The US and the EU have broad prospects for semiconductor cooperation, but face challenges in terms of policy frameworks and legal regulations. Whiile by coordinating cooperation strategies and integrating technological advantages, the two sides can jointly cope with the uncertainty of the global semiconductor market.
The United States and the European Union introduced U.S. CHIPS Act and the European Chips Act in 2022, respectively, and the introduction of both legislation marks a heightened focus on the semiconductor supply chain by the world's major economies and the need to address potential geopolitical and economic risks.
During COVID-19, the global semiconductor shortage hit the economies of the United States and the European Union hard. The auto industries in the two largest economies have slashed production because of chip shortages, losing production capacity by millions of vehicles each.
The most advanced 2 nm and 3 nm node semiconductors are essential for the next generation of artificial intelligence (AI) and telecommunications technology, and also promote strategic cooperation between the two major economies in the semiconductor field.
Strategic Goals and Implementation of US and EU Chip Acts
The US and EU Chip Acts differ in implementation framework and specific measures, but their strategic goals are generally consistent.
Both bills aim to reduce reliance on offshore chip manufacturing, ensure greater supply chain security and resilience, and promote the development of cutting-edge semiconductor production technologies.
In addition, cultivating a workforce that supports the semiconductor industry is also one of the core goals of the two bills.
In terms of funding, both the U.S. CHIPS Act and the European Chips Act provide huge amounts of public funds, mainly for investment in domestic chip manufacturing facilities and support related public-private research projects.
The U.S. CHIPS Act directly appropriates funds from Congress and establishes new financial resources, while the European Chips Act is mainly achieved by reallocating existing EU funding programs.
US and EU chip companies have long accumulated rich experience in chip R&D and production through cooperation with institutions such as CEA-Leti in France, Imec in Belgium, and the Albany Nanotechnology Center in the United States. These long-term collaborations have laid a solid foundation for future transatlantic cooperation.
With the same goals, the United States and the European Union have significant differences in their legal and policy frameworks.
The EU's competition law provides for a strict ban on state aid, and member states cannot provide subsidies to the semiconductor industry unless they meet specific exceptions. This provision limits the financial support of EU member states for chip manufacturing and increases the complexity of implementing the EU's "Chips Act".
In contrast, the United States has no similar state aid restrictions, and state governments are free to provide subsidies to chip manufacturers, which has led to an interstate "subsidy competition".
Another significant difference is that the US "CHIPS Act" provides a large number of federal tax incentives to encourage investment in chip manufacturing facilities. The EU "Chips Act" does not provide similar tax incentives, which makes it more challenging for the EU to attract chip manufacturing investment.
In addition, the US regulatory framework is relatively simple and is mainly implemented by the Department of Commerce, while the EU "Chips Act" involves multiple levels of public and private participants, increasing the complexity of the project.
Challenges and Opportunities for Future Cooperation
The potential for cooperation between the United States and the European Union in the field of semiconductors is huge, but there are also many challenges.
First, the differences between the two economies in terms of state aid policies and funding sources may lead to asymmetry in cooperation. For example, the EU's funding mainly comes from existing grant programs, while the US's funding is a newly established fiscal resource, which may affect the equality and sustainability of cooperation.
Differences in tax policies may become an obstacle to cooperation. The generous tax incentives of the United States provide a strong competitive advantage for its semiconductor industry, while the EU lacks similar incentives, which may put the EU at a disadvantage in attracting investment.
In addition, although both bills emphasize the importance of international cooperation, how to effectively coordinate transatlantic policies and investments remains a complex issue.
Chip companies in the United States and the European Union are competitors and partners in the global semiconductor market. How to balance competition and collaboration in cooperation will be a major challenge in the future.
The cooperation between the United States and the European Union also faces unprecedented opportunities.
First, the technological complementarity between the two sides in the semiconductor field provides the possibility for deepening cooperation. The United States has advantages in semiconductor design and software, while the European Union is in a leading position in manufacturing equipment and materials science. By integrating the advantages of both sides, strong competitiveness can be formed in the global semiconductor market.
Transatlantic cooperation can enhance the resilience and security of the supply chain. In the context of the current global supply chain vulnerability, cooperation between the United States and the European Union will help reduce dependence on a single region and reduce geopolitical risks.
In addition, cooperation between the two sides in the fields of labor training and R&D can provide lasting impetus for the development of the semiconductor industry in the future.