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The EU reaffirms itself in achieving digital sovereignty by 2030

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The European Union reaffirms the need to invest in 5G and fiber, but also in digital training, to achieve its full technological sovereignty in 2030 and achieve short-term economic recovery and long-term prosperity, its president said last week. , Ursula von der Layen, in her State of the Union address Obviously placed greater emphasis on tackling climate change and strengthening European defense policy, but considered that digital technology is a matter of “life and death ”For the future of the European Union and announced a new proposal for a law on semiconductors, the European Chips Act, to achieve greater sovereignty.

 

The objective of achieving the “digital sovereignty” of the European Union in 2030 was already set last March by the Commission and ratified by the Member States in June. It is now a question of moving from concept to tangible reality and, therefore, the Commission will propose a legal framework that facilitates and stimulates the efforts that all Member States must make to achieve, as soon as possible, the desired technological sovereignty. “Setting the goals for 2030 has been important; now we must deliver on our promises ”, says Thierry Breton, Commissioner for the Internal Market.

 

“We have learned the lessons of the past when we were too divided and too far behind. The difference is notorious: it took eight years for the eurozone’s GDP to return to pre-crisis levels, ”said the EC president. “This time, she assured, we expect 19 countries to be at pre-pandemic levels this year and the rest next year.” In the last quarter, growth in the euro zone has outpaced both the United States and China, ”she added.

The objective with the European Chips Act is to create a European ecosystem of first-line chips, including their manufacture, to ensure security of supply and develop new markets

But this, she said, “is only the beginning” and the lessons of the financial crisis should put us on our guard. So, “Europe declared victory too early and we paid the price for it; We cannot repeat the same mistake now ”. The good news is that “with NextGenerationEU we will invest in both short-term recovery and long-term prosperity and solve structural problems in our economy.” And she explicitly cited “labor market reforms in Spain”, as well as pensions in Slovenia or taxation in Austria.

 

“We will invest in 5G and fiber in an unprecedented way, but equally important is the investment in digital training,” he remarked, although von der Leyen clarified that “this task needs the attention of leaders and a structured dialogue at the highest level” and announced a review of the community governance system in the coming weeks to achieve full consensus in 2023. The Common Market, he recalled, will soon turn 30 years old and has been a key piece for the progress and prosperity of Europe and will be, “with our recovery , the engine of quality jobs and competitiveness ”.

 

Digitization has the highest priority and Member States share this point of view, the president said in her speech. The digital investment contemplated in NextGen will even exceed 20%, “which reflects the importance of technological sovereignty in the EU.” And she stressed that “we have to reaffirm our commitment to digital transformation, in accordance with our rules and values.”

Investment in semiconductors

The European Commission is deeply concerned about the global shortage of semiconductors. “This shortage, highlights Thierry Breton on his blog, has concrete consequences on the economy of the European Union, on jobs and even on leisure. Car manufacturers postpone production, broadband providers run out of routers, and video game fans can’t afford their next-generation consoles. ”

 

For the Commissioner for the Internal Market, the situation will last for a while, but it is not just a problem of supply and demand. Semiconductors are at the center of strong strategic interests and are the core of the global technology race and a strategic component of any industrial logistics chain. “The race to have the most advanced chips is about technological and industrial leadership,” he emphasizes on his blog, published on the same day as the State of the Union address.

 

The United States wants to increase its resilience in chips, Taiwan to ensure its primacy and China to close the technological gap it has. “Europe cannot and must not be left behind: the president has sent a strong geopolitical and geostrategic signal with the announcement today of the European Chips Act.” With the European Chips Act, national efforts can be integrated into a coherent vision and strategy at the European level, emphasizes Thierry Breton.

Being more self-sufficient in chips is a colossal task for Europe, but possible, the president of the European Commission acknowledged in her speech to the Union; However, it will be necessary to weave multiple alliances

With this proposal, von der Leyen said in his speech, “we need to unite our world-class [chip] research, design and verification capabilities and coordinate community and national investment across the value chain.” The aim is to create together a European ecosystem of world-class chips, including their manufacture, to ensure our security of supply and develop new markets for technological Europe.

 

Von der Leyen acknowledged in his speech that achieving it “is a colossal task” and that some say it cannot be done, but, he added, the same was said 20 years ago with the satellites of the European Galileo system, which now provide a navigation signal. to more than 2 billion smartphones worldwide.

