The European Chips Act

Preamble 31 to 40.

(31) In order to encourage the establishment of the necessary manufacturing and related design capabilities, and thereby ensure the security of supply and strengthen the resilience of the Union’s semiconductor ecosystem, public support may be appropriate, provided that this does not lead to distortions in the internal market. In that respect, it is necessary to harmonise certain conditions for operators to carry out specific projects at Union level that contribute to achieving the objectives of this Regulation and distinguish between two types of facility, namely, integrated production facilities and open EU foundries.

The distinguishing factor for qualification as either type of facility should be the business model. Open EU foundries offer production capacity to other undertakings. Integrated production facilities produce for their own commercial purposes and could integrate other steps of the supply chain in addition to manufacturing into their business model, such as designing and selling the products.

(32) Integrated production facilities and open EU foundries should provide capabilities in semiconductor manufacturing or the production of equipment or key components for such equipment predominantly used in semiconductor manufacturing that are ‘first-of-a-kind’ in the Union and contribute to the security of supply and to the resilience of the semiconductor ecosystem in the internal market.

The qualifying factor for being a ‘first-of-a-kind’ facility is to bring an innovative element to the internal market regarding the manufacturing processes or the final product, which could be based on new or existing technology nodes. Relevant innovation elements could be with regard to the technology node or substrate material, or approaches that lead to improvements in computing power or other performance attributes, energy efficiency, level of security, safety or reliability, as well as integration of new functionalities, such as artificial intelligence (AI), memory capacity or other.

Integration of different processes leading to efficiency gains or packaging and assembly automation are also examples of innovation. With regard to environmental gains, innovation elements include the reduction in a quantifiable way of the amount of energy, water or chemicals used, or improving recyclability.

Those innovation elements could apply to both mature and cutting-edge technology nodes. Such innovation should not yet substantively be present or committed to be built within the Union. For example, similar innovation in R & D or small-scale production would not necessarily exclude subsequent qualifying as a ‘first-of-a-kind’ facility. Both the installation of a new or substantially upgraded facility could lead to qualification as a ‘first-of-a-kind’ facility.

(33) Where an open EU foundry offers production capacity to undertakings not related to the operator of the facility, the open EU foundry should establish, implement and maintain adequate and effective functional separation in order to prevent the exchange of confidential information between internal and external production. This should apply to any information obtained in the design and in the front-end or back-end manufacturing processes.

(34) In order to qualify as integrated production facilities or open EU foundries, the establishment of the facility should have a clear positive impact with spill-over effects beyond the undertaking or the Member State concerned on the Union’s semiconductor value chain in the medium to long term with a view to ensuring the security of supply and resilience of the semiconductor ecosystem and contributing to the Union’s twin green and digital transitions. Various activities aiming to create positive spill-over effects may be considered for the purpose of qualifying as integrated production facilities or open EU foundries.

Examples include giving access to manufacturing facilities against a market fee; giving process design kits to smaller design companies or to the virtual design platform; disseminating results from their R & D activities; engaging in research collaboration with European universities and research institutes; cooperating with national authorities or educational and vocational institutions to contribute to skills development; contributing to Union-wide research projects; or offering dedicated support opportunities for start-ups and SMEs. The impact on several Member States, including with regard to cohesion objectives, should be considered as one of the indicators of a clear positive impact of an integrated production facility or open EU foundry on the semiconductor value chain in the Union.

(35) It is important that integrated production facilities and open EU foundries are not subject to extraterritorial application of public service obligations imposed by third countries that could undermine their ability to use their infrastructure, software, services, facilities, assets, resources, IP or know-how needed to fulfil the obligation on priority-rated orders under this Regulation, to which they would have to commit.

(36) In light of the fast development of semiconductor technologies and to strengthen the future industrial competitiveness of the Union, integrated production facilities and open EU foundries should invest in the Union in continued innovation with a view to achieving concrete advances in semiconductor technology or preparing next-generation technologies.

In light of this, integrated production facilities and open EU foundries should be able to test and experiment new developments through preferential access to the pilot lines established by the Initiative through fast-tracked applications for their services. Any such preferential access should neither exclude nor prevent effective access on fair terms to the pilot lines by other interested undertakings, in particular start-ups and SMEs.

(37) Taking into account the importance of a qualified and skilled workforce to achieve the objectives of this Regulation, integrated production facilities and open EU foundries should support the Union talent pipeline by developing and deploying educational and skills training and by increasing the pool of qualified and skilled workforce.

(38) To allow for a uniform and transparent procedure to attain the status as an integrated production facility or open EU foundry, the decision to grant this status should be adopted by the Commission following the application by an individual undertaking or a consortium of several undertakings. The status should be open for both the installation of a new semiconductor manufacturing facility and the significant scale-up or innovative transformation of an existing semiconductor manufacturing facility.

To account for the importance of a coordinated and cooperated implementation of the planned facility, the Commission should take into account in its assessment the readiness of one or more Member States where the applicant intends to establish its facilities to support the establishment of such facilities. Furthermore, when assessing the viability of the business plan, the Commission could take into account the overall record of the applicant.

(39) In light of the rights attached to recognition as an integrated production facility or open EU foundry, the Commission should monitor whether facilities that have been granted that status continue to comply with the requirements set out in this Regulation. If this is no longer the case, the Commission should have the right to re-examine and, if necessary, repeal the status and, accordingly, the rights attached to this status.

Any decision on the repeal of the status should be taken only after consulting the European Semiconductor Board and should be properly reasoned. Correspondingly, the undertaking operating an integrated production facility or open EU foundry should have the possibility to proactively request a review of the duration of the status or implementation plans where unforeseen external circumstances, such as serious disturbances with a direct economic impact on the recognised facility, could have an impact on its ability to comply with the criteria. To account for the fact that most rights are granted in the period of establishment, facilities should remain subject to the obligation to comply with priority-rated orders even in the event of a repeal of the status for the time remaining until the status would have expired.

(40) In light of their importance for ensuring the security of supply and enabling a resilient semiconductor ecosystem, integrated production facilities and open EU foundries should be considered to be in the public interest. Ensuring the security of supply of semiconductors is also important for digitalisation, which enables the green transition of many other sectors.

To attract investments to the Union’s semiconductor sector and contribute towards security of supply of semiconductors and resilience of the Union’s semiconductor ecosystem, Member States may apply support measures, including incentives, and provide for administrative support in national permit-granting procedures for integrated production facilities and open EU foundries.

This is without prejudice to the competence of the Commission in the field of State aid under Articles 107 and 108 TFEU, where relevant. To ensure the correct and efficient application of the State aid rules, in its communication of 8 February 2022 entitled ‘A Chips Act for Europe’, the Commission has already recognised the need for a case-by-case assessment regarding State aid granted to advanced semiconductor production facilities with a view to safeguarding the Union’s security of supply and supply-chain resilience while generating significant positive impacts on the wider economy.

Furthermore, the procedures for the recognition as integrated production facilities or open EU foundries and for the authorisation of State aid, where applicable, will be conducted in parallel in order to accelerate the decision-making process. Member States should support the establishment of integrated production facilities and open EU foundries in accordance with Union law.

When providing support measures for integrated production facilities and open EU foundries, Member States should be able to consider setting non-discriminatory requirements related to intellectual protection and security, including cyber-security, and confidentiality and could recommend mitigation measures to address specific risks related to the interference, forced technology transfers, and IP theft by entities from third countries.