EU, US Look To Avoid Semiconductor ‘Subsidy Race’

US and EU officials on Monday are to announce an initiative to coordinate investment into the semiconductor industry in order to avert a “subsidy race”, amidst ongoing worldwide chip shortages.

A senior US administration official, speaking for background purposes, said the announcement would also include a transatlantic “early warning system” to help identify supply chain disruptions early on.

The US instituted its own early warning system in 2021 focusing on supply chains in Southeast Asia which “has been very helpful in helping us get ahead of a couple of potential shutdowns earlier this year”, the US official said.

The person said the two sides are looking ahead to monitor supply disruptions caused by pandemic lockdowns in China, the only major economy to retain a zero-Covid policy.

‘Subsidy race’

The announcements are planned for the second day of the US-EU Trade and Technology Council (TTC), formed last year largely to counter the competitive threat from China.

The council held its first meeting last September in Pittsburgh, and this year’s meeting began on Sunday and runs through Monday of this week in Saclay, a technology hub near Paris.

The EU and the US are both introducing massive spending packages aimed at boosting domestic semiconductor production, amidst disruption to the current production system that is largely controlled by a few massive producers based in Asia.

The US official said the parties planned to announce “a transatlantic approach” to the investment schemes.

“As both Washington and Brussels look to encourage semiconductor investment in our respective countries, we do so in a coordinated fashion and don’t simply encourage a subsidy race,” the official said.

Russian disinformation

“We hope to agree on high levels of subsidies – that they will not be more than what is necessary and proportionate and appropriate,” European Competition Commissioner Margrethe Vestager said at a press briefing on Sunday.

Officials acknowledged that Russia’s invasion of Ukraine has broadened the council’s scope, and the EU and US are also planning to announce joint measures on fighting disinformation and hacking, especially from Russia.

These are to include a guide on cybersecurity best practices for small- and medium-sized companies and a task force on trusted technology suppliers, the US official said.

“It’s not a European matter but a global matter,” the official said.

US Commerce Secretary Gina Raimondo and US Trade Representative Katherine Tai are co-chairing the talks along with Secretary of State Antony Blinken, who attended an opening dinner before cutting short his visit to travel to Abu Dhabi for the funeral of late leader Sheikh Khalifa.

The EU co-chairs are Vestager and EU trade chief Valdis Dombrovskis.