EU Pushes for 'Chips Act 2.0' to Strengthen Supply Chain Control with Contract Intervention and Fines

Mandatory Priority Supply of Key Products During Semiconductor Shortages
Fines of Up to 300,000 Euros for Refusing to Provide Supply Chain Information
120 Billion Euros in Investment Needed by 2035

The European Union (EU) is pushing ahead with its own version of the Chips Act and is considering granting the legislation significant emergency powers. One of the measures under review would allow the EU to override existing contracts and require chip manufacturers to prioritize certain orders in the event of a semiconductor shortage.

According to the Financial Times (FT) and Bloomberg News on May 28 (local time), the EU is preparing to introduce the "Chips Act 2.0."

EU flag at the European Union (EU) Commission in Brussels, Belgium. Photo by EPA Yonhap News

The draft bill obtained by FT states that, in the event of a semiconductor shortage threatening the supply of key products such as weapons, medical devices, and digital infrastructure, the European Commission would have the authority to disregard existing contracts and force companies to prioritize orders for these critical products. Additionally, during such crises, the Commission could require manufacturers to provide information on their supply chain production capacities. Failure to comply could result in fines of up to 300,000 euros (approximately 524.27 million won).

To prevent competition among member states for semiconductor procurement and to strengthen its bargaining power, the Commission is also pursuing joint purchasing. Similar to the centralized vaccine procurement during the COVID-19 pandemic, the Commission would act as a central buyer on behalf of multiple member states.

The Chips Act 2.0 is being pursued as a new piece of legislation after the previous act, enacted in 2023 to expand the EU's share in the semiconductor market, failed to deliver. The strategy is to foster European companies in the advanced semiconductor sector and reduce reliance on U.S. and Asian technologies. In reality, over 90% of high-performance chip supplies within the EU come from Taiwan, where TSMC is located. Currently, the EU accounts for less than 10% of global semiconductor production, and with the goal of doubling this share by 2030, achieving the Chips Act’s objectives remains uncertain.

While the original Chips Act focused on expanding EU semiconductor production through increased investment in research and development (R&D) and easing fiscal spending regulations for member states, the new bill emphasizes reducing demand and dependence on foreign technology. According to Bloomberg, the draft bill estimates that about 120 billion euros in public and private investment will be needed by 2035 to achieve these goals.

Bloomberg also reported that the Commission is considering a new foundry construction project worth 30 billion euros to produce artificial intelligence (AI) chips and advanced 3-nanometer chips. The project is expected to be jointly funded by the Commission, individual member states, and private companies. In addition, the Commission plans to connect companies in sectors such as telecommunications, defense, and automotive with semiconductor suppliers to support technology development tailored to each industry's needs.

Chips Act 2.0 is expected to be submitted next week, but as it is still in draft form, Bloomberg noted that its contents could change.

This content was produced with the assistance of AI translation services.