Proposed Chips Act 2.0 fortifies Europe’s electronics ecosystem

Further erosion in these critical parts of the manufacturing base deepens reliance on non-EU suppliers, undermining the EU’s technological sovereignty and industrial resilience goals

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By Alison James,
Brussels
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Three years ago, the European Union adopted the European Chips Act.

It marked an important first step in enabling funding for first-of-a-kind semiconductor’s research, development and production.

It also laid the foundations for emerging advanced packaging capabilities as strongly advocated by the Global Electronics Association (hereafter the association).

While welcoming these opportunities, we also knew that the Chips Act did not address all vulnerabilities across the European electronics ecosystem.  

In the wake of the initial Chips Act, the association initiated a Call-to-Action to form a Pan European coalition of leading EMS (electronics manufacturing services) and PCB (printed circuit board) companies.

That coalition included 17 peer associations, 68 companies, and even the European Space Agency. It rallied around a vision for stronger partnership with governments to strengthen Europe’s electronics industrial base.

Together, on the basis of data studies, we made our case to the European Commission, the European Parliament, and member states that a true “silicon-to-systems” strategy was essential for Europe’s critical industries at a time of significant geopolitical change. Most notably, the Covid pandemic and the war in Ukraine. Later to be exacerbated by the situation in the Middle East. 

The first signs of Europe adopting a silicon-to-systems approach came this year in April with the adoption of the European Defence Industrial Programme (EDIP) which allocated €122m for capacity building for key electronic components. 

Earlier this month, the commission took a very significant step, adopting a Chips Act 2.0. proposal as part of a broader Technological Sovereignty package.

The proposal takes a more holistic approach to the electronics ecosystem. 

The Chips Act 2.0 would give a wider array of Europe’s electronics companies a path to seek member state funding for new or substantially upgraded facilities across the electronics supply chain, once they meet the criteria for First-of-a-Kind.

Losing market share

The proposal explicitly calls out printed circuit board and electronics assembly; segments of the European electronics industry that have lost significant market share over the last few decades and had projected to shrink further between now and 2035.

Further erosion in these critical parts of the manufacturing base deepens reliance on non-EU suppliers, undermining the EU’s technological sovereignty and industrial resilience goals.    

In taking steps to reverse the offshoring trend of critical electronic parts and components, the Chips Act 2.0 could move Europe closer to reclaiming a measure of ownership of its most critical systems. As the Commission acknowledges in the text of the proposal itself, “Europe remains structurally dependent on non-EU suppliers in critical segments.” 

By expanding eligibility for project funding from silicon to systems, the legislation paves the way for European electronics manufacturers to produce advanced chips, and also to manufacture, assemble, and deploy the next-gen electronics systems that those chips go into. 

A proposed Cloud and AI Development Act, published in parallel, creates incentives to accelerate the construction of European data centres, and would enable member states to promote homegrown cloud and AI technologies to reduce reliance on foreign entities in the most critical areas.  

Last week, the Global Electronics Association hosted a summit in Brussels, bringing together industry leaders and government officials.

Summit participants discussed challenges and opportunities to build an even more resilient and competitive electronics ecosystem. This convening comes at a pivotal moment, with trade tensions rising and global supply chains more vulnerable than ever. 

Such volatility makes clear that Europe needs to secure the electronics industrial capabilities and capacity to provide critical industries with a strategic level of the required electronic components, assemblies, and systems.

The Chips Act 2.0 proposal shows that Europe is finally acknowledging and responding to a fundamental geopolitical reality – one that’s equally applicable to the defence, critical infrastructure, healthcare, and energy sectors: a complete electronic manufacturing ecosystem is needed to enable a secure supply of the essential goods of modern life. 

This stakeholder article is paid for by a third party. All opinions in this article reflect the views of the author and not of EUobserver.

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Further erosion in these critical parts of the manufacturing base deepens reliance on non-EU suppliers, undermining the EU’s technological sovereignty and industrial resilience goals

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Alison James is senior director of European government relations at the Global Electronics Association.

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