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European chip law: digital sovereignty for the recovery of industrial sovereignty

"The European Commission has launched this law with the aim of ensuring the security of supply, resilience and technological leadership of the EU in semiconductor technologies and applications"

The problems caused in global supply chains by the pandemic -although not only because of it- have provoked at European level a reflection on the dependency of manufactured products that are not manufactured or they are insufficiently so in the territory of the Union. The maximum exponent of these products are the semiconductors or chips, whose global shortage in a complex geopolitical scenario has forced the closure of factories in a wide range of sectors, from automobiles to medical devices. This shortage, which starts in 2020 and continues today, has caused the increase in prices and extension of delivery times, with direct consequences, for example, on the automobile production, reduced by almost a third in some EU countries.

Faced with this situation, the European Commission launched, in February 2022, the so-called european chip law in order to ensure the safety of the supply, resilience and technological leadership of the EU in semiconductor technologies and applications. Under this name is included, in fact, a package of measures. Firstly, the processing of two proposals for European regulations begins (the proposal for a regulation establishing a framework of measures to strengthen the European semiconductor ecosystem and the proposal for a Council regulation that modifies Regulation (EU) 2021/ 2085, which establishes the Joint Undertakings within the framework of Horizon Europe, as regards the Chips Joint Undertaking) that aspire to use Europe's strengths as leverage (world-leading research and technology organizations and networks, and a host of pioneering equipment manufacturers) to drive industry prosperity at every link in the chain.

Together with these regulations in preparation, as standards that will be directly applicable, the European Commission relies on two 'soft law' instruments to underpin your strategy: a communication calling on the Council and the European Parliament to support measures that will make the ambition of reinforcing Europe's leadership capabilities in semiconductors a reality in the shortest possible time as a matter of digital sovereignty, and a recommendation addressed to the Member States so that they collaborate through the European Semiconductor Expert Group, in order to exchange information on the current state of the semiconductor crisis in their national markets and coordinate internal measures to respond to this crisis.

In total, therefore, the package is made up of four measures aimed at the European Union, by mobilizing more than 43.000 million euros in public and private investments, double its global market share, from the current 10% to 20%.

The Spanish reaction has not been long in coming, embodied in the approval, by the Council of Ministers of May 24, of the Strategic Project for the Recovery and Economic Transformation of Microelectronics and Semiconductors (Perte Chip), aimed at reinforcing the design and production capabilities of the microelectronics and semiconductor industry in Spain, from a comprehensive perspective, and promoting national and European Union strategic autonomy in this sector, in line with the provisions of the European chip law.

To this must be added the impulse of a new industry law, an initiative that was submitted to public consultation, between April 20 and May 17, and among whose declared objectives is to face the problems derived from external dependence on basic materials that the pandemic has evidenced; all this for the sake of providing greater resilience and robustness to the Spanish industry, in coherence with the European industrial strategy.

In short, both at community and internal level, the need to shorten industrial supply chains y intelligently and strategically relocate production in Europe and in Spain. It is, therefore, about recovering the security of supply through reindustrialization, in the face of the progressive relocation experienced in recent decades. However, this process must be adapted to the European Green Deal, which must take the form of promoting new industrial processes and cleaner technologies, in the pursuit of climate neutrality and circularity of the economy.

Undoubtedly, semiconductors or chips have been the paradigmatic example of the difficulties associated with its scarcity in a globalized economy, which is why specific measures have been put in place through the European chip law and the Perte. All in all, these measures are part of a broader review of Community and Spanish industrial policy, with the aspiration that digital sovereignty be the first stone in the recovery of industrial sovereignty.

Jose Amerigo Alonso

Partner of the PwC European Funds Office and Head of Regulatory at PwC Tax & Legal.

Article originally published in the Blog Fide in the withfideinitial

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