EU stumps up €8.1bn to fuel home-grown chip tech

• The European Union is to provide €8.1bn in state aid to foster innovation in microelectronics and communications technologies
• The move is expected to “unlock” €13.7bn in private investments
• The project directly involves 14 member states, 56 companies, 68 projects and 600 indirect partners
• The focus is on advances in 5G, 6G, autonomous driving, AI, quantum computing and green technologies
• Analog Devices, Ericsson, Nokia, Orange and STMicroelectronics amongst the beneficiaries

The European Commission (EC) is talking telephone numbers where funds for home-grown communications and microelectronics is concerned: It has just approved, under the European Union (EU)’s complex state aid rules, up to €8.1bn in publicly funded support by 14 member states for an “Important Project of Common European Interest” (IPCEI) in microelectronics and communication technologies.

Together, and between them, Austria, Czechia, Finland, France, Germany, Greece, Ireland, Italy, Malta, the Netherlands, Poland, Romania, Slovakia and Spain collaborated to devise and prepare the project and will jointly stump-up the initial money which, the EC says, will “unlock” a further €13.7bn in private investments.

The project, which goes under the catchy shorthand identification of IPCEI ME/CT, will involve 56 companies (including some SMEs and startups) involved in 68 projects that will support “research, innovation and the first industrial deployment of microelectronics and communication technologies across the value chain”, all the way through from materials and tools to semiconductor designs and manufacturing processes. 

The EC document says the aim of the latticework of interlocking projects will further enable digital and green transformation by creating innovative microelectronics and communications solutions, and developing energy-efficient and resource-saving electronics systems and manufacturing methods. These will contribute to the technological advancement in sectors as varied as 5G and 6G, autonomous driving, artificial intelligence (AI) and quantum computing, as well as at companies involved in the energy generation and distribution sectors as they advance further up the green spectrum.  

The first innovative products developed under the aegis of IPCEI/ME/CT should become available as early as 2025, while the overall project will continue until the end of 2032. Timelines will vary according to the demands of the individual parts of the project, and some 8,700 direct jobs are expected to be created, as well as many more indirect ones. 

The move is linked to the European Chips Act, the impact of which the commission believes can help Europe double its share of the global semiconductor sector to 20% by 2030. 

Under the provisions of the EU’s State Aid rules in general, and the IPCEI Communication legislation of 2021, the EC can step in to assess a project’s eligibility for state aid in cases where, despite their potential, “private initiatives supporting breakthrough innovation fail to materialise because of the significant risks such projects entail.” In such circumstances, member states can “jointly fill the gap to overcome important market failures.” The IPCEI regulations are further framed to ensure that the overall macro-economy of the entire EU will benefit from the state-supported investments and that any potential distortions to the competitive landscape are minimised.

A win-win situation: Both individual member states and the totality of the EU benefit from the system

The EC’s announcement about the funding shows that the IPCEI ME/CT “directly contributes to achieving several EU objectives of a greener, digital, more secure, resilient and sovereign economy set out in key EU policy initiatives, such as Europe’s Digital Decade and the European Green Deal.” 

It adds that all the 68 projects enumerated “are highly ambitious” in that they are involved in “developing technologies that go beyond what the market currently offers and will allow major improvements, notably in the areas of sensors, high performance processors, microprocessors, including artificial intelligence, actuators and communication means for secure data exchange.”

In addressing what the EC acknowledges could be the significant technological and financial risks of the overarching project, the commission adds that it found it “necessary to provide incentives to companies to carry out the investment”. Thus, state aid to individual companies is limited to what is necessary, proportionate and does not unduly distort competition. In particular, the commission has verified that the total planned maximum aid amounts are in line with the eligible costs of the projects and their funding gaps.

Additionally, if large projects covered by the IPCEI prove to be highly successful and generate extra net revenues over what has been calculated, those companies will return part of the aid received to the respective member state. What’s more, the companies benefitting from public support will share the results of their labours with the European scientific community and industry beyond the companies and countries that are part of the IPCEI via conferences, publications, access to pilot and production facilities or the licensing of intellectual property rights.

The 56 companies involved in the 68 projects and cooperating closely via some 180 cross-border collaborations, are part of a wider ecosystem that includes 30 other participants, including universities, research organisations and companies located in five additional EU member states (Belgium, Hungary, Latvia, Portugal, and Slovenia) and Norway (which is closely linked with the EU through the European Economic Area agreement). There are a further 600 indirect partners, companies or organisations that have official partnership/collaboration agreements with one or more direct participants. The first IPCEI ME/CT to support research and innovation in the field of microelectronics was approved by the EC in December 2018.

Among the companies directly involved are: ADVA; Analog Devices; Ericsson; GlobalFoundries; Infineon; NFP; Orange; Rohde & Schwarz; SIAE Microelettronica; and STMicroelectronics. Among the associated participants are Nordic Semiconductor and Vodafone. 

Commenting on the announcement, Thierry Breton, the EU commissioner for the internal market, said: “This latest IPCEI approved today is yet another demonstration of the EU Chips Act already triggering considerable public and private investment across the European semiconductor value chain: From materials to design, from equipment to advanced packaging. By investing in our innovative companies, we are investing in Europe’s technological and industrial leadership in semiconductors, as well as our security of supply and economic security.”

State aid (and its ramifications for and across the EU member states and in regard to non-member countries) has long been a contentious and frequently divisive subject and cause of friction. However, the EC now has a structure in place that is sophisticated, robust enough and of proven efficacy such that it is able to provide public funds to specific member states whilst benefiting the rest of the EU without distorting competition: That is an impressive achievement.

Looking on from the sidelines, of course, is the UK – no longer a member state and undertaking its own chip development efforts, which received a mixed reaction when finally announced in May – see UK’s chip strategy is absolutely fab-less.

- Martyn Warwick, Editor in Chief, TelecomTV