Explanatory Memorandum to COM(2022)47 - Amendment of Regulation (EU) 2021/2085 establishing the Joint Undertakings under Horizon Europe, as regards the Chips Joint Undertaking

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dossier COM(2022)47 - Amendment of Regulation (EU) 2021/2085 establishing the Joint Undertakings under Horizon Europe, as regards the Chips Joint ...
source COM(2022)47 EN
date 08-02-2022


1. CONTEXT OF THE PROPOSAL

• Reasons for and objectives of the proposal

This explanatory memorandum accompanies the proposal for a Council Regulation amending Council Regulation (EU) 2021/2085 establishing the Joint Undertakings under Horizon Europe.

This proposal complements the proposal for a Regulation of the European Parliament and Council establishing a framework of measures for strengthening Europe’s semiconductor ecosystem (‘Chips Act’) 1 by implementing most of the actions foreseen under the Chips for Europe Initiative, set up under the Chips Act proposal.

The Chips Act proposal delivers on the political commitment by President von der Leyen, who announced in her 2021 State of the Union speech that the aim is to jointly create a state-of-the-art European chip ecosystem, including production 2 . The Chips Act proposal’s underlying strategic vision for strengthening Europe’s semiconductor ecosystem is explained in its accompanying Communication. 3

Contents

1.

To fulfil this vision, the European Chips Strategy is articulated around five strategic objectives:


·Europe should strengthen its research and technology leadership;

·Europe should build and reinforce its own capacity to innovate in the design, manufacturing, and packaging of advanced chips, and turn them into commercial products;

·Europe should put in place an adequate framework to increase substantially its production capacity by 2030;

·Europe should address the acute skills shortage, attract new talent, and support the emergence of a skilled workforce;

·Europe should develop an in-depth understanding of global semiconductor supply chains.

The Chips Act proposal aims at reaching the strategic objective of increasing the resilience of Europe’s semiconductor ecosystem and increasing its global market share. It also aims at facilitating early adoption of new chips by European industry and increase its competitiveness. For this, it needs to attract investment in innovative production facilities, have a skilled workforce, but also be in the position to design and produce the most advanced chips that will define the markets of tomorrow, developing capabilities and having the possibility to test and prototype innovative designs through pilot lines in close collaboration with its industrial vertical sectors. These are necessary steps, but not sufficient unless Europe has the analytical capability of increasing the transparency of the value chain and is capable to benefit from increased capacity to serve the common interest of the single market in case of crisis. The objective is not to become self-sufficient, which is not an achievable target. The Union must strengthen its strengths and work with third countries in a supply chain where interdependencies will remain strong.

In terms of delivering on these objectives, one of the goals of the proposed Chips Act is to set up the Chips for Europe Initiative (the ‘Initiative’), to support large-scale capacity building throughout investment into cross-border and openly accessible research, development and innovation infrastructure set up in the Union to enable the development of cutting-edge and next-generation semiconductor technologies that will reinforce the EU’s advanced design, systems integration, and chips production capabilities, including emphasis on start-ups and scale-ups.

In particular, the Initiative will build a virtual design platform to reinforce Europe’s design capacity, which will be accessible on open, non-discriminatory, and transparent terms. The platform will stimulate a wide cooperation of user communities with design houses, intellectual property (IP) and tool suppliers, designers, and research and technology organisations (RTOs), and will integrate existing and new design facilities with extended libraries and EDA 4 tools.

The Initiative will support pilot lines that provide the means for third parties under open, transparent, and non-discriminatory terms to test, validate, and further develop their product designs. The development of new pilot lines will prepare for the next generation of production capabilities and their validation.

Furthermore, the Initiative will set up advanced technology and engineering capacities for quantum chips, e.g. in the form of design libraries for quantum chips, pilot lines, and testing and experimentation facilities.

