MEMS and Sensors

Overview of the European Chips Act

07 July 2023
A worker at STMicroelectronics’ fab in Crolles, France. The European Chips Act is modeled after the CHIPS and Science Act in the U.S. with funding for semiconductor manufacturing to boost supply chain resilience. Source: STMicroelectronics

The CHIPS and Science Act came with a huge price tag of $280 billion in new funding with the goal of incentivizing domestic research and manufacturing of semiconductors, both by U.S. companies and foreign companies from friendly nations.

The goal was simple: Re-establish American semiconductor vendors as the leading semiconductor manufacturers in terms of market share and capabilities, while also securing domestic production of the most advanced components required in critical electronic systems.

Europe passed its own version in April called the European Chips Act with the EU Parliament and 27 member states passing the legislation pledging investment in domestic semiconductor production with a stated goal to double the EU’s global semiconductors market share from 10% to 20% by 2030.

The two pieces of legislation have similar goals, and with the effectiveness of the CHIPS Act driving private investment in new production capacity, how will Europe’s version fare?

The following details the European Chips Act versus the U.S. CHIPS and Science Act.

What’s in the European Chips Act

The European Chips Act outlines an investment plan that aims to establish Europe as a market leader in semiconductor production, which would ultimately require taking market share from Asian producers and foundries. As of 2022, Europe accounts for less than 10% of the production of semiconductors worldwide, and the Commission hopes to increase the figure to 20% with a €43 billion investment (approximately $47 billion).

The funding allocated in the Act covers multiple areas:

  • Subsidies for new foundries and packaging facilities construction
  • A new state aid exemption covering semiconductor manufacturing
  • Measures to monitor the supply chain and intervene if necessary

The European Chips Act was modeled on the U.S. CHIPS and Science Act, which provides funding for the same areas outlined above. However, the U.S. version includes a significantly larger budget, a focus on R&D for advanced technologies, and a focus on workforce development.


Like any broad and expensive piece of legislation, the European Chips Act has faced criticism. While €42 billion may seem significant, it is much smaller than the initial U.S. allocation of $76 billion and up to $280 billion allocation throughout the lifetime of the legislation. It also does not solve the supply chain problems regarding sourcing of raw materials required for chip production.

Nevertheless, the Act has already started to influence the European semiconductor industry. For example, the European segment has already seen sizable investment by well-known manufacturers. First is a €293 million investment by Dutch company STMicroelectronics to expand a silicon carbide wafer plant in Catania, Sicily. Also, Infineon, Germany's largest chip manufacturer, is planning to add two plants in Dresden for €5 billion and hoping for a subsidy of €1 billion.

Other initiatives

There is another important difference when compared to the U.S. CHIPS and Science Act, but it has nothing to do with legislation supporting semiconductor manufacturing. The U.S. is working with companies in the Pacific Rim region to form the so-called “Chip 4 Alliance,” a strategic economic alliance that includes Japan, South Korea and Taiwan. The alliance aims for cooperation on trade and industrial production to ensure stable supply of advanced semiconductors while also coordinating uniform export controls regarding China.

Now the EU is joining the export control game alongside the U.S. and the Chip 4 Alliance. Earlier in 2023, only the Netherlands was imposing export controls restricting supply of advanced semiconductor lithography equipment to China. Following passage of the European Chips Act, the U.S. and EU issued a joint statement outlining the extent of their cooperation on trade and technology matters, including the topic of export controls.


From what is outlined above, it should be clear that the European Chips Act is a significant step by the EU to bolster its semiconductor production capabilities and capacity. Similar to the U.S., the goal of greater self-sufficiency aims to reduce dependency on external supply chains and increase global market share in semiconductor production.

However, it also faces criticism, particularly in comparison to similar efforts by the U.S. Compared to the long-term U.S. support of $280 billion throughout the lifetime of the Act, and the broader scope in terms of R&D, the European Chips Act invests only about $47 billion (at current exchange rates). Given that the U.S. has similar market share aims and has already seen hundreds of billions of dollars of private investment in domestic production capacity, whether the EU will see similar growth in market share is an open question.

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