Three dimensions in the European Chips Act

For Thierry Breton, the European Chips Act should cover three dimensions: a semiconductor research strategy, a collective plan to strengthen European production capacity and, third, a framework for international cooperation and alliances. It is not about producing everything in Europe, but, among other things, diversifying our chip supply chains and preserving the security of this supply. We must mobilize all our resources, as in the recently introduced European Alliance on Semiconductors “With the European Chips Act, he emphasizes, our technological sovereignty is within our reach” and “the time to act is now”.

 

The new EU semiconductor policy that you are about to propose is very similar in objectives to the CHIPS for America Act being enacted by the United States. Under the terms of the National Defense Authorization Act, the United States Congress has recognized the critical role that a powerful semiconductor industry will play in the future.

 

The Joe Biden Administration plans to approve $ 52 billion in grants through 2026 in tax credits and reductions for semiconductor R&D and manufacturing, as well as supply chain security. Contrary to infrastructure improvement, Democrats and Republicans seem to agree on subsidizing semiconductor development.

 

The new support plan for European chips unveiled in the Union’s speech by its president and elaborated in a little more detail by Thierry Breton on his blog has received few comments in the mainstream media, partly because it lacks a lot of specifics. , starting with the budget and a schedule of goals. Last March, the Commission and the Commissioner for the Internal Market pointed out that they wanted to double the percentage of chips produced in the EU, from 10% currently calculated to 20% in 2030.

 

Ursula von der Leyen herself recognized in her speech that it is a colossal task. Furthermore, by the end of this decade the world semiconductor market is expected to be much higher than it is today. Relatively recently, it was around half a trillion dollars, but next year it could be three-quarters of a trillion and by 2030 it could exceed one trillion. Therefore, doubling the quota may mean almost a fourfold in European chip production, if the market is really growing at the dizzying pace of the last two years.

 

In any case, many more optimistic observers point out, prices are now skyrocketing due to the lack of supply of all kinds of chips (except perhaps memories); when it normalizes in a couple of years when the plants now under construction come into full operation, it is likely that the market, in terms of units, will continue to grow, but in unit value they will drop a lot and, therefore, also the market value of semiconductors in dollars.

 

Another issue that is not fully understood is the component supply problem that European car manufacturers have, as well as those of the United States and Japan, given that Europe is a power, in relative terms, in the manufacture of automotive components, with companies such as Bosch, Infineon, NXP, ST MIcroelectronics.

Probably, it is due to the fact that many of the manufacturing, assembly and verification processes of its components are carried out in several Southeast Asian countries, greatly diminished by the virulence of the pandemic in recent months. But throughout this last quarter, production should normalize and, at least, European car producers should have sufficient supplies of components.

 

Another issue is having a sufficient supply of ultra-sophisticated semiconductors, which require state-of-the-art chip manufacturing plants (with production lines manufactured by the Dutch company ASML). They are essential, even in the less sophisticated components, but their amount is relatively small. Therefore, building a chip plant in Europe of, for example, 5 nanometers, would also require creating a large market and sales volume, which Europe does not have, to accommodate the high production that would amortize the investment.

 

For this reason, Thierry Breton is right when he talks about the need to build alliances at the international level. But, as France has seen with the security pact between the United States, the United Kingdom and Australia (Aukus) and the one that is about to be forged between the United States, India, Japan and Australia, the position of Europe in the international concert of nations It is very weak. Relying on alliances, especially in extremely complex times like today, is risky.

“Something is broken” between the EU and the US.

Precisely, Thierry Breton told the Financial Times last Tuesday, the same day that Joe Biden proclaimed the need to forge international alliances in his speech to the UN, that “something has broken” between relations between the United States and the European Union and He announced that the high-level negotiations on foreign trade and technology to be held this month were being postponed, precisely due to the American attitude, first with the march from Afghanistan and now with the Auskus.

 

Breton is a very influential Commissioner on European technology issues, apart from running the Internal Market, and is the right hand of Vice President Margrethe Vestager. He was previously Minister of Finance in the French Government and head of Atos, a software company. Breton told the newspaper that he was a strong supporter of cooperation between the United States and Europe, “because we have many common interests,” but said that these interests must coincide. “Reconciliation must be based on actions, not just words.”

 

In an interview on CNN, Ursula von der Leyen acknowledged that “business cannot continue in the same way” now that the EU has been cornered, referring to the Auskus. At first, there was not much official reaction from the Member States regarding Auskus, but the very angry reaction of France has caught on within the European Union, which can have serious consequences on the technological and commercial relations between the two blocs. , now that Britain is not part of the European Union.