Infineon shares & Co. on the verge of a big price jump? How the EU Chips Act is intended to help the European semiconductor industry

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• The EU Chips Act is intended to reduce European dependence on Asia
• Many experts consider the package of measures to be insufficient
• New factory buildings by Intel and Infineon should benefit from the Chips Act

Europe’s market share in global chip production is only ten percent. As a result, many companies are dependent on non-European suppliers such as TSMC. This shall be changed now. The EU Chips Act was recently passed, which is intended to strengthen the European chip industry with the help of billions in subsidies. What are the chances of the European semiconductor offensive?

Key points of the EU Chip Act

After weeks of intensive discussions, the time has now come: The negotiators of the EU Commission, Parliament and Member States recently agreed on the EU Chips Act, which includes a support package of 43 billion euros for European and non-European chip companies that have factories in Europe maintain or are considering such a construction (like the US chip company Intel in Magdeburg). The snag in the law: the EU itself is only making around 3.3 billion euros available, the remaining 40 billion euros should be easier for the member states and investors to leverage than usual thanks to various privileges. The CHIPS and Science Act from the USA, on the other hand, provides for direct investments of 39 billion US dollars with a total support package of 52.7 billion US dollars.

Many experts are therefore skeptical about the success of the EU Chip Act. Iris Plöger, member of the executive board of the Federation of German Industries (BDI), criticizes: “With the EU Chips Act, the EU is not succeeding in catching up. Instead of closing the gap to the USA, Europe will continue to lose ground as a semiconductor region ,” predicts Plöger in a statement published on the BDI website. “The expansion of semiconductor production is likely to shift even more strongly to the USA. With this Chips Act, the EU will not be able to take advantage of the current wave of investment in semiconductors,” is Plöger’s verdict.

Soon every fifth chip from EU countries?

Plöger considers the EU’s goal of expanding the global market share of chip production from the current ten to twenty percent by 2030 to be unrealistic. In order to be able to achieve this ambitious goal, the EU “should have provided significantly more financial resources, significantly less bureaucracy in the event of a semiconductor crisis and more effective strategies for recruiting skilled workers,” says Plöger. That is why Europe will continue to be left behind by Asia and the USA in terms of chip production.

The chip industry association Bitkom is also skeptical. The agreement between the European Council and the European Parliament is to be welcomed in principle, but on the one hand Europe is too late and on the other hand the funds are not sufficient to catch up successfully. “Europe is comparatively late and throws less into the scales. It is all the more important that we don’t lose any time in implementing the Chips Act,” is the assessment of Bitkom boss Achim Berg. He calls for more far-reaching measures: “In view of the continuing increase in demand, Europe and Germany must therefore quickly become more independent – and thus strengthen central areas of the digital economy, including telecommunications, data centers, cloud and edge computing as well as the classic industrial sectors of automotive and mechanical engineering,” writes Berg in a Bitkom press release published on the association’s own website. According to Bitkom, four out of five companies are already dependent on semiconductors for their production – and the trend is rising. According to the “Börsen-Zeitung”, the industry association VDA expects that chip requirements in the automotive industry alone will triple by 2030.

These companies receive billions in subsidies

Reiner Haselhoff (CDU), Prime Minister of Saxony-Anhalt, is much more enthusiastic than the BDI or Bitkom. He sees the EU Chips Act as a “clear signal of competitiveness compared to other regions such as Asia and North America”. However, his enthusiasm is not too surprising – the support package enables the construction of a large Intel production facility in the state capital Magdeburg. The federal state, which is considered to be structurally weak, is to benefit from the newly built large factory, and thousands of qualified workers are to work there in the future. The planned new construction of an Infineon factory near Dresden is under a similar star. Thanks to the subsidy package, these factory buildings can now definitely be built, and any financing difficulties for the planned expansion seem to have been solved. According to the MDR, the industry association “Silicon Saxony” praises the Chips Act, which creates investment and planning security for semiconductor companies and their suppliers in Saxony.

Even if the chip industry will suffer from weakening demand in 2023 and the Corona boom has finally come to an end, all signs point to growth in the semiconductor industry. It remains to be seen, however, whether Europe will get a bigger piece of the pie in the future thanks to the Chip Act in the global chip business.

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