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The European Commission on Tuesday proposed a new plan to boost European production of microchips, at a time when the procurement of these technological components, essential to the operation of all electronic devices, is becoming an industrial priority in many parts of the world. In fact, many countries have recently announced major investment plans to increase production and gain new market share.
The European plan, which is currently still a proposal and is called the European Chip Act, envisions a total investment of 43 billion euros, split between public and private investment, as well as the creation of a specific investment fund and a facilitation of rules on state aid from member states. The goal, the Commission explained, is to reach 20% of world microchip production by 2030. Currently, the European Union accounts for only 9% of world production.
Microchips are essential components in many products and not just in electronics, although we think they are only found in computers and mobile phones, but now chips are essential for any device that has at least one electronic component.
In one car, for example, there are dozens of such and are used to manage power windows, on-board computer, entertainment system, airbags, parking sensors and so on. For more than a year, partly due to the economic effects of the coronavirus pandemic and partly due to the crisis in global trade, there has been a severe shortage of microchips worldwide, which has led to a slowdown in production in many sectors. In Europe, one of the most affected sectors was the automotive sector, as the Commission explained, while production in some countries fell by a third due to a lack of chips.
In this context, Europe has found itself in great difficulty, as it is almost entirely dependent on other countries for the supply of chips. Currently, global production of microchips, especially the most sophisticated ones, is dominated by three countries: the USA, South Korea and above all Taiwan, which with its multinational TSMC occupies 54% of world production.
“Chips are essential in any device. “But the pandemic managed to expose weaknesses in the supply chain.” said the President of the Commission, Ursula von der Leyen.
The European plan for the production of microchips, although very ambitious, was met with some skepticism. First of all, because the allocated funds, although sufficient, are nevertheless smaller compared to the budgets of other economic powers.
The European Chips Act provides funding of 43 billion euros, an amount compared to the $ 52 billion recently approved by the US Congress for the microchip sector.
However, $ 52 billion includes federal aid alone, individual U.S. states have advanced with their industry development plans, adding several billion.
Of the 43 billion euros provided by the European Union, only 11 billion will go to direct financing of the sector and of this 11 billion, half will come from the EU budget, while the other half will have to be allocated by member states. . The remaining funds should come either from private investment or from state aid of EU member states.
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