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March 6, 2024

SEMI: EU export controls on China could harm European chip industry

The microelectronics industry association says the EU’s strategy for economic security should not solely focus on ‘restrictive measures’ but encourage partnerships with non-EU countries.

By Tech Monitor Staff

SEMI has criticised the European Commission’s strategy to impose export controls on China, as doing so could backfire on EU companies. The association, representing over 3000 chip vendors, declared in a paper published this week that additional controls should be a “last resort.”

The association believes that while the European Union’s five-point strategy, published in January this year, is a positive step for the economic security of the European Union, it requires a “positive approach based on support and incentives at the European level and international cooperation globally, and thus should not focus solely on restrictive and protective measures.”

The industry association, SEMI, urges additional controls on exports should be a “last resort”. (Photo by gopixa via Shutterstock)

EU exports depend on global supply chains

SEMI is urging that the strategy should have more emphasis on creating opportunities for partnerships with non-EU countries to increase access for EU companies to global markets, acknowledging the “highly specialised and globalised nature of the semiconductor supply chain.”

The strategy aims to improve the bloc’s economic security, marking another attempt by Brussels to control Chinese influence upon the bloc’s economy. With recent events such as Russia’s war on Ukraine evidencing the impacts of harmful dependencies on one country, the EU aims to roll out measures to safeguard the bloc and de-risk it from China.   

“In light of the recent geopolitical tensions, and the prominent role that export controls in the semiconductor industry have played in this, it has become increasingly necessary for the EU to speak with a common voice,” SEMI said. “Export controls should indeed be a last resort for cases with genuine concerns for national security.”.

The five-point strategy involves legislation to improve foreign investment screening, monitoring and assessing outbound investment risks and more effective EU control of dual-use goods exports. The EU also highlighted research and development support opportunities with dual-use potential and enhanced research security across the EU in its strategy.

“We felt that it was the right time to respond” SEMI Europe spokesman Stefano Orlando told Reuters on Tuesday.

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SEMI emphasises export partnerships over additional controls

As restrictions on exports have been increasingly instrumented in the US-China tug-of-war on chips, Biden’s White House has increased pressure on European nations to stunt China’s tech growth. Much of this involves bans on investments in Chinese technology companies, with imposed new reporting requirements for funding technologies in China surrounding quantum, computing, AI systems and advanced semiconductors.

While SEMI acknowledges the need to control exports and prevent sensitive technologies entering the hands of ‘countries of concern’, it also recalls how European semiconductor companies have “greatly benefitted from substantial investment from outside the EU” in recent decades, warning against the new controls which might deter non-EU investors and “undermine the potential success of the European Chips Act” due to the introduction of “excessive screening mechanisms”.

SEMI claims that the reverse could also have undesirable effects, with increased scrutiny on outbound investments increasing the burden on local semiconductor businesses. The success of such an industry in the EU relies upon freedom in investment decisions, SEMI comments in the report, or companies will “risk losing their agility and relevance in global markets.”

The EU should think twice, says SEMI

This trend has long been foreseen by analysts following the US-China chip tensions, where slowing China’s tech growth with semiconductor restrictions can have significant impacts on the US.

Alicja Bachulska, policy fellow at the European Council on Foreign Relations (ECFR), told Euractiv: “If these policy changes are to be taken seriously, they will incur some costs. And while these costs might be necessary for the EU to retain its economic competitiveness over the long run, from the short-term perspective, they will raise tensions between some business communities and Brussels.”

Read more: EU fines Apple €1.84bn following Spotify anti-competition claims

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