European Lawmakers Strike A Deal For Their Own Semiconductor Bill After Criticizing American Version

European lawmakers reached a deal Tuesday on a semiconductor stimulus bill meant as an answer to the CHIPS and Science Act, a similar package enacted in the United States that prioritized domestic semiconductor firms.

The European Chips Act will mobilize some $47 billion of public and private investments into semiconductors such that the European Union composes 20% of the worldwide market by 2030. The legislation would allocate funds to develop technological capabilities, foster talent in microelectronics, and build partnerships with like-minded nations.

“Semiconductors are at the centre of strong geostrategic interests, and of the global technological race,” the European Commission said in a statement. “Chips are the essential building blocks of digital and digitised products. From smartphones and cars, through critical applications and infrastructures for healthcare, energy, defence, communications and industrial automation, chips are central to the modern digital economy.”

Western incentives for the semiconductor industry come as a response to the reality that China, South Korea, Taiwan, and Japan control nearly 80% of global semiconductor manufacturing capacity, according to data from the Brookings Institution, while Taiwanese firm TSMC alone produces over 90% of the sophisticated chips used in cell phones and computers. A reliable supply of semiconductors is necessary to develop artificial intelligence and weapons technologies, as well as mitigate risks over supply chain disruptions that could emerge from Chinese geopolitical ambitions toward Taiwan.

European leaders have criticized the CHIPS and Science Act, which authorizes nearly $53 billion in manufacturing incentives for semiconductor operations in the United States, for favoring domestic firms. French President Emmanuel Macron, for instance, said the law promotes a protectionist approach toward global trade and risks “fragmenting the West,” as noted by a report from the Center for European Policy Analysis.

Initial negotiations over the European Chips Act last year prompted Intel, an American multinational corporation headquartered in California, to announce a $36 billion investment into a research hub in France and a manufacturing facility in Germany. The advancement of the European Chips Act this week could prompt additional semiconductor investments in Europe from companies based in the United States.

The CHIPS and Science Act has meanwhile attracted significant investments from both domestic and international firms: Micron announced a $100 billion memory chip initiative in New York, and TSMC devoted $40 billion toward new facilities in Arizona. Several companies had issued “public warnings” last summer vowing to “scale back their plans to make semiconductors” in the United States since lawmakers had stalled in negotiations over the new incentives, according to a report from the Department of Commerce.

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European and American lawmakers have also traded blows over the Inflation Reduction Act, another $369 billion package from the United States which subsidized American electric vehicle manufacturers and neglected to offer the same benefits to European automakers. West Virginia Democratic Senator Joe Manchin told European officials at the World Economic Forum that the law was “designed to basically strengthen the United States so that we can help our allies and friends, which need it right now.” He also called the continent’s leaders “hyper-hypocritical” given the several decades in which they advanced their own protectionist measures.

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