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(1) Semiconductors are at the core of any digital device and the Union’s digital transition: from smartphones and cars, through critical applications and infrastructures in health, energy, communications and automation to most other industry sectors. As semiconductors are central to the digital economy, they are powerful enablers for the sustainability and green transition, contributing thus to the objectives of the Commission communication of 11 December 2019 on ‘The European Green Deal’. While semiconductors are essential to the functioning of today’s economy and society as well as defence and security, the Union has witnessed unprecedented disruptions in their supply, the consequences of which are significant. The current disruptions have exposed long-lasting vulnerabilities in this respect, in particular a strong third-country dependency in manufacturing and design of chips. Member States are primarily responsible for maintaining a strong industrial, competitive, sustainable base in the Union promoting innovation across a full range of chips.

(2) A framework for increasing the Union’s resilience in the field of semiconductor technologies should be established, reinforcing the Union’s semiconductor ecosystem by reducing dependencies, enhancing digital sovereignty, stimulating investment, strengthening the capabilities, security, adaptability and resilience of the Union’s semiconductor supply chain, and increasing cooperation among the Member States, the Commission and international strategic partners.

(3) This framework pursues two general objectives. The first objective is to ensure the conditions necessary for the competitiveness and innovation capacity of the Union, to ensure the adjustment of the industry to structural changes due to fast innovation cycles and the need for sustainability, and to strengthen the Union-wide semiconductor ecosystem with pooled knowledge, expertise, resources and common strengths. The second objective, separate from and complementary to the first, is to improve the functioning of the internal market by laying down a uniform Union legal framework for increasing the Union’s long-term resilience and its ability to innovate and provide security of supply in the field of semiconductor technologies with a view to increasing robustness in order to counter disruptions.

(4) It is necessary to take measures to build capacity and strengthen the Union’s semiconductor ecosystem in accordance with Article 173(3) of the Treaty on the Functioning of the European Union (TFEU). Those measures should not entail the harmonisation of national laws and regulations. In this regard, the Union should reinforce the competitiveness and resilience of the semiconductor technological and industrial base, whilst strengthening the innovation capacity of its semiconductor ecosystem across the Union, reducing dependence on a limited number of third-country companies and geographies, and strengthening its capacity to design and produce, package, reuse and recycle advanced semiconductors. The Chips for Europe Initiative (the ‘Initiative’) established by this Regulation should support those aims by bridging the gap between the Union’s advanced research and innovation capabilities and their sustainable industrial exploitation. The Initiative should promote capacity building to enable design, production and systems integration in next-generation semiconductor technologies, and should enhance collaboration among key players across the Union, strengthening the Union’s semiconductor supply and value chains, serving key industrial sectors and creating new markets.

(5) Due to the ubiquity of semiconductors, the recent shortages have either directly or indirectly adversely affected businesses across the Union and induced strong economic repercussions. The economic and social impact has led to an increased consciousness of the public and of economic operators and a resulting pressure for Member States to address the strategic dependencies as regards semiconductors. At the same time, the semiconductor sector is characterised by interdependencies across the value chain, where no single geography dominates all steps of the value chain. This cross-border nature is further emphasised by the nature of semiconductor products as an enabler for downstream industries. While semiconductor manufacturing may be concentrated in some regions, user industries are spread out across the Union. Against this background, the security of supply of semiconductors and resilience of the semiconductor ecosystem can be best addressed through Union harmonising law on the basis of Article 114 TFEU. A single coherent regulatory framework harmonising certain conditions for operators to carry out specific projects that contribute to the security of supply and resilience of the Union’s semiconductor ecosystem is necessary. Additionally, a coordinated mechanism for monitoring, strategic mapping, crisis prevention and response should be established to address shortages of supply and prevent obstacles to the unity of the internal market, avoiding differences in response among Member States.

(6) Strengthening the Union’s critical infrastructure and security as well as its technological leadership requires both leading-edge and mature chips, in particular for future-proofing strategic sectors.

(11) It is a clear objective of the Union to promote international cooperation and knowledge exchange on the basis of the Union’s interests, mutual benefits, international commitments, and, to the extent possible, reciprocity. Nevertheless, the infringement of intellectual property (IP) rights, the unauthorised disclosure of trade secrets, or the leakage of sensitive emerging technologies in the semiconductor sector could compromise the interests of the security of the Union. Against this background, the Commission is exploring concrete proposals to strengthen the Union’s investment and export control frameworks. In addition, the Union and the Member States should cooperate with strategic partners to strengthen the joint technological and industrial leadership in accordance with applicable procedural requirements.

(12) The semiconductor sector is characterised by very high development and innovation costs and very high costs for building state-of-the-art facilities for testing and validating to support the industrial production. This has direct impact on the competitiveness and innovation capacity of the Union industry, as well as on the security of the supply and the resilience of the Union’s semiconductor ecosystem. In light of the lessons learnt from recent shortages in the Union and worldwide and the rapid evolution of technology challenges and innovation cycles affecting the semiconductor value chain, it is necessary to reinforce the Union’s existing strengths, thus increasing its competitiveness, resilience, research and innovation capacity by setting up the Initiative.

(13) Member States are primarily responsible for sustaining a strong Union industrial, competitive, sustainable and innovative base. However, the nature and scale of the research and innovation challenges in semiconductors requires action to be taken collaboratively at Union level.

(14) In order to equip the Union with the semiconductor technology research and innovation capacities needed to maintain the leading role of its research and industrial investments at a leading edge, and bridge the current gap between research and development (R & D) and manufacturing, the Union and Member States should coordinate their efforts better and co-invest. The current challenges of the Union’s semiconductor ecosystem call for the achievement of large-scale capacity and require a collective effort by Member States, with the Union supporting the development and deployment of large-scale capacity. That collective effort includes providing financial resources in line with the ambition of the Initiative to support the development and widespread availability of innovative capacities and extensive digital infrastructures, comprising a virtual design platform, pilot lines, including for quantum chips, and the diffusion of knowledge, skills and competences for the benefit of the entire semiconductor ecosystem. To achieve this, the Union and Member States should take into consideration the twin green and digital transition goals. In this regard, semiconductor devices and manufacturing processes offer significant opportunities for decreasing the environmental, and, in particular, the carbon impact of industries, thereby contributing to the ambitions of, for instance, the Commission communication of 14 July 2021 entitled ‘Fit for 55’: delivering the EU’s 2030 Climate Target on the way to climate neutrality’, the Recovery and Resilience Facility established by Regulation (EU) 2021/241 of the European Parliament and of the Council and the communication of the Commission of 18 May 2022 entitled ‘REPowerEU plan’. The Initiative should throughout all components and actions, to the extent possible, mainstream and maximise the benefits of application of semiconductor technologies as powerful enablers for the sustainability transition that can lead to new products and more efficient, effective, clean and durable use of resources, including energy and materials necessary for production and the whole lifecycle use of semiconductors.

(15) In order to achieve its general objective, and address both the supply and demand side challenges of the current semiconductor ecosystem, the Initiative should include five operational objectives. First, to reinforce the Union’s design capacity, the Initiative should support actions to build a virtual design platform that is available across the Union. The virtual design platform should connect the communities of design houses, start-ups, SMEs and IP and tool suppliers and research and technology organisations to provide virtual prototype solutions based on co-development of technology.