AUGUST 2024
A World of Chips Acts
The Future of U.S.-EU Semiconductor Collaboration
By Sujai Shivakumar, Charles Wessner, and Thomas Howell
T
he United States and the European Union have each recently enacted legislation providing for
an unprecedented volume of public investments in semiconductors, with the largest portion
allocated to the establishment of new onshore chip production facilities. Substantial funds
are also allocated to semiconductor research and development, supply chain security, and workforce
expansion and training. These parallel initiatives have been prompted by an awareness in both
regions of threats to economic and strategic security arising out of their dependency on foreign-made
chips. The question posed by the enactment of the two Chips Acts is how such joint activities can be
deepened, broadened, and leveraged by direct engagement between the United States, the European
Union, and national authorities to address the vulnerabilities faced by both ecosystems.
Shared Vulnerabilities
Both the U.S. and EU economies were disrupted by shortages of semiconductors during the Covid-19
pandemic. These emerged from unexpected surges in demand for chips (e.g., for electronic devices),
which led to curtailed auto production in both regions. Reportedly, the U.S. automotive industry lost
production of some four million vehicles due to chip shortages in and after 2020, while in Europe, a
senior German ocial observed in 2023 that “we lost 11.5 percent of our GDP in 2021 because of a lack
of semiconductors—or about €40bn.”
Genuine post-pandemic vulnerabilities remain. Both the United States and the European Union are
heavily dependent on chips fabricated in Taiwan and could experience catastrophic economic
disruption if conict between China and Taiwan shuts o the island’s semiconductor exports. Arati
Prabhakar, director of the White House Oce of Science and Technoloy Policy, said in January 2024
that “all of the leading-edge chips that are critical to our infrastructure, to AI, to our national security
ambitions, automotive manufacturing even, are being built in one part—a fragile part of the world
[Taiwan].” Bloomberg Economics estimates that a war over Taiwan would cost the global economy
