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The EU on Thursday announced that its European Chips Act officially enters into force, in a move that has been widely described as the bloc's answer to the US' protectionist CHIPS Act - both aiming to bolster their own chip industries, in another serious escalation in the global protectionist trend in the semiconductors initiated by the US.

The move by the EU also underlined the limitations and likely unintended consequences of the US' attempt to crack down on other countries' chip industries so as to bolster its own domestic industry, which could reshape what has been a highly globalized global chip supply chain. The EU and other parties seeking to bolster their chip industries also need China's chip market, the biggest in the world, Chinese observers noted.

"Digital sovereignty: European Chips Act enters into force today," the EU declared in a statement on Thursday, claiming that the move "puts in place a comprehensive set of measures to ensure the EU's security of supply, resilience and technological leadership in semiconductor technologies and applications."

With various initiatives that translate to about 43 billion euros ($47 billion) of public and private investments, the European Chips Act aims to help the EU reach its target to double its current global market share to 20 percent by 2030.

The EU currently holds a less than 10 percent share in the global semiconductor manufacturing market and is heavily dependent on third-country supplies. "In case of severe disruption of the global supply chain, there is a risk that European industrial sectors could run out in a short amount of time, bringing European industries to a standstill," the EU said in a separate press release.

Since news of European Chips Act first broke last year, it has been widely described by media outlets as the EU's answer to the US' CHIPS Act, which aims to invest $280 billion in subsidies for chipmakers to bolster the US' semiconductor capacity. In addition to the subsidy program, other US protectionist moves, including a relentless campaign to ban sales of chips and chipmaking tools to China, have also raised alarm for many countries and regions about potential risks of a broken chip supply chain and pushed them to come up with their own plans.

The European Chips Act is relatively small in terms of direct funding compared to that of the US. It remains to be seen whether the EU - or any individual country or region, for that matter - will be able to flourish on its own given that the global chip supply chain is a complex one that requires the participation of numerous companies across multiple regions, Chinese observers noted.

Meanwhile, to really take on the US' protectionist program, the EU and other parties that seek to bolster their own chip industry also need a vast market to consume their chip outputs and in return boost their innovative capabilities. China has the world's biggest market for chips, observers said.

Global Times