France is investing $3.1 billion into chip production, joining other countries seeking to expand their semiconductor industry amid growing global chip demand.
The fund will be used to build microchip factories, according to officials’ statement on Monday.
The chip industry has seen accelerated growth since the outbreak of covid-19, triggering a heated global competition in the lucrative market.
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The US and China are leading the competition with tight policies aimed at boosting local production. But Europe has joined the race – passing the Chips Acts to boost investment in the sector.
Chips, which are vital for every electronic device, from smartphones to electric cars, have come to the center of an economic war between China and the US recently. The US Chips Act comes with over $50 billion in incentives to encourage local production.
In April, the European Union passed the Chips Act to reduce the bloc’s vulnerabilities and dependencies on foreign actors.
The new rules aim at “doubling the EU’s global market shares in semiconductors from 10% to at least 20% by 2030”, and are expected to “improve the EU’s security of supply, resilience and technological sovereignty in the field of chips.”
The European Chips Act is expected to unlock 43 billion euros of investment.
The European semiconductor industry is currently experiencing supply challenges due to geostrategic issues and supply chain disruptions. Supply chain has become a major priority for the world’s biggest trading blocs.
France’s economy ministry said the state aid was the biggest subsidy it had offered since 2017, and would go towards a 7.5-billion-euro project announced last year to be run by European multinational STMicroelectronics and US company GlobalFoundries, according to France24.
The French ministry said the project, in the Alpine town of Crolles near Grenoble in southeastern France, would boost European production capacity by almost six percent by 2028, per France 24.
Demand for chips skyrocketed during the pandemic as activities shifted online. The shift, which came with a shortage of chips, impacted production across many sectors and triggered the global race for the control of supply the chain.
Europe has relied on foreign supplies to keep its industries running for years, with Taiwan being the bloc’s major supplier.
The adoption of the EU Chips Act provides for the Council to pass an amendment of the Single Basic Act (SBA) for institutionalized partnerships under Horizon Europe. This is to allow the establishment of the Chips Joint Undertaking, which builds upon and renames the existing Key Digital Technologies Joint Undertaking, according to the bloc.
Increased chip production in the EU is expected to reduce the influence of the US and China in the global semiconductor supply chain.