The European Semiconductor Industry Association (ESIA) works across the European Commission and member states to promote the trade interests of semiconductor businesses in the EU. The organization is focused on defragmenting the market and creating demand for European semiconductors while upholding its internationally renowned strength in research and development.
How is ESIA trying to shape the EU Chips Act 2.0?
Semiconductors are at the heart of digitalization, making every electronic device possible, from mobility and healthcare to cybersecurity and manufacturing. They are truly strategic and have become central to policymaking. For decades, executives have said the semiconductor industry is where physics and the chemical industry meet.
Chemical engineering and materials are among the key enabling layers of semiconductor manufacturing – essential and most powerful when combined with innovations in equipment, design, process integration and packaging. They are fundamental to hundreds of manufacturing steps, such as deposition and etching. Without key materials like photoresists, polymers and pure glass, you have no chips, no electronics.
The 2022 EU Chips Act was successful in increasing Europe’s relevance in manufacturing and R&D. For the Chips Act 2.0, our focus is on making sure those investments succeed. That depends on three main pillars: demand creation, framework conditions such as lower energy costs and permitting speed and attracting skills and talent. This support should be more strategic and targeted, aligned with market demands rather than being top-down decisions from authorities. The goal is to focus on our strengths to make sure there is a sustainable semiconductor ecosystem in Europe.
What are the main pressure points affecting the semiconductor supply chain?
Energy costs are now very high in Europe and this has a high impact in manufacturing operations. There are also consequences from changes in international regulations and what we see is de-risking, not decoupling, with more companies serving local markets. Companies are operating globally but trying to focus on serving local markets to avoid supply chain risks.
The semiconductor industry moves quickly, with product cycles around 18 months. Permitting delays, decisions to award funds, and the overall bureaucracy associated with funding for manufacturing, can mean losing out on the cycle. We need more certainty on timelines and reduced bureaucracy to maintain Europe’s attractiveness for investment. We are now coming out of a first cycle of first-of-a-kind projects approved by the European Commission Chips Act. Approvals took about a year and a half in Europe compared to roughly nine months in other regions. In a fast-paced industry, that difference is significant and directly affects investment decisions. Part of this comes from fragmentation across member states and a lack of predictability in procedures. We are told that authorities have learned from this and that the next wave should be faster.
Would a comprehensive PFAS ban in Europe affect the semiconductor industry?
PFAS are critical for specific functions in chips. There has already been some impact on chemical manufacturers in Europe, which creates a bit of uncertainty for us. There is an undeniable reputational impact which may not be warranted but we do not see a threat from a purely regulatory point of view since the focus is on more sensitive applications like clothing and kitchen tools where there is more consumer exposure and emission into the environment.
We expect exemptions for all industrial users and continued use at industrial sites and in final products combined with risk control measures such as reporting to the European Chemicals Agency. The search for alternatives is driven by downstream users. This can be an asset – a marketing and competitive tool for companies to develop PFAS-free final products. We are working with the European Commission to support the development of alternatives. The Multi-annual Financial Framework contains initiatives for safe and sustainable design and green chemistry.
How are export controls and geopolitical uncertainties affecting the sector?
U.S. export controls are a factor for European equipment makers, as is the fact that tariffs for chips are at zero currently. Even without a formal free trade agreement, the two sides of the Atlantic are highly integrated. The overall issue is the uncertainty – all the not knowing and the multiple announcements are endangering the business. The fact that there was a joint statement for U.S.-E.U. cooperation last August is promising as some kind of reassurance of predictability. We hope in the medium term that cooperation will continue based on reciprocal strengths and complementarity that have already existed for decades between the two sides.
What are Europe’s strengths in the semiconductor market and what are ESIA’s target areas for growth?
European chips play a significant role in digitalization of advanced manufacturing systems and connected vehicles. There are critical chips that enable AI data centers to run. Physical AI, or Edge AI with complementary functions is also an area of promising growth, alongside robotics. Europe has a huge ecosystem of manufacturing SMEs that will increasingly use tailored robotics-enabled solutions in their manufacturing.
Companies worldwide come to Europe to conduct R&D because we have this strength and the biggest institutes in the world, but there is a lack of centralized approach. We are calling for much more synergy between the EU and its member states, and more regional-level efforts to pull this talent to the semiconductor industry.
A remaining challenge is how to close the gap between research and deployment. One idea is to bring together chip designers, makers and users to develop products and technologies jointly and thus bridge the gap between research and market readiness. Public support for such cooperation could create a solid foundation for organically reinforcing the European market by transforming innovation leadership into durable competitiveness. This requires a shift in mindset among policymakers at the European Commission, as well as member states and regions. We are in an environment with heavily subsidized semiconductor activities worldwide. We need to move away from public support as a concession or exception and toward public support as a strategic tool.
