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3rd Jul 2022

EU mulls relaxing state-aid rules to help chip production

  • EU commission vice-president Margrethe Vestager said the bloc should not rely on one European company - or country - for crucial chip-production (Photo: European Commission)
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The EU could allow a relaxing of state-aid rules in order to fund new chip-producing plants in the bloc.

The move is part of an effort to ease worries around Europe's dependence on Asian producers, but will face tough scrutiny.

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The bloc has been hard-hit by an unprecedented global shortage in semiconductors, holding up the trade of goods and has been driving up prices of smartphones.

"The commission may consider approving public support to fill possible funding gaps in the semiconductor ecosystem for the establishment in particular […] of first-of-its-kind facilities," EU Commission vice-president Margrethe Vestager told MEPs on Thursday (18 November).

She added that the support would be subject to strong competition safeguards, and that the benefits should be shared widely and without discrimination across Europe.

But the commission has resisted pressure, led by France, to unleash more direct funding for European chip-making.

Vestager argued in a press conference on Thursday that the scale of what is needed to be done on chips is so massive, that "not one country or company can do it alone".

"We should not rely on one company or one member state," the competition chief added, saying the aim should be "diversification among like-minded partners".

The commission's internal market chief Thierry Breton earlier argued for the bloc to become a global powerhouse for chip-making, as the US producer Intel is looking for a European base to build more local chip-making capacity.

However, other EU member states, such as Netherlands and Ireland, have expressed worries that allowing large and non-targeted use of funds would create unfair competition within the bloc.

No easy mergers

Vestager, the Danish competition chief also resisted pressure from Germany and France, who have argued for relaxing merger rules after the commission axed Germany's Siemens' planned acquisition of France's Alstom companies in 2019.

At the time, the commission said the merger would have harmed competition in markets for railway-signalling systems and high-speed trains.

Paris and Berlin have argued for the need of big European companies to compete on a global scale with Chinese and US firms.

"We do not design the market, we assess the market," Vestager insisted, adding "European champions come in every size and shape."

"You can buy yourself more market power, as long as you accept to be challenged," the EU competition chief said.

The commission also strengthened its control of acquisitions in the digital sector, reacting to concerns over the dominance of US tech giants and Chinese state entities taking over EU technologies.

The centre-right German MEP Markus Ferber heavily criticised Vestager's approach.

"The EU's competition policy is still stuck in the 20th century," he said in a statement. "Nowadays, competition policy does not only need to have a European perspective, but a global one," he argued.

"If we want European companies to be able to compete against their US or Asian competitors, EU competition policy needs to get smarter in allowing European champions to emerge", Ferber said - echoing the argument pushed by Germany and France.

More Covid-19 help

The commission has also decided to extend for another six months relaxed state aid rules to help member states cope with the economic fallout from the Covid-19 pandemic.

Since the easing of the rules, EU countries handed out €3.1 trillion to offset the pandemics effect that threatened with the worst economic downturn since the second world war.

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The EU blocked the merger of the makers of Germany's ICE and France's TGV trains, citing concerns of reduced competition and extra costs for consumers and taxpayers. The two countries now want to change the rules.

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