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Analysis |

Chip Act versus Chip Act

The past years have illustrated the importance of the electronics industry in general and the semiconductor industry in particular. The semiconductor shortage highlighted just how vulnerable both the US and Europe are without sufficient domestic production capacity, as well as how dependent the regions are on Asian capacity.

In light of the extraordinary demand situation for semiconductors that surfaced alongside the pandemic, the U.S. introduced the CHIPS and Science Act, the U.S. initiative that aims to stimulate investments in domestic semiconductor manufacturing capacity, strengthening the supply chains, and national security. 

In early August, U.S. President Biden signed the act into law, and thus USD 52.7 billion has been made available to stimulate US semiconductor research, development, manufacturing, and workforce development. The goal of the act is to increase the level of domestic semiconductor manufacturing and ultimately reduce the dependency on Asian production. And the act has already made an impact.

The EU equivalent was introduced at the beginning of 2022, and it has taken up until now for it to pass through the different hoops of EU bureaucracy. In April of 2023, the European Council and the European Parliament reached a provisional political agreement on the regulation to strengthen Europe's semiconductor ecosystem, better known as the EU Chips Act.

The act is expected to create the conditions for the development of an industrial base that can double the EU’s global market share in semiconductors from 10% to at least 20% by 2030. However, that number has been contested.

On the surface, these two initiatives might seem comparable. They both have similar targets, aim to create better footing for their respective regions and will make similar funds available. In a way, the major difference seems to be semantics and phrasing. Until you dig deeper.

Head-to-head, similar goals, different budgets

Increasing supply chain resilience along with safeguarding against Chinese developments from a national security standpoint are the two main goals of the U.S. CHIPS Act. The EU Chips Act also seeks to strengthen its supply chain resilience while simultaneously preserving European sovereignty and strategic independence. Some time ago, the Federation of German Industries (BDI) released a paper directly comparing different key elements of the EU and US Chips Acts – so let's have a look at how these initiatives stack up against each other.

If we look at funding, the two initiatives do seem comparable. The CHIPS and Science Act has made USD 52.7 billion available to the industry and the EU will mobilise EUR 43 billion. And that is a keyword, mobilise. The EU is not providing “fresh money” through its Chips Act, as this sum will partly be made up from already existing EU funding programmes.

It’s also worth mentioning that the USD 52.7 billion in the U.S. CHIPS Act is strictly for semiconductor manufacturing, R&D, and workforce development. Another USD 24 billion worth of tax credits are being made available for chip production, as pointed out by McKinsey & Company.

Both the U.S. and EU have comparable goals with these chip initiatives – essentially doubling their market share in terms of production capacity. However, they differ considerably in the funds made available to reach these goals. 

And unlike the EU Chips Act, the U.S. Chips Act offers tax incentives to encourage investment and manufacturing. In the U.S., investments in equipment and facilities for semiconductor production are eligible for a 25% tax credit.

Broader spectrum of funding

In contrast to the EU Chips Act, which promotes state funding for "first-of-a-kind facilities" projects, the U.S. Chips Act has no such constraints. The U.S. Chips Act is generally more about subsidising the construction, modernisation and expansion of fabs. And like the BDI points out, Europe would benefit from financial support for 2nd, 3rd, and 4th-of-a-kind facilities as otherwise investments in this area would have to come exclusively from the companies – which will make Europe less attractive and less competitive in comparison.

Adding to this the US CHIPS and Science Act has designated a budget of USD 2 billion for "mature semiconductors" while the European counterpart offers no special financial support for mature semiconductors – which if we are frank about it, was exactly what the region was running short of.

“Today, 67% of the European industry needs semiconductors larger than 90nm, the demand for the size from 22nm to 65nm is 21%, that between 22nm and 7nm is 7% and semiconductors smaller than 7nm are needed in 5%,” BDI points out in its research paper.


The U.S. Chips Act allocates USD 200 million to the "CHIPS for America Workforce and Education Fund". This money is meant to address the semiconductor industry's persistent lack of skilled workers. 

The EU Chips Act states that it will address the skills shortage, attract new talent and support the emergence of a skilled workforce but without a clear funding framework.

Money with strings attached

The U.S CHIPS Act is very clear and any company that receives funding under it – or utilises the tax credits – must agree not to expand semiconductor manufacturing in China or any other “countries of concern” for a period of 10 years. In the event of non-compliance, the companies are obliged to repay the subsidies received. In contrast, the EU Chips Act does not require any such commitments from companies seeking funding. However, export licenses might be required in the event of an economic crisis.

In conclusion, it is challenging to compare the two initiatives directly as they differ in their funding levels, and scope even if they have similar objectives. The success of each initiative will depend on its ability to attract investment, foster innovation, and create a sustainable semiconductor industry that can meet the demands of the future.

What is clear, however, is that the most crucial difference between the EU Chips Act and the U.S. Chips Act is funding. As stated before, the initiatives have comparable targets, the US is aiming for 30% of global chip production and the EU has set a target of 20% – doubling each region's current production share. However, the U.S. is providing fresh funds to reach its goal while the EU funds in the EU Chips Act largely come from existing EU funding programmes (such as IPCEI II), money from member states and assumed investments from companies. Out of the EUR 43 billion that the EU aims to mobilise, only EUR 3,3 billion is coming from the EU budget.

During several of Evertiq's Expo in 2023 –in  Malmö, Sweden Cracow, Poland and Berlin in Germany, Evertiq will present an overview of the US CHIPS and Science Act and the European Chips Act. Looking at the reason for their existence, comparing strategies and also paying close attention to the effects of the already implemented US Act. 

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May 14 2024 7:33 am V22.4.46-1