Biden and EU clash over ‘make or break issue’ as bloc asserts dominance with ‘Chips Act’

US and UK missile destroyers put out of action by microchips

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Ursula von der Leyen, President of the European Commission announced in a speech in Strasbourg on Wednesday the European Union aims to catch up on the design and production of microchips. Ms von der Leyen argued the bloc needs to “be bold again” with its upcoming industrial policy plan on semiconductors. She said: “We need to link together our world-class research design and testing capacities.

“We need to coordinate the European level and the national investment.

“The aim is to jointly create a state-of-the-art ecosystem.”

Following a global chips shortage and becoming heavily dependant on countries including the US and Taiwan, the EU is hoping to boost its share of the global chips market to 20 percent by 2030.

The shortage hit some industries heavily, such as the automotive industry in Canada which requires microchips as vital components in the manufacturing process.

Ms von der Leyen was critical of the EU’s reliance on chips made in Asia and its declining share in the supply chain, which involves areas from design to manufacturing capacity.

A shortage of semiconductors also posed a threat to the EU’s economic recovery following the coronavirus pandemic.

Last year, the European Commission revealed its plans to invest a fifth of its £638billion (€750billion) Covid recovery fund in digital projects.

While the EU admits it has slipped behind in the race, the US announced last year its CHIPS for America Act to help the country catch up with China’s technology sector.

The Act included plans to inject tens of millions of dollars into the industry to help it achieve global domination in this area.

But other countries are starting to heavily invest in this technology too.

Many countries from the bloc are making an investment plan called
Important Projects of Common European Interest (IPCEI) and the European Commission has started collaborating with companies to set up an industrial alliance.

But European industry has urged policymakers to speed up its investment plans, saying the EU is at risk of missing out on a booming sector.

Ms von der Leyen also said building up the sector “is not just a matter of our competitiveness” but a matter of the EU’s “tech sovereignty”.

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She added: “Digital is the make or break issue.”

Industry Commissioner Thierry Breton said chips’ importance and potential stretch further than merely being key components for automakers and smartphone makers.

He wrote in a blog post: “The race for the most advanced chips is a race about technological and industrial leadership.”

But the EU does face some obstacles as it tries to implement its Chips Act.

It requires access to rare earth minerals outside the bloc to boost the chip industry and companies have been reluctant to invest if they cannot run their plants at full capacity to boost returns.

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