secure handling of data, in particular Commission Decision (EU, Euratom) 2015/443 (26). The Commission and the national competent authorities, their officials, servants and other persons working under the supervision of these authorities as well as officials and civil servants of other authorities of the Member States should ensure the confidentiality of information obtained in carrying out their tasks and activities. This should also apply to the European Semiconductor Board and the Semiconductor Committee established by this Regulation. Where appropriate, the Commission should be able to adopt implementing acts to specify the practical arrangements for the treatment of confidential information in the context of information gathering.

(79)

Compliance with the obligations imposed under this Regulation should be enforceable by means of fines and periodic penalty payments. To that end, appropriate levels of fines for non-compliance with information requests and notification obligations under this Regulation should be laid down, taking into account the different levels of gravity of the non-compliance between both obligations and with different ceilings for SMEs. Furthermore, periodic penalty payments should be laid down for non-compliance with the obligation to accept and perform priority-rated orders, which should be proportionate and reflect the price levels on the market during the last 90 days, with different ceilings for SMEs. Limitation periods should apply for the impositions of fines and periodic penalty payments, in addition to limitation periods for the enforcement of penalties. In addition, the Commission should give the concerned undertaking or representative organisations of undertakings the right to be heard.

(80)

In order to reflect technological change and market developments, to ensure effective implementation and evaluation of the Initiative and to lay down detailed rules for the label of design centres of excellence, the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission with a view to amending this Regulation with regard to the actions supported by the Initiative in a manner consistent with its objectives and with regard to the measurable indicators for monitoring the implementation of the Initiative and for reporting on its progress towards the achievement of its objectives, and with a view to supplementing this Regulation by establishing the procedure for applications and the requirements and conditions for the granting, monitoring and withdrawal of the label of design centres of excellence. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making (27). In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States’ experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.

(81)

In order to ensure uniform conditions for the implementation of this Regulation, implementing powers should be conferred on the Commission as regards the selection of ECICs, so that the objectives of the Initiative are achieved, laying down the practical and operational arrangements for the functioning of priority-rated orders, and specifying the practical arrangements for the treatment of confidential information. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council (28).

(82)

Since the objective of this Regulation, namely to establish a framework for strengthening the semiconductor ecosystem at Union level, cannot be sufficiently achieved by the Member States but can rather, by reason of the scale or effects of the action, be better achieved at Union level, the Union may adopt measures in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve that objective.

(83)

In order to allow for the implementation of this Regulation to start as soon as possible, with a view to reaching its objectives, it should enter into force as a matter of urgency,