Chips Act (cepPolicyBrief)


The European Union wants to massively expand the production of cutting-edge computer chips. The aim is to reduce dependence on countries such as the United States, Taiwan and South Korea through European research and production. The Centrum für Europäische Politik (cep), has doubts that the law will have this effect and fears a subsidy race worth billions. The cep had already warned against an industrial policy aberration last March.


“Ensuring the supply of chips is primarily the task of the companies. EU intervention is only justified when there is a market failure. However, this is not recognisable,” says cep economist Matthias Kullas, who has analysed the Chips Act with cep lawyer Lukas Harta. The plan to reduce dependence on other economy areas will be very expensive for the EU. Moreover, the proposal jeopardises the free trade with chips.

According to Harta, however, it is not clear yet how the money necessary for pilot lines to be up to date with the latest technology will be raised. The planned promotion of chip factories runs the risk of turning into a subsidy race with other states and creating overcapacities. “If companies are not able to profitably produce as a result of that, they should not receive operating cost support under any circumstances.”

The cep experts consider the EU’s focus to be wrong. “The focus on chips with a node size of less than ten nanometres is misguided, as there are hardly any customers for chips with this node size in the European Union,” warns Kullas. In addition, the criteria for predicting shortages are too vague. Kullas also emphasises, "The current chip shortage is temporary rather than structural." The Chips Act’s foundation is, thus, thin. It could prove to be  a quick shot.