On September 21st, the European Chip Act officially came into effect. The announcement released by the European Commission on the same day stated that the plan was approved

The European Chip Program promotes the industrialization of key technologies and encourages public and private enterprises to invest in the manufacturing facilities of chip manufacturers and their suppliers. According to the Chip Act, by 2030, the EU will gather € 11.15 billion in public investment from EU institutions and member states, and will utilize a large amount of private investment. In July of this year, the European Parliament passed the Chip Act. The bill requires that by 2030, the EU's share of global chip production should be increased from the current 10% to 20% to meet its own and global market demand. Against this backdrop, how will the European Chip Act take effect and impact the global chip industry and key landscape?

Can the global chip industry technology landscape be changed? From the performance of the European semiconductor manufacturing industry in recent years, there are still shortcomings in the fields of large consumer electronics enterprises and advanced process technology. Public information shows that currently, European chip manufacturing is mainly concentrated in relatively mature process nodes of 22 nanometers and above, and does not have high-end chip manufacturing capabilities for processes of 7 nanometers and below. Europe accounts for less than 10% of the global semiconductor production market and heavily relies on third-party suppliers. If the global supply chain is severely disrupted, the European industrial sector may be depleted in a short period of time, leading to a stagnation of European industry. Under the framework of the bill, in addition to increasing investment in the chip field, the EU plans to establish coordination mechanisms between member states and committees to strengthen cooperation between member states, monitor chip supply, estimate demand, and activate emergency mechanisms if necessary. The entry into force of this bill will undoubtedly have a broad impact. In terms of the key global chip landscape, Europe is one of the world's largest economies. The implementation of the Chip Act means that Europe will increase investment and support in the chip industry, improve its competitiveness in the global chip market, and may have an impact on the distribution of global chip market share and pose a challenge to competitors in other regions. At the same time, the implementation of the bill will promote the industrialization of key technologies in Europe, or change the technological landscape of the global chip industry, increasing Europe's technological influence in the chip field. However, the entry into force of the European Chip Act will not cause a drastic change in the global chip industry in the short term, and the long-term effects are worth observing and maintaining vigilance. In the past few decades, EU countries have been net importers of semiconductor equipment, accounting for approximately 20% of global chip supply, while manufacturing only accounts for 9%. Even if the EU Chip Act provides policy incentives for chip manufacturing, this trend of "net importing countries" in the EU will not fundamentally change by 2030.

02 | Will the global chip industry chain be readjusted? The implementation of the European Chip Act has a significant impact on the global chip industry chain. Due to the increase in chip production target in Europe to 20%, efforts to strengthen chip industrialization may further squeeze the share of small and medium-sized chip enterprises, force large enterprises to accelerate technology competition to ensure their status, and trigger intensified competition in the chip industry, further promoting investment and research and development in chip technology and production in various countries, and upgrading the global industry chain. However, the effectiveness of the implementation of the European Chip Act depends on its specific implementation measures and policy support. If Europe can provide effective financial support, research and development environment, and market mechanisms that are conducive to the development and innovation of the chip industry, then this will be a positive measure. However, if improperly implemented or lacking effective policy support, it may lead to resource waste and market distortion, which can have a negative impact on the global chip industry chain. Meanwhile, as an important member of the global chip market, the growth of market demand in Europe may become an opportunity for domestic chip companies to expand into overseas markets.

03 | What impact will the formal entry into force of the bill have on China? 1. The Act on Weakening China's Status and Influence in the Global Chip Market proposed the "chip diplomacy" initiative, requiring the EU to cooperate with strategic partners with similar ideas, including the United States, Japan, South Korea and Taiwan, China, China, to strengthen supply security, deal with chain breaks, and strengthen dialogue and coordination in the fields of chip raw materials and export control of the third country. These measures will undoubtedly weaken China's position and influence in the global chip market. On the one hand, increasing the EU's production capacity will reduce demand for the Chinese market and reduce China's bargaining power as the largest consumer market. On the other hand, strengthening cooperation between the EU and other countries and regions will increase competitive pressure on China and limit the expansion space of Chinese enterprises in the global market. More importantly, the coordination of export controls between the European Union and countries such as the United States will exacerbate the risk of technology lockdowns and sanctions against China, bringing greater uncertainty to the development of China's chip industry. 2. The bill to promote China's accelerated pace of independent innovation and industrial upgrading does not have a completely negative impact on China, but also has a certain positive effect. That is to promote China's accelerated pace of independent innovation and industrial upgrading: firstly, to leverage the advantages of the new national system and accelerate the realization of technological self-reliance and self-reliance in the semiconductor field. At the same time, basic research in the semiconductor field is the source of the industrial system and a summary of all technical issues. Once breakthroughs are made in basic research and key technologies, their impact will be disruptive. The second is to continue to increase investment in the semiconductor industry, unblock semiconductor capital channels and fund support, and effectively control funds and track semiconductor projects. In response to the particularity of the semiconductor industry, we will increase government funding to prioritize core technologies, semiconductor supply chain security, and other areas. The third is to strengthen talent support for the semiconductor industry and attract global technical talents to develop in China. This requires fully learning from the United States' approach to attracting global technological talent, as well as its emphasis on intellectual property and original technology, as well as policy measures.

04 Jingtai Viewpoint | Industrial cooperation is expected to create more business opportunities. The implementation of the European "Chip Act" indicates that global competition for the chip industry will become increasingly fierce. Domestic chip companies need to closely monitor global market trends and strengthen top-level design and deployment domestically. In addition, European chip plans may also provide some learning experience and cooperation opportunities, and domestic chip companies can learn from the practical experience of European companies to further improve their development strategies. For China, the progress of the European semiconductor industry is a double-edged sword. On the one hand, cooperation in the semiconductor industry between countries is expected to be sublimated and generate more business opportunities. On the other hand, the difficulty of China's semiconductor industry catching up with the world's advanced level may continue to increase, and enterprises should prepare for technological reserves and response.