EU initiative

Main provisions

Timeline

-Support identified ecosystems with a tailor-made approach, building on the work of the Strategic Forum on Important Projects of Common European Interests (IPCEIs).

-Collaboration with an Industrial Forum: composed of industry, social partners, researchers, Member States and EU institutions.

-Some ecosystems will be identified as requiring support. Support will take the shape of regulatory action, financing or better use of trade defence instruments.

-Industrial alliances, such as the European Battery Alliance, could be used.

GREEN TRANSITION

-Create lead markets in clean technologies and clean energy.

-Favour green procurement through a new legislation.

-Potential Carbon Border Adjustement Mechanism.

-New Circular Economy Action Plan.

-Diversification of raw materials supply is a key priority.

KEY ENABLING TECHNOLOGIES

-Support the development of: AI, robotics, microelectronics, high-performance computing and data cloud infrastructure, blockchain, quantum technologies, photonics, industrial biotechnology, biomedicine, nanotechnologies, pharmaceuticals, advanced materials and technologies.

-Invest in digital infrastructures, for instance in 5G and 6G networks.

-Set up public-private partnerships under Horizon Europe.

SINGLE MARKET AND STANDARDS

-Adoption of a Single Market Enforcement Action Plan, which creates a Single Market Enforcement Task Force (Member States and the Commission). The Task Force will assess the state of compliance of national law with single market rules, and prioritise the most pressing barriers.

-Need for well-functioning systems for standardisation and certification + increase EU’s participation in standardisation bodies.

INTERNAL AND FOREIGN COMPETITION

-Review of EU’s competition framework and revision of State aid rules in some priority areas, such as energy and environmental aid.

-Publication of a  White Paper on an Instrument on Foreign Subsisdies. The White Paper will also tackle the issue of non-reciprocal market access. A legislative instrument will follow in 2021.

11/03/2020: new Action Plan on Circular Economy

Mid-2020: White Paper on an Instrument on Foreign Subsidies

September 2020: set up of the Industrial Forum

2021: potential adoption of a Carbon Border Adjustment Mechanism | revised State aid rules in priority areas | legislative instrument on foreign subsidies

This new document updates the 2020 Industrial Strategy. The former Strategy was published one day before WHO announced the COVID-19 as a pandemic. Since then, the European Commission has realised how dramatically dependent the EU was in a number of areas, including pharmaceutical ingredients and semiconductors. The new Strategy mentions the recent semiconductor shortage faced by the automotive industry. The European Commission acknowledges that “some disruptions caught Europe by surprise, showing the need for a better grasp of where its strategic dependencies lie […]”.

As a result, the European Commission carried out a thorough analysis of its dependencies. It analysed 5,200 products imported into the EU and identified 137 products in sensitive ecosystems for which the EU is highly dependent. These products include pharmaceutical ingredients and raw materials for energy intensive industries. About 50% of imports for these dependent products originate in China, followed by Vietnam and Brazil.

The Commission issued a report on strategic dependencies in 6 key areas, including semiconductors (see below) and cloud. It plans on launching an in-depth review of potential dependencies in other key areas, such as cybersecurity. In addition, the Commission’s Observatory of Critical Technologies permanently keeps an eye on current dependencies and risks of future dependencies.

THE SPECIFIC CASE OF SEMICONDUCTORS

In its Report on strategic dependencies and capacities, also published on 5 May, the European Commission gives an overview of the situation in the semiconductor industry (pages 82-90). The Commission notes that Europe’s semiconductor footprint is small compared to other regions. The EU represents 23% of world GDP but accounts for only 10% of global revenues for semiconductor chips, only 6% for the computing and communication segments.

The Report mentions the major European companies: Infineon, NXP, ST and Bosch Semiconductors. These companies are global market leaders in automotive, industrial automation, security and healthcare. The Commission also observes that manufacturers of chips at leading-edge nodes (TSMC, Samsung, Intel) rely for their technology development on specific EUV photolithography machines produced by the Dutch company ASML.

However, overall Europe is strongly dependent on the US for general design tools and on Asia for advanced chip fabrication. Europe is particularly weak when it comes to semiconductors for data processing, communication, infrastructure and the many applications of AI. The Commission intends to reverse the trend by reducing critical dependencies in advanced technologies and process technology manufacturing at leading edge nodes.

Public money is needed. The Commission underlines that “a new fab with the latest technology (2nm in 2025/6) is challenging both technologically and economically (EUR 20 billion upfront and EUR 5 billion p.a. to operate) and is not in the reach of any individual EU supplier today.” China, the US, Japan and South Korea devote large amounts of public resources to strengthen their global presence.

EU INITIATIVES TO SUPPORT THE SEMICONDUCTOR INDUSTRY

Member States agreed to consolidate and build on Europe’s position in area of proven expertise. They aim to establish advanced European chip design capabilities and production facilities for data processing and connectivity. Their efforts take the shape of a second Important Project of Common European Interest on cutting-edge semiconductors.

In addition, the European Commission will set up an industrial Alliance on processors and semiconductor technologies. In parallel, an Alliance for Industrial Data, Edge and Cloud will also be launched. These two alliances will be set up in Q2 2021.

The European Commission also wants public procurement to be used in a way that supports strategic sectors. The Commission will develop guidance on how to use public procurement effectively to strengthen the resilience of key ecosystems.

The budget for these actions will partly come from the EU Recovery and Resilience Facility. Horizon Europe, Digital Europe and InvestEU will also be used.

WORKING WITH LIKE-MINDED PARTNERS

The US review of its semiconductor supply chain (February 2021) shows that the US administration wants to work with partners and allies to ensure that they too have strong and resilient supply chains. The Commission stresses that this is an opportunity for the EU. This joint work could take place within the new EU-US Trade and Technology Council or in plurilateral settings with Japan, Korea or Taiwan.

EU INFLUENCE IN SETTING STANDARDS

The EU wants to strengthen its leadership in standard-setting. For this purpose, the EU needs to ensure that is own standardisation system functions in an agile and efficient way. The Commission might amend the Standardisation Regulation.

The Commission will present a strategy on standardisation in Q3 2021. The EU wants to work openly with others on areas of mutual interest (e.g. US and Canada on ethical AI).

Q2 2021: launch of an industrial alliance on semiconductors and an industrial alliance on cloud

Q3 2021: Commission to publish the Standardisation Strategy