The European Court of Auditors is scathing about the Chips Act in a report. According to the Court of Auditors, the Chips Act will not improve the EU’s position in the global chip industry.
The Chips Act came into effect in 2023. The ambitious plan to increase chip production on European soil already received much criticism at the time. This criticism is confirmed two years later by the European Court of Auditors, which draws up an initial assessment in a report. The report gives the Chips Act failing grades across the board.
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Insufficient Progress
The brief conclusion of the Court of Auditors is that the EU will not achieve its objectives with the Chips Act. The aim is to have twenty percent of global chip production on European soil by 2030, by attracting major chip companies to Europe. Although the Chips Act has stimulated investments in the microchip sector, the EU is far from reaching its goal.
According to the European Court of Auditors, Europe would need to roughly quadruple its production capacity to reach the 20 percent target. The current progress is far from this, as production in the regions with which the European Union compares itself is advancing much faster. Even the European Commission predicts that the EU will only represent 11.7 percent of the global microchip industry in 2030, which is hardly better than the 9.8 percent at the time the Chips Act was approved.
Meager Budget
The European Court of Auditors sees multiple problems with the Chips Act, but the budget is the biggest bottleneck. A total of 86 billion euros is provided, which sounds like a lot on paper, but is only a fraction of what the major chip companies themselves invest in their factories. The American Chip Act under President Biden provided a multiple of this, although not much remains of that approach under the current president.
Not only is the budget inadequate, but the financing of the Chips Act is also a difficult issue. The European Commission itself manages only five percent of the savings pot, the rest must come through the member states. The budgetary constraints became painfully clear when Intel decided to put its German chip factory on hold, after much delay and discussion about subsidies.
The Court of Auditors points out that the Commission has no mandate to coordinate national investments. Moreover, according to the auditors, the Chips Act lacks sufficiently clear objectives and monitoring. As a result, it is difficult to determine whether the investments align well with the current demand for chips.
Doomed to Fail?
In addition, other factors play a role in weakening the European competitive position, according to the Court of Auditors. High energy prices, dependence on raw material imports, geopolitical tensions, and a shortage of specialized workforce pose additional obstacles. The European microchip industry is also characterized by a limited group of large companies, meaning that the failure of one project can have serious consequences.
The Chips Act, introduced in September 2023, was developed after the global chip shortages during the COVID-19 pandemic. Although production capacity in Europe has grown since 2013, it has lagged behind global development, causing the EU’s market share to decline. The first interim evaluation of the Chips Act is expected by September 2026. Whether the report will be better then seems doubtful.