Economic security and semiconductors : a comparison of the EU and US approaches

Abstract

Semiconductors have become recognised as being crucial for modern life and have a critical role with the global economy. Semiconductors underpin critical industries and form the basis for numerous national security technologies. Moreover, the semiconductor supply chain has become intertwined within tensions between world powers. Thus, semiconductors are a critical technology for economic security. This study seeks to provide a comparison of the EU and US approaches with regards to economic security and semiconductors. Both the EU and US have respectively enacted legislation with regards to semiconductors including the European Chips Act and the US CHIPS and Science Act. On the one hand, while the EU has put together its own strategy for economic security, the US lacks an integrated economic security strategy. The study aims to understand the link between economic security and semiconductors and how the global landscape is exposing vulnerabilities for economic security within the semiconductor industry. It also seeks to understand how both these global powers, the EU and US, compare with regards to the boosting of their competitiveness and autonomy within this interdependent sector, and determine factors which explain difference in the EU’s and US’ approaches. The literature review discusses various definitions of economic security which has an existing link with competitiveness, and strategic autonomy in the case of the EU, and autonomy with regards to the US. The study makes use of a comparative research design in order to compare the respective EU and US approaches, and takes the form of qualitative research, making use of document-based research. The analysis was based on the research frameworks comprised of themes that were developed within the methodology, based on the concepts discussed in the literature review. Thus, vulnerabilities for economic security in the semiconductor industry range from shocks and disruptions to increased dependencies, instability within the global environment, and tariffs. While a few of these vulnerabilities are common to both the EU and US, they differ with respect to other vulnerabilities including exposure to tariffs and their respective global market share of semiconductors. Furthermore, while the approaches of the EU and US may be similar in certain aspects with regards to boost competitiveness and autonomy in the semiconductor industry, they differ in other aspects. Both the EU and US seek to reduce dependencies and increase production. The EU’s approach favours a cooperative and a coordinated approach visible through the Semiconductor Coalition. It should also as Mario Draghi outlines within the future of European competitiveness report, focus on segments of the supply chain in which it holds a competitive advantage. Meanwhile, the US’ approach seeks to reshore manufacturing on US soil and favours the imposition of tariffs. Factors explaining the differences within the approaches included vulnerabilities; competitiveness and autonomy; geopolitical and geoeconomic realities, as well as political and economic ideologies of the EU and US. Both the EU and US have set ambitious targets; however, the semiconductor industry remains a global industry, comprised of several interdependencies.