The Initiative will support a network of competence centres across Europe that will provide expertise to stakeholders, including end-user small and medium-sized enterprises (SMEs), start-ups as well as vertical sectors, and improve their skills. Competence centres will facilitate open, transparent, and non-discriminatory access to and effective use of the design infrastructure and the pilot lines. They will become poles of attraction for innovation and for new, highly skilled talent, including via reskilling and upskilling of workers.

The actions under the Initiative will be primarily implemented through the Chips Joint Undertaking, i.e. the amended and renamed current Key Digital Technologies Joint Undertaking 5 . This Joint Undertaking currently provides extensive support for industrially driven research, technology development, and innovation in the area of electronic components and systems, and related software and systems technologies. These activities will become part of the Initiative.

This proposal aims to amend the legal provisions of the Council Regulation amending Council Regulation (EU) 2021/2085 establishing the Joint Undertakings under Horizon Europe for equipping the Key Digital Technologies Joint Undertaking for its new tasks related to the Initiative. This proposal also renames the Key Digital Technologies as the “Chips Joint Undertaking”.


• Consistency with existing policy provisions in the policy area

The Chips JU will pool resources from the Union, including the Horizon Europe and the Digital Europe Programme, Member States and third countries associated with the existing Union programmes, as well as the private sector.

The proposal defines the actions under the Chips for Europe Initiative that are implemented through the Chips Joint Undertaking. The proposal complements the Digital Europe programme 6 , which supports digital capacity building in key digital domains where semiconductor technology underpins performance gains, notably High Performance Computing, Artificial Intelligence, and Cybersecurity, together with skills development and the deployment of digital innovation hubs. The proposal supports capacity building to reinforce advanced research, design, production and systems integration capabilities in cutting-edge and next-generation semiconductor technologies. The Digital Europe Programme contributes to the Chips JU via a new sixth Specific Objective, which will have a thematic focus on semiconductor technologies.

The Chips JU also builds on and complements Horizon Europe 7 , which in the area of semiconductors provides support for academically driven research, technology development, and innovation. The Chips JU will focus on supporting investment into cross-border and openly accessible research, development and innovation infrastructures set up in the Union to enable the development of semiconductor technologies across Europe. New semiconductor technologies from research and innovation actions supported by Horizon Europe may be progressively taken up and deployed by the capacity building activities supported by the Chips JU. Conversely, the technology capacities set up under the Chips JU will be made available to the research and innovation community, including for actions supported through Horizon Europe.

• Consistency with other Union policies

The proposed measures are in line with some of the main policies of the Union, such as the Green Deal 8 . The application of semiconductor technologies such as for power electronics, and for digital technologies in general, are powerful enablers for the sustainability transition and can lead to new products and more efficient and effective ways of working that contribute to the Green Deal objectives.

Semiconductor supply disruptions and dependencies on other regions can slow down the sustainability transition of European sectors benefiting from digital solutions. To address the disruptions and dependencies, the proposal strengthens Europe’s technology and innovation leadership in the semiconductor domain.

Digital technologies have their own environmental footprint, including their significant energy consumption. The information and communications technology (ICT) sector is responsible for 5-9% of the world’s total electricity use and more than 2% of all emissions 9 . Data centres alone accounted for 2.7% of electricity demand in 2018 in the EU and will reach 3.21% by 2030, if development continues on the current trajectory 10 . Such energy consumption needs to be reduced. The proposal, and in particular via the design facilities and pilot lines that it supports, will lead to the design, testing, and validation of new, low power processors. Processors are the core components of servers that handle the computational workload in data centres. Larger data centres contain millions of such servers and improvements in the power consumption of processors can have a significant bearing on the overall power consumption of a data centre. Such chips with a low-energy footprint contribute also to positioning the EU as a leader in sustainable digital technologies.

