How the US and EU are Shaping the Semiconductor Landscape Together

The semiconductor industry, a cornerstone of modern technology, has found itself at the center of geopolitical strategy and economic security. As global demand for chips surges and supply chain vulnerabilities become apparent, two of the world’s largest economies — the United States and the European Union — are stepping up efforts to secure their place in the semiconductor race. Both regions have enacted ambitious legislative frameworks, commonly known as the “CHIPS Acts,” designed to enhance domestic semiconductor production capabilities and reduce reliance on foreign suppliers.

While the US and EU share similar goals of technological sovereignty and supply chain resilience, their approaches and priorities differ significantly. The question remains: Will these differences lead to collaboration, or set the stage for competition? Understanding the nuances of each region’s strategy is crucial to predicting the future of the global semiconductor landscape.

Comparing the US and EU Chips Acts

The US CHIPS Act, signed into law in 2022, marks a historic investment in America’s semiconductor sector. With a budget of $52 billion in subsidies, tax incentives, and funding for research and development, the act aims to make the US a global leader in semiconductor manufacturing. The legislation is a response to growing concerns about supply chain vulnerabilities, especially those exposed during the COVID-19 pandemic, and the strategic threats posed by relying heavily on East Asian countries for critical technologies.

In contrast, the EU Chips Act, announced in early 2022, seeks to increase Europe’s share of the global semiconductor market from 10% to 20% by 2030. With a €43 billion investment plan, the act focuses on building a resilient semiconductor ecosystem through increased funding for research and development, expanding manufacturing capabilities, and fostering innovation in key areas such as next-generation semiconductors. While both the US and EU prioritize security and technological leadership, the EU’s strategy places a stronger emphasis on collaborative innovation and creating a more integrated supply chain within its member states.

Despite these shared objectives, the US and EU strategies differ in significant ways. The US approach is heavily weighted towards direct subsidies for manufacturing and is largely focused on reducing reliance on Asian suppliers. The EU, however, takes a more holistic approach, emphasizing partnerships, both within Europe and internationally, to create a more diversified supply chain. This difference in strategies reflects the broader economic philosophies of each region — with the US favoring a more protectionist stance and the EU leaning towards multilateral cooperation.

Challenges to US-EU Collaboration

While there is a clear mutual interest in securing semiconductor supply chains, several challenges could hinder collaboration between the US and EU. Firstly, regulatory differences between the two regions pose a significant barrier. The US’s focus on unilateral subsidies and tax breaks has raised concerns in Europe about the potential for a subsidy race, which could distort the global market. European policymakers are particularly wary of the competitive disadvantage they may face if the US continues to offer more lucrative incentives to attract semiconductor companies.

Trade policies and political considerations also complicate the landscape. Recent tensions over trade tariffs and technology regulations underscore the complexities of US-EU relations. For example, European leaders have expressed frustration over the US Inflation Reduction Act, which they argue unfairly favors American companies at the expense of European competitors. These frictions, if not managed carefully, could spill over into the semiconductor sector, undermining efforts for a coordinated response to global supply chain challenges.

Moreover, competition for investment remains a critical issue. Both the US and EU are vying to attract major semiconductor manufacturers to build new facilities on their soil. This competition could lead to a zero-sum game where each side is primarily focused on outbidding the other for investments from leading semiconductor companies like Taiwan Semiconductor Manufacturing Company (TSMC) or Intel, rather than finding common ground for cooperation.

Opportunities for Collaboration

Despite these challenges, there are substantial opportunities for collaboration between the US and EU in the semiconductor sector. Both regions have significant expertise in research and development, and a joint approach to semiconductor R&D could yield breakthroughs that benefit both economies. Collaborative projects could focus on next-generation technologies such as quantum computing, artificial intelligence (AI), and advanced materials, areas where pooling resources could accelerate innovation.

In addition, aligning on global standards and norms for semiconductor production and supply chains presents another area of potential collaboration. By working together, the US and EU could shape global standards that reflect shared values around transparency, security, and sustainability. This could help counterbalance the influence of other major players, particularly China, which has its own ambitious semiconductor strategy.

Efforts to diversify the global semiconductor supply chain also present a shared interest. Both the US and EU recognize the risks of over-reliance on any single region for critical components. Coordinated efforts to develop alternative supply chains could help mitigate these risks, ensuring that both regions have access to the chips needed to power their economies.

Sources:

https://www.csis.org/analysis/world-chips-acts-future-us-eu-semiconductor-collaboration