Subsidizing Semiconductor Production for a Strategically Autonomous European Union?

Abstract

Abstract The COVID-19 pandemic has highlighted the vulnerability of international supply chains and the dependency of the economy of the European Union (EU) on goods from non-EU countries. The scarcity of microchips that has persisted since the COVID lockdowns has laid bare the dependency of the EU on overseas producers of this essential high-tech product. The Russian attack on Ukraine has magnified this issue due to the close economic ties and geographic proximity between the EU and both countries. While ensuring production capability in a crisis is primarily the task of enterprises themselves, a supply disruption can also have tremendous consequences for an entire economy and therefore justify state interventions. The EU has reacted to these circumstances with its concept of Open Strategic Autonomy and the initiative for an EU Chips Act. This concept of autonomy should entail the incorporation of the benefits of an open economy and the aspiration of the EU to co-determine the global framework in a favourable way. But it also calls for more market interventions. However, these require an economic and political justification and close monitoring. The measures should be discussed with international partners in order to prevent retaliation measures or international subsidy races.