According to the report, while the 2022 EU Chips Act has brought new momentum to the European microchip sector, the investments that are being made are unlikely to significantly enhance the EU’s position in the field.
Part of the EU’s Digital Decade strategy, the act was intended to drive the development of cutting‑edge and sustainable microchip development, but the auditors have found that there is a gap to bridge between ambition and reality.
“The EU urgently needs a reality check in its strategy for the microchips sector”, said Annemie Turtelboom, the ECA Member in charge of the audit. “This is a fast-moving field, with intense geopolitical competition, and we are currently far off the pace needed to meet our ambitions. The 20 per cent target was essentially aspirational – meeting it would require us to approximately quadruple our production capacity by 2030, but we are nowhere close to that with our current rate of progress.”
According to Turtelboom, the European Commission should reassess its long-term strategy to match “the reality on the ground”.
That will be a tough ask as the Commission is responsible for only 5 per cent (€4.5 billion) of the €86 billion in estimated funding for the Chips Act up to 2030.
The rest will need to come from member states and industry, and with weak economic growth, strained budgets and other pressures on the public purse the chances of finding more money does appear to be limited.
By comparison, the top global manufacturers have budgeted €405 billion in investment over just a three-year period, from 2020 to 2023, which dwarves the financial firepower of the Chips Act.
In addition, the Commission has no mandate to coordinate national investments at the EU level to ensure they align with the Act’s objectives. In addition, the auditors said that the Chips Act lacked clarity in its targets and monitoring.
Other issues that are impacting implementation of the Chips Act include the EU’s dependency on imports of raw materials, high energy costs, environmental concerns, geopolitical tensions and export controls, and a shortage of skilled workers.
Furthermore, the EU microchip industry consists of a few large enterprises focused on high-value projects, meaning that funding is concentrated. The cancellation, delay or failure of a single project can therefore have a significant impact on the whole sector.
With all that it seems highly unlikely that the EU’s ambition of taking a 20 per cent share of the microchips market will be achieved.
The European Commission’s own forecast, published in July 2024, predicts that despite a significant expected increase in manufacturing capacity, the EU’s overall share of the global value chain in a fast-growing market would increase only slightly, from 9.8 pr cent in 2022 to just 11.7 per cent by 2030.
