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EU concludes deal to boost production of semiconductor chips

origin 1A visitor to the 21st China Beijing International High-tech Expo looks at a computer chip through the microscope. ©Ng Han Guan/Copyright 2020 AP. All rights reserved.

The European Parliament and EU member states reached an agreement on Tuesday on how to boost supply of semiconductors in Europe as the bloc races to reduce its reliance on Asian suppliers.

The European Union has prioritized local chip manufacturing following the economic fallout from the Covid-19 pandemic which triggered supply chain shocks that led to significant shortages.

Asian companies, especially those in China and Taiwan, currently dominate semiconductor manufacturing and exports.

“The Chips Act will strengthen Europe’s semiconductor ecosystem and play a vital role in boosting the EU’s global competitiveness,” announced the bloc’s Swedish presidency.

Under the deal, the EU aims to double its current global market share to 20% in 2030 and mobilize more than €43 billion in public and private investment to feed Europe’s growing appetite for chips.

Europe will need to quadruple its production to achieve this.

German MEP Henrike Hahn tweeted that the deal included €3.3 billion set aside to “support large-scale technology capability building and innovation across the EU in the semiconductor sector”.

The piece of legislation, known as the Chips Act, is also part of the bloc’s bid to produce more in Europe to reduce its vulnerability to geopolitical shocks such as the war in Ukraine.

When Russia invaded Ukraine last year, the EU scrambled to find alternative energy sources after years of dependence on Russian fossil fuels.

“This will allow us to rebalance and protect our supply chains, reducing our collective dependence on Asia,” European Commissioner for Industry Thierry Breton said in a statement after the European Parliament and Council, representing Member States, have reached an agreement.