EU: Evaluation and Revision of the Chips Act (“Chips Act 2.0”)

 

The EU Commission is conducting a public consultation regarding the revision of the Chips Act.

The EU’s competitiveness is closely linked to semiconductors. The Chips Act has succeeded in attracting significant manufacturing investments and in fostering initiatives to bridge the gap between research and large-scale production. However, challenges persist, particularly in advanced manufacturing and artificial intelligence chips. Additional measures are needed to strengthen Europe’s position across a broad range of semiconductor technologies and the entire value chain, including materials, equipment, design, and manufacturing.

The Chips Act seeks to reinforce the EU’s resilience and technological sovereignty in semiconductor technologies and applications. Its objectives are to:

1. support technological capacity building and innovation within the EU;
2. attract investment and expand production capacity in semiconductor manufacturing, as well as in advanced packaging, testing, and assembly; and
3. anticipate and mitigate future chips crises through close coordination with Member States.

The evaluation of the Chips Act will serve as a stocktaking exercise and will follow a two-pronged approach: (i) broad consultations—both public and targeted, including this Call for Evidence; and (ii) an analysis of the Act’s implementation. This analysis will draw, where relevant, on consultation outcomes as well as other sources such as commissioned studies and academic research. The evaluation will apply the Better Regulation criteria (effectiveness, efficiency, relevance, coherence, and EU added value) and use a range of methods, including cost-benefit analyses, case studies, and workshops. It will also explore opportunities to simplify the Chips Act and reduce regulatory burdens.

Overall, the instruments of the Chips Act appear largely fit for purpose. Under Pillar 1, the Chips for Europe Initiative is well-suited to building next-generation technological capacity and fostering innovation. Pillar 2, which supports First-of-a-Kind facilities, has proven effective in attracting investment in semiconductor manufacturing, packaging, testing, and assembly. Under Pillar 3, the toolbox for responding to a future chips crisis appears broadly appropriate.

Nonetheless, three major obstacles remain:

1. Limited capacity for leading-edge nodes: The EU currently lacks manufacturing capability for advanced semiconductor nodes below 10 nanometres, relying entirely on non-EU suppliers. While demand within the EU is relatively modest and insufficient to justify a full-scale commercial foundry, these chips are crucial for strategic sectors such as defence, security, automotive, space, and high-performance computing. Ensuring access to leading-edge chips is therefore a strategic priority.
2. Maintaining competitiveness in mainstream semiconductors: Europe holds a strong position in areas such as power electronics, microcontrollers, photonics, and sensors. However, this competitive edge faces growing pressures from non-market policies and practices in third countries. Continuous innovation—particularly in energy efficiency and security—must be supported to sustain Europe’s advantage.
3. Insufficient insight into resilience: Current knowledge of the resilience of supply chains, key market actors, and the EU’s semiconductor ecosystem remains limited. Without a clearer understanding, the EU cannot adequately guarantee supply security or effectively respond to disruptions. Moreover, from an economic security perspective, the assessment of vulnerabilities—such as risks of technology leakage—remains insufficient.

Finally, there may be scope for simplification, particularly in the application of State aid rules for ‘First-of-a-Kind’ facilities under Pillar 2, in order to reduce administrative burdens and accelerate investment.