European Chips Act 2.0 faces cost headwinds
The EU’s Chips Act 2.0 may fall short in boosting local chip production, facing challenges like high costs and insufficient investment incentives.
The European Union’s Chips Act 2.0 is unlikely to achieve its goal of increasing the region’s global chip production share to 20% by 2030, primarily due to high production costs and insufficient investment incentives. Currently, the EU accounts for only 4% of global electronics production, significantly trailing behind the US and Asia.
Despite the Act’s intentions to bolster domestic chip production and reduce reliance on external suppliers, it lacks the necessary financial commitments and strategic focus. The proposed public investment of an additional €15 billion in its preferred policy option is insufficient to compete with the more substantial subsidies offered by other regions, which are crucial for attracting investment in semiconductor fabrication.
Moreover, the EU faces structural challenges, including high energy and labour costs, regulatory complexities, and a fragmented capital market. These factors contribute to a projected decline in the EU’s share of global electronic components and boards to just over 3% by 2030, while the region continues to depend on partnerships with countries like the US, Taiwan, and South Korea for cutting-edge chips.
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