Key Takeaways:

• Drawing lessons from the ongoing shortages in chip supply, the United States, China, and the European Union are adopting industrial policies in the semiconductor sector in search for supply chain security and economic and technological competitiveness.

• The EU Chips Act in particular represents a notable shift from a long-held opposition to industrial subsidies seen as detrimental to international competition.

• The proposal will support R&D in Europe, provide a legal basis for EU member states to use subsidize domestic semiconductor manufacturing, and facilitate trade measures to intervene in the supply chain in times of crisis. 

• This new global subsidy race to build foundries carries the risks of channeling billions in public funds into unprofitable investments, due to the complexity of semiconductor production and risks of overcapacity in certain segments.

• To avoid that, cooperation with like-minded partners of the EU, especially the US, appears necessary but still needs to be worked out.

This briefing is available in two languages:

• in English : Fishing for Chips : Assessing the EU Chips Act
• In French : Marché aux puces : analyse de la loi européenne sur les semi-conducteurs