The proposal contributes to the objectives of parts of the Fit for 55 package that focus on promoting cleaner vehicles and fuels in a technologically neutral way 11 . The revision of the CO2 emission standards for new cars and vans aims at further reducing the greenhouse gas emissions of these vehicles, providing a clear and realistic pathway towards zero-emission mobility. Consumer demand for zero emission vehicles, such as electrically chargeable vehicles, is increasing already 12 . Electrically chargeable vehicles typically have more than twice the amount of semiconductor content per vehicle than cars with internal-combustion engines 13 . Advanced packaging technologies are increasingly important to address increasing power and energy-efficiency requirements by electrical vehicles. It follows that the objectives of the proposal are consistent with the objectives of the Fit for 55 package.

With digitalisation and electrification increasing, energy-efficient chips contribute to other policies as well, including policies on industrial manufacturing, transport, and energy, e.g. the upcoming Digitalisation of Energy Action Plan 14 . The demand for semiconductor technologies is expected to double in a decade. More and more chips are embedded in robots, and manufacturing machines, in industry, in energy and in agriculture, but also in transport vehicles and other devices. The demand of power electronics semiconductors is expected to increase due to the growing penetration of renewables in the electrical system and to the transition to electro mobility. Via smart use of chips and other digital technologies, and via more energy-efficient chips, the proposal is consistent with and contributes to several sectoral policies.

2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

• Legal basis

This Regulation will amend Council Regulation (EU) 2021/2085 of 19 November 2021 that established nine institutionalised European partnerships based on Article 187 TFEU according to which the EU may set up joint undertakings or any other structure necessary to efficiently carry out EU research, technological development and demonstration programmes. Therefore, this amending Regulation will also be based on Article 187 TFEU.

• Subsidiarity (for non-exclusive competence)

Research is a shared competence between the EU and its Member States according to the TFEU. Article 4(3) specifies that in the areas of research, technological development and space the EU can carry out specific activities, including defining and implementing programmes, without affecting the member states’ freedom to act in the same areas.

The proposed regulation amends the provisions of the Council Regulation (EU) 2021/2085 applicable to one of the nine joint undertakings established thereunder, the Key Digital Technologies, which, through this regulation, is renamed to Chips Joint Undertaking. The Chips Joint Undertaking focuses on areas where there is a demonstrable value added in acting at EU level due to the scale, speed and scope of the efforts needed for the EU to meet its long-term Treaty objectives and deliver on its strategic policy priorities and commitments. The proposed initiative should also complement and reinforce national and sub-national activities in the same area. Each European partnership, including the Chips Joint Undertaking, is based on a long-term Strategic Research and Innovation Agenda, and is well suited to address complex cross-border challenges.

2.

In particular, the Chips Joint Undertaking focuses on:


·strengthening collaboration and knowledge exchange between key actors in the European research and innovation system, including cross-disciplinary and cross-sectoral collaboration and an improved integration of value chains and ecosystems;

·ensuring alignment and integration of European, national / regional and industrial research and innovation strategies, programmes and investments with the agreed directions;

·creating critical scales of investments on common priorities and increasing private investment in research and innovation;

·reducing risks and uncertainties for industry that are related to investing in research and innovation activities and new technologies / solutions by sharing risks and providing investment predictability.

Action at national level or by industry alone cannot achieve the scale, speed and scope of research and innovation support needed for the EU to meet its long-term Treaty objectives, deliver on its strategic policy priorities (including the climate and energy goals set out in the Paris Agreement, and the European Green Deal), and to contribute to tackling global challenges and meeting the Sustainable Development Goals (SDGs).

• Proportionality

The proportionality principle underpins the entire approach that led to the current proposal amending the Council Regulation (EU) 2021/2085 for Chips Joint Undertaking. Given the greater focus on the need to rationalise key EU policy priorities and ensure they have a measurable and meaningful impact, the Chips Joint Undertaking proves its added value, in particular by efficiently and effectively achieving objectives that cannot be more effectively achieved through simpler means, including the default approach of traditional Horizon Europe or the Digital Europe Programme calls or simpler partnership forms, such as “co-programmed partnerships”.

