The EU’s chips plan implodes as Intel pauses investments

BRUSSELS — The European Commission’s landmark 2022 chips strategy has collapsed just as it laid out a new team to fix the bloc’s competitiveness.
United States-based technology giant Intel announced late on Monday that it was pushing back the construction of a major microchips plant in Magdeburg, Germany and another investment in Poland by two years as it tries to shore up heavy losses.
Intel’s €30 billion investment in Germany was essential for the European Union’s pandemic-era goal to produce more semiconductors in the region after supply chain shortages forced European carmakers to shutter plants.
Its pause spells trouble for Commission President Ursula von der Leyen, who presented her team for her second mandate on Tuesday, and singled out a “more robust industrial strategy” to compete on key technologies as its number one priority. The Frenchman who pushed the chips plan, Thierry Breton, quit the Commission just a day earlier.
The new delays cripple Europe’s chances to compete in the global chips race. The U.S., China, South Korea and other countries have pledged massive public support schemes to lure manufacturers to their shores to build new factories to churn out the chips that power everything from cars to smartphones.
Intel’s projects in the U.S. are already closer to becoming operational. Chips market leader TSMC has large-scale plans in the U.S. while limiting itself to a smaller, less advanced manufacturing project in Europe.
In July, POLITICO reported that Intel had already quietly shelved smaller projects in France and Italy. The company is also planning to cut staff and spin out costly manufacturing unit to address its cash drain.
Intel had pitched the plant in Germany, and a supporting €5 billion factory in Poland, in 2022, right after the EU’s then internal market chief Thierry Breton had presented a plan to claim a larger share of the global microchips industry.
Essential to that plan would be billions of euros in public support from German and Polish governments, with some €10 billion from Germany alone. Germany’s pledge faced a delay after it struggled to find funding after a court wouldn’t let it repurpose an emergency fund.
On Tuesday, German Chancellor Olaf Scholz said on X that Germany and the state of Sachsen-Anhalt continue to believe that the Intel “project is worthwhile and worth supporting.”
The collapse of Europe’s chips ambitions is a bad omen for the bloc’s urgent — and at times alarmist — plans to stop its key industries from falling behind other regions in the world.
Through the bloc’s European Chips Act, the Commission aimed to claim 20 percent of the global microchips value chain by 2030, up from around 9 percent in 2022.
The Commission admitted earlier this year that the bloc was nowhere on track to reach that target: In a July report it said the EU’s share was projected to grow to only 11.7 percent by 2030.
EU executives have still touted the plan as a success, though. In late August, von der Leyen attended the groundbreaking ceremony of a new €10 billion microchips plant in Dresden, Germany built by Taiwan’s TSMC. The Commission president said that, under the Chips Act, €115 billion in private and public money was already being pledged, calling it a “true investment revolution” and “just the beginning.”
The Commission has never given a detailed breakdown of the €115 billion figure.
Europe’s role in global microchips manufacturing now hinge on the TSMC factory in Dresden and several other smaller investments, often focused on the car industry. These chips aren’t the cutting-edge projects that the plan was supposed to push.
Von der Leyen on Tuesday urged her pick to lead technology policy in the next European Commission, Finland’s nominee Henna Virkkunen, to “follow up on the Chips Act,” in a mission letter shared when presenting the new commissioners. It’s not going to be her top priority.