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EU looking to relax the rules of cutting-edge chip plant

The European Union may ease state-aid rules. This is to allow the funding of new chip plants for tackling the shortages in the bloc. Due to its reliance on Asian chips, the EU has been particularly hard hit by an unprecedented global shortage in semiconductors. This is on those that are holding up the delivery of goods from cars to Playstations and driving up smartphone prices worldwide.

Margrethe Vestager told a news conference that the European Commission may approve state aid to fill funding gaps. This is in particular if it helps set up cutting edge chip plants. The Commission, which oversees antitrust policy in the 27 EU countries, would seek to ensure such support. She also added that this should also be without discrimination across the European economy.

Vestager noted that each case for the supply of semiconductors will be rigorously assessed based on their respective merits. This is so as to ensure that a project has a European nature and of course avoid a subsidy race within the union and beyond. The U.S. last year announced its CHIPS for America Act aimed at boosting its ability to compete with Chinese technology. This is while the EU seeking to double the bloc’s share of global chip output to 20% over the next decade. The U.S. chipmaker Intel Corp said that it could invest as much as 80 billion euros ($91 billion) in Europe over the next decade. In this, Germany and France are seen as the leading contenders for production sites.

France had been pushing for the EU to allow subsidies with fewer restrictions. The creation of just one mega-semiconductor factory in Europe could add between 77-85 billion euros additional GDP over a 10-year period. According to research by management consulting company Kearney, this is over twice the investment needed to set it up. The Commission also separately, strengthened its control of acquisitions in the digital sector. This is in reaction to the increasing concern about the dominance of U.S. tech giants and Chinese state entities acquiring EU technologies. This will encourage member states to refer transactions for review, even if national thresholds for referral are not reached. The Commission also can review whether there is competitive potential in an acquisition. France and Germany have argued that antitrust policy should not hinder the creation of European champions. They also recalled the regulators blocking mergers such as Siemens’ planned acquisition of France’s Alstom in 2019. The Commission extended looser state aid rules for virus-hit companies for six months to June 2022 because of the COVID.

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