In the European Chip Act, the EU set a target of accounting for 20% of the global microchip value chain by 2030, up from around 9% in 2022. However, a report by the European Commission in July 2023 lowered the expectation to just 11.7%.

Earlier this week, Intel, one of the world's leading chipmakers, announced it would postpone construction of a major microchip factory in Magdeburg, Germany, as well as another project in Poland for at least the next two years. The move comes after the company faced huge losses, forcing it to restructure and look for ways to cut costs.

The project in Germany, with a total investment of up to 30 billion euros, was expected to play an important role in the EU's plan to increase domestic semiconductor production capacity.

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Intel's suspension of semiconductor investments in Germany and Poland has a strong impact on Europe's semiconductor ambitions. Photo: ChatGPT

The European auto industry's collapse during the pandemic, when chip shortages created a supply chain crisis, has prompted the EU to prioritize building chip manufacturing facilities within the bloc to reduce the risk of dependence on foreign supplies.

European Commission President Ursula von der Leyen’s industrial strategy has suffered a major blow as Intel has postponed key projects. Von der Leyen had made boosting core technology industries, including microchip manufacturing, a key priority for her second term. But the delays have not only disrupted progress on the plan but also raised questions about the EU’s competitiveness in the global tech race.

Other countries such as the US, China and South Korea have committed to investing heavily in chip factories to maintain their leading position in the industry. Meanwhile, Intel’s project in the US is nearing completion and TSMC – the global chip market leader from Taiwan (China) – has also planned to expand in the US. In contrast, similar projects in Europe have been limited or postponed, making it difficult for the EU to catch up with its rivals.

Part of the delay is due to the difficulty of European governments, especially Germany, in finding funding to support chip projects. For example, the €30 billion investment plan for the Magdeburg plant required a large financial support from Berlin, up to an initial €10 billion commitment. However, the plan was delayed after a court refused to allow the government to re-use emergency funds to finance the project.

(According to Politico)

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