Reuters: EU new strategy to cut foreign reliance on chips, pharma materials

The bloc is preparing an industrial action plan, while also trying to set up a chipmaker alliance as alternative to foreign-funded megafab

Photo: TechPowerUp

The European Union plans on cutting its dependency on Chinese and other foreign suppliers in six strategic areas including raw materials, pharmaceutical ingredients and semiconductors, Reuters claims citing an industrial action plan that is to be announced on 5 May by EU digital chief Margrethe Vestager and EU industry chief Thierry Breton. 

"To be leaders not followers, EU industry requires urgent, ambitious action on digital technologies such as semiconductors, cloud, quantum, space connectivity & batteries," the Breton tweeted on Thursday before the news was announced.

The draft seen by media's team reportedly outlines the urgency of the task ahead since data shows that Europe is reliant on China for about half of 137 products used in sensitive ecosystems, mainly raw materials and pharmaceuticals and other products key to the bloc's green and digital goals.

"The European Commission will conduct an in-depth review of the six areas, which also include batteries, hydrogen and cloud and edge technologies, before deciding on the appropriate measures," the draft document said.

Such measures could include "diversifying supply and demand relying on different trading partners whenever possible, but also stockpiling and acting autonomously whenever necessary", the 19-page document said.

Another strategy set out in the paper to reduce import dependency could see EU countries pool resources for Important Projects of Common European Interest (IPCEIs) in next-generation cloud, hydrogen, low-carbon industry, pharmaceuticals and a second IPCEI on cutting-edge semi-conductors. An IPCEI allows EU governments to pump in funding under easier state aid rules and for companies to work together on the entire range of the project, from design to production and downstream applications.

"Europe also needs to take the lead in setting standards for batteries, hydrogen, offshore wind, safe chemicals, cybersecurity and space data to ensure the competitiveness and resilience of EU industries," the paper said.

Reuters reported separately that EU is also considering creating a semiconductor alliance including STMicroelectronics, NXP, Infineon and ASML once again with the aim of cutting dependence on foreign chipmakers amid a global supply chain crunch. It would complement or come as an alternative to a possible foreign-funded factory, with the aim to double the EU's market share in semiconductors to 20% by 2030, a target set out by European internal market chief Thierry Breton.

The EU Commissioner, who is seeking to persuade a leading chipmaker to site a major fabrication plant in the bloc, was due to meet Intel CEO Pat Gelsinger on Friday and hold a video conference with Maria Marced, President of TSMC Europe.

A spokesman for ASML, the world's leading producer of advanced chipmaking tools, confirmed the company has participated in the Breton-led talks.

"We're of course bringing the equipment manufacturers' view to the table," Sander Hofman said.

GlobalFoundries, which runs Europe's largest semiconductor foundry complex in Dresden, Germany, said: "We stand in close contact with team Breton, the EU Commission, the German government and other key public authorities across Europe.”

STMicro and NXP declined to comment. Infineon didn’t respond to the Reuters request seeking comment.

However, several EU officials winced at the idea of foreign-funded megafab, saying they weren't happy with a strategy relying on non-EU companies to build factories and that partnerships between EU companies and foreign peers may work better.

"There's also a big question mark over the capacity of the European internal market, which lacks a big smartphone industry, and whether it could absorb the additional output," a French official told Reuters.

Such disagreements cast a light on the struggles experienced by the European executive body in defining an industrial strategy for its semiconductor industry, which is dwarfed by its Asian competitors and doesn't have a champion with the financial firepower necessary to build a new plant.

"They also underline the suspicion with which Breton, a French national and former chief executive of IT firm Atos, is met within the European Union," another official told Reuters.

"Talks of a strategic autonomy unnerve supporters of a free market, who see him as a protectionist," the source said.

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