EU’s Breton on Asia tour to foster digital cooperation, tackle chips shortages

“With the upcoming EU Chips Act, we will secure our supply chain in partnership with trusted players across the globe,” Breton said [EPA/Olivier Hoselt]

European Commissioner Thierry Breton visited Japan and South Korea this week to find common grounds for future cooperation on digital and tech matters. The agenda was dominated by the recently announced European Chips Act and the prospect of digital partnership agreements.

The trip comes amidst growing semiconductor supply shortages that have led to production losses all over Europe, as global supply is struggling to meet the rising demand driven by the internet of things, connected cars and mobile devices.

“With the upcoming EU Chips Act, we will secure our supply chain in partnership with trusted players across the globe,” Breton said on Twitter on Thursday (30 September), adding that “The epicentre of the geopolitics of semiconductors is here, in Asia.”

Asia has drastically increased its share of semiconductor production in recent years.

Around two-thirds of the global chip production is now located in Asia, with South Korea alone holding around 20% of the worldwide market share.

Europe’s share in chip production, on the other hand, has steadily declined from 44% in 1990 to only 9% in 2020.

South Korea, however, is determined to increase investment even further.

In May, the government announced plans to deploy a “wartime-like effort” to stay at the top of the value chain in the future and said it would invest an exorbitant €390 billion by 2030, most of which will come from private investment.

European efforts to bring semiconductor production back to Europe pale in comparison. The German government’s flagship subsidy package to attract investors, for instance, is only worth €3 billion, which could trigger between €20 and €50 billion total investment, according to Economy Minister Peter Altmaier.

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The EU Chips Act

To close the gap European Commission President Ursula von der Leyen announced the EU Chips Act during her state of the union speech earlier in September, aimed at creating “a state-of-the-art European chip ecosystem, including production.”

The Chips Act attempts on integrating the various national efforts into a coherent European strategy.

The Chips Act is planned to cover three dimensions: increasing research ambitions in Europe, enhancing European production capacity, and fostering international cooperation in the supply chain management of semiconductors.

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European Commission President Ursula von der Leyen announced on Wednesday (15 September) the intention to present a European Chips Act meant to boost Europe’s semiconductor capacity and reinforce its new drive for strategic autonomy.

The latter is the main rationale behind Breton’s visit to South Korea and Japan.

“With the upcoming EU Chips Act, we will secure our supply chain in partnership with trusted players across the globe,” Breton commented on Twitter during his stay in South Korea.

According to Niclas Poitiers from the think tank Bruegel, this greater emphasis on the international component of supply shortages marks a positive development.

While the European Commission has so far primarily focused on enhancing European production capacity at home, the new international approach is better suited to tackle the supply chain challenges.

“The semiconductor industry is highly specialised and there is no country that is dominating in every aspect along the value chain,” Poitiers told EURACTIV.

“Some parts of the value chain will always remain in other countries. Hence international cooperation is crucial to fight supply chain shortages,” he added.

In a similar vein, the semiconductor industry welcomed the approach.

“As value chains in the semiconductor industry are globally intertwined, regions are codependent on each other.” a spokesperson of Silicon Saxony, one of Germany’s leading semiconductor associations, told EURACTIV, adding that they welcomed the Commission’s push for more collaboration with Asia.

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The European Union outlined on Thursday (16 September) a new strategy for raising its presence in the Indo-Pacific and counter China’s increasing influence in the region, which has become the latest arena of the international geopolitical race.

Digital Partnership agreements

Fostering cooperation in other areas of digitalisation is also one of the hot topics of the talks with South Korea and Japan.

These Digital Partnership Agreements were already announced in the EU’s Indo-Pacific strategy last April and aim at enhancing the cooperation and interoperability of emerging technologies, such as AI, as well as convergence of data protection regimes.

They are part of a larger strategic framework for trusted connectivity, that Commission President von der Leyen dubbed the Global Gateway, to connect goods people and services across the globe.

However, while Poitiers pointed out that “it is generally speaking a good idea to ask others how they deal with evolving technologies such as AI,” he warned that it is too early to really start negotiating these digital partnership agreements.

“Europe first has to find its own stance on Artificial Intelligence, before we can head into negotiations with partner countries to reach a partnership agreement on these issues,” Poitiers said.

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The EU data protection authorities issued a non-binding opinion on Monday (27 September) on the level of adequacy of South Korea’s privacy law compared to EU rules, providing an overall positive assessment that some analysts said fell short of expectations.

[Edited by Luca Bertuzzi/Zoran Radosavljevic]

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