The European Union announced a blueprint on Tuesday to make one-fifth of the world’s microchips, saying it was “open for business” to semiconductor giants from Taiwan and other industry leaders. The European Chips Act provides at least €42 billion (US$48 billion) by 2030 in public and private sector capital behind an ambitious plan to effectively double the bloc’s chip production, to 20 per cent of the global supply of semiconductors, the tiny processing units that will power the industries of the future. Currently, the bloc produces 10 per cent of the world’s supply, few of which are considered to be cutting-edge. The aim is to make the EU less reliant on other countries, with officials citing the current chip shortage as evidence of the need to bolster Europe’s supply chain. “The pandemic has painfully exposed the vulnerability of chips and supply chains. You will know that the global shortage of chips has really slowed down our recovery,” European Commission President Ursula von der Leyen said. “We have seen that whole production lines came to a standstill, for example with cars. While the demand was increasing, we could not deliver as needed because of the lack of chips.” Key to the plan will be attracting world-leading chip manufacturers to invest in building the EU’s capacity – no easy task when it’s estimated to be two or three times as expensive to make chips in the West than in China and other hi-tech Asian production hubs. While China is not yet an innovator in chip production, it does have a world-class manufacturing supply chain, in which Taiwanese and South Korean semiconductor companies are heavily invested. To attract the industry’s leaders, Brussels has loosened EU rules on state aid – meaning that member states can, under certain conditions, pump public money into building new or improving old manufacturing facilities. Margrethe Vestager, the EU’s competition tsar, said that the bloc is already in talks with Taiwan Semiconductor Manufacturing Co (TSMC), a market leader. “I know that some of the discussions taking place that include TSMC of Taiwan. And now let’s see if those projects, they materialise as well. Europe is open for business, also for TSMC,” Vestager said, adding that the companies in the United States, Japan, South Korea and Singapore were “like-minded partners” the EU would work with. The Taiwan government is in talks with its Lithuanian counterparts about building a manufacturing facility there, a senior diplomat said – part of a blossoming relationship that has angered China. TSMC and Sony team up on US$7 billion chip plant in Japan “Well, at the government level, we are only helping Lithuania. I think this is the first case but we would like to provide assistance for other European countries,” Eric Huang, head of the Taiwanese Representative Office in Vilnius, told the South China Morning Post . Huang said that Taipei has formed an “expert group” to examine the “most feasible way” to help develop a tech ecosystem in Lithuania, and subsequently Europe. “This is something that we would like to do intelligently because we want it to be a successful case. After the study of our expert groups we are going to understand which are the most feasible sectors for Lithuania to develop is semiconductor industry,” Huang said. Brussels, too, has been keen to draw on Taiwan’s expertise in the sector, although it faces a challenge in managing the geopolitical fallout with China. Late last year it shelved plans to upgrade its trade ties with Taiwan, for fear of further angering China. The upgrade would have established working groups on semiconductors and other hi-tech sectors. Bilateral meetings would take place more regularly than the current annual consultation and at “director general” level in the EU; previous encounters have involved deputy levels. The plan is likely to be revisited in the coming months. The EU’s chips plan drew praise from businesses, with the powerful Federation of German Industries (BDI) describing chip independence as “an integral part of a European industrial policy geared towards resilience”. “Technological competition is intensifying with increasing geopolitical tensions and high state subsidies for semiconductor production from countries such as China and the USA. The European semiconductor strategy must take these developments and the needs of industry in Europe into account,” said Iris Plöger, a BDI executive board member. EU officials cautioned that this plan alone would not be sufficient to make Europe self-sufficient. True independence, Vestager said, would cost between €240 billion and €320 billion. “And if you had that kind of money, where to find the capacity actually to build it? The point is that Europe should have a much stronger foothold in the global value chain and in the global supply chain,” she said. Nor does the EU’s budgetary allocation compare favourably to other economies. The US has allocated US$52 billion by 2026 to its own semiconductor development programme. China is estimated to have invested US$150 billion in the sector through initiatives such as Made In China 2025, the EU estimated. And South Korea will bolster its semiconductor industry by a whopping US$450 billion, through tax incentives, private and public investment by 2030.