3.

In the proposal for Council Regulation (EU) 2021/2085, the proportionality of the Chips Joint Undertaking was assessed according to the following two-step logic:


Justification of the use of a partnership approach in a given area (including considerations on additionality, directionality and a link with strategic priorities) instead of other forms of intervention available under Horizon Europe or the Digital Europe Programme;

If the partnership approach is deemed appropriate, proportionality considerations guided the assessment of which type of partnership (co-programmed, co-funded or institutionalised partnership) would be most effective in achieving the intended objectives.

4.

The proposed amendment to Council Regulation (EU) 2021/2085 adds one further rationale:


Given the relation in scope of the objectives of the Chips for Europe Initiative with the scope of the KDT (now, Chips) Joint Undertaking, it is deemed appropriate to task this Joint Undertaking, which is already in force, with the implementation of certain activities related to the Chips for Europe Initiative.

• Choice of the instrument

This proposal aims to amend an existing joint undertaking established under Council Regulation (EU) 2021/2085 and based on Article 187 TFEU. For this kind of structure, Article 188(1) TFEU requires the adoption of a Council Regulation.

3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

• Stakeholder consultations

In her speech at the World Economic Forum in January 2022, President von der Leyen mentioned that “we will propose our European Chips Act in early February” and that “we have no time to lose” 15 . Leading economies are keen to secure their supply in the most advanced chips as this increasingly conditions their capacity to act (economically, industrially, militarily) and drives digital transformation. They are already heavily investing and rolling out support measures to innovate and strengthen their production capacities, or expect to do so soon 16 . There are indications that EU companies and RTOs may be attracted to move to other regions. International players are less likely to expand existing facilities or set up new production facilities in the EU without full clarity, including, on investment conditions, possibilities for public support, public investments in skills, infrastructure, and advanced R&D.

Given the urgent need to act, no impact assessment was carried out and no online public consultation was foreseen. The analysis and all supporting evidence will be set out in a staff working document published at the latest within three months of the publication of the Chips Act proposal.

Nevertheless, ad-hoc workshops with industry stakeholders on specific topics related to the Initiative indicated the need to consider facilities for upcoming technologies, such as photonics, neuromorphic computing, and quantum technologies, as well as new materials 17 . In addition, these workshops emphasised the need for due consideration of alternative instruction set architectures, such as RISC-V.

Furthermore, in the context of the ECSEL Joint Undertaking – the predecessor of the Key Digital Technologies Joint Undertaking – meetings with industry representatives and public authorities took place in summer 2021, where the Digital Compass objectives, the update of the industrial strategy, the Industrial alliance, and the European Chips Act were discussed.

Regular meetings with Member States took place monthly in 2021 to prepare the planned second IPCEI on Microelectronics. They provided inputs for the definition and assessment of Integrated Production Facilities and Open EU Foundries of the proposed regulation, as well as for the definition of specific facilities under the regulation.

A meeting with CEOs representing key stakeholders in the European semiconductor ecosystem took place on 10 January 2022. Key takeaways from that meeting relevant for this proposal were: building on European strengths, e.g. R&D and equipment manufacturing; clear support for pilot lines and design infrastructures; and the need for a worldwide level playing field 18 .

There were also numerous meetings with representatives of CEOs on the need to strengthen the European sector, following Commissioner Breton’s meetings with the CEOs of the main semiconductor players and RTOs. These provided inputs notably to the research and innovation activities and capacity building activities to be implemented in the Chips JU.

The European Forum for Electronic Components and Systems (EFECS), in November 2021, with over 500 participants, provided a large platform for discussion on industrial needs. Further input was provided in meetings with industry associations and their members, such as SEMI, ESIA, and DigitalEurope.

Moreover, long-standing and regular contacts with industry stakeholders, Member States, trade associations, and user associations enabled the collection of a fair amount of information and feedback relevant to the proposal.

Many reports have been published since end-2019 on the semiconductor sector describing trends and providing facts and figures, and served to inform the proposal 19 .

• Impact assessment

This proposal is not accompanied by a formal impact assessment. Considering the urgency as explained above, an impact assessment could not have been delivered in the timeframe available prior to the adoption of the proposal.

• Fundamental rights

Article 16 of the Charter of Fundamental Rights of the European Union (‘the Charter’) provides for the freedom to conduct business. The measures under this proposal create innovation capacity and foster the security of supply of semiconductors, which can reinforce the freedom to conduct a business in accordance with Union law and national laws and practices.

4. BUDGETARY IMPLICATIONS

The EU budget will support the Chips for Europe Initiative with a total of up to EUR 3.3 billion, including EUR 1.65 billion via Horizon Europe programme and EUR 1.65 billion via Digital Europe Programme. Out of this total amount, EUR 2.875 billion will be implemented through the Chips Joint Undertaking.

Further details are provided in the Legislative Financial Statement annexed to the ‘Chips Act’ proposal.

5. OTHER ELEMENTS

• Implementation plans and monitoring, evaluation and reporting arrangements

The Chips Joint Undertaking will be monitored and evaluated in line with Articles 50 and 52 and Annex III of the Horizon Europe Regulation. The interim and ex-post evaluations will be supported by external contractors and fed into the overall Horizon Europe evaluations. In accordance with the criteria set for European partnerships, the evaluations will assess the most effective policy intervention mode for any future action, as well as the possible renewal of the partnership within the overall European partnerships landscape. In the absence of renewal, appropriate measures will be developed to ensure the phasing-out of framework programme funding according to the conditions and timeline agreed with the partners of the partnership.

• Detailed explanation of the specific provisions of the proposal

The institutionalised European partnerships, including the Chips Joint Undertaking, are designed to increase coherence and to maximise impact in an evolving research and innovation landscape.

The amendment to Council Regulation (EU) 2021/2085 is necessary in order to allow the Chips Joint Undertaking to implement the Chips for Europe Initiative established under Regulation (EU) […] establishing a framework of measures for strengthening Europe’s semiconductor ecosystem (the ‘Chips Act’). To this end, the following proposed amendments to Council Regulation (EU) 2021/2085 are required:

Amendments to ‘Part One’ on ‘Common Provisions’ of Council Regulation (EU) 2021/2085:

Article 2 (Definitions): the definitions on ‘founding member’, ‘associated member’, ‘participating state’ and ‘work programme’ are amended in order to include the fact that the Chips Joint Undertaking will now also be financed from the Digital Europe Programme.

Article 3 (Establishment): under this Article, the name of the former Key Digital Technologies Joint Undertaking is renamed to ‘Chips Joint Undertaking’.

Article 4 (Objectives and principles) is amended to make sure that the Chips Joint Undertaking also contributes to the general and specific objectives of the Chips for Europe Initiative and the Digital Europe Programme.

Article 10 (Union financial contribution) is amended to reflect the fact that the Union contribution can also be paid from the appropriations in the general budget of the Union allocated to the Specific Objective implementing the Digital Europe Programme.

Article 12(1) (Management of contributions from the participating states) is amended to reflect that the eligibility criteria set out in Article 18 of the Digital Europe Programme should also be taken into account in the work programme. Furthermore, each participating state should entrust the joint undertaking with the evaluation of the proposals according to the contributing Union programme.

Article 29(2) (Financial commitments) is amended to include the Chips Joint Undertaking amongst the joint undertakings that can divide their budgetary commitments into annual instalments.


Amendments to ‘Part Two’ on ‘Specific Provisions Of Individual Joint Undertakings’ of Council Regulation (EU) 2021/2085:

Article 126 (Additional objectives of the Chips Joint Undertaking) