EU Wants Crisis Powers to Seize Control of Chip Supplies¶
Source: Financial Times
The European Commission is preparing to arm itself with sweeping crisis powers that would allow it to take direct control of semiconductor supply chains during future disruptions. The move, embedded within the European Chips Act — a €43 billion plan to bolster Europe's chip sovereignty — represents one of the most aggressive industrial policy interventions in the bloc's history.
The Problem: Overdependence on Asian Foundries¶
Europe currently accounts for roughly 10% of global semiconductor production, down from over 20% in the 1990s. The vast majority of advanced chips are manufactured in Taiwan (TSMC) and South Korea (Samsung). The pandemic-era chip shortage exposed the fragility of this arrangement, shuttering European auto plants and costing billions in lost output. The Chips Act, proposed in 2022 and finalised in 2023, was designed to prevent a repeat.
The Proposed Crisis Toolkit¶
The original draft of the Chips Act contained a controversial set of emergency measures that the Commission argued were necessary to respond to future supply disruptions:
| Measure | Description |
|---|---|
| Compulsory Information Requests | Firms would be legally required to disclose inventories, production capacity, and demand forecasts to the Commission. |
| Priority Rated Orders | The Commission could mandate that chipmakers prioritise crisis-relevant orders over others — effectively forcing companies to reallocate capacity. |
| Joint Purchasing Mechanism | Member states and key buyers would pool demand to negotiate collectively, mimicking the successful EU vaccine procurement model. |
| Export Monitoring | Enhanced surveillance of chip exports to prevent critical components from leaving the bloc during a crisis. |
Industry Backlash and Concerns¶
The proposed powers triggered fierce pushback from the semiconductor industry. Three concerns dominated:
Intellectual Property Risks¶
Mandatory data sharing — particularly inventory and order-book details — could expose proprietary information to competitors or leak through Brussels' bureaucracy. Chipmakers guard their capacity utilisation data as a trade secret.
Expropriation Fears¶
Priority rated orders were described by one industry executive as a "backdoor nationalisation" of private manufacturing capacity. If a fab is told it must dedicate 60% of output to crisis products, who bears the financial loss from broken contracts with regular customers?
Investment Chill¶
Perhaps the most consequential criticism: the threat of future state intervention could deter the very mega-fab investments the Chips Act was meant to attract. Intel's planned Magdeburg facility (€17 billion) and TSMC's Dresden plant (€10 billion) — both benefiting from billions in state aid — might not proceed if investors feared unpredictable state control.
The Final Compromise¶
After intense negotiation between the Commission, member states, and the European Parliament, the final Chips Act emerged significantly softened:
- Priority rated orders were scrapped. In their place is a voluntary system where the Commission can request priority treatment, subject to a qualified majority vote of member states.
- Information gathering powers retained. The Commission kept the right to request data during declared crises — a win for central planners.
- Coordination role preserved. The Commission will act as a crisis coordinator, matching supply and demand across member states.
The 2030 Target¶
The Chips Act sets a headline goal: Europe should capture 20% of global semiconductor production by 2030, up from ~10% today. Achieving this requires roughly quadrupling European chip output in less than a decade — an ambitious target that would require flawless execution of the megafab strategy and hundreds of billions in additional investment.
Bottom Line¶
The EU is attempting a high-wire act: it wants to attract private investment for cutting-edge chip fabs while simultaneously retaining the power to commandeer those same fabs in an emergency. The final Chips Act struck a more market-friendly balance than initially proposed, but the debate over crisis powers is far from settled. The next genuine chip shortage will test whether the compromise holds — or whether calls for harder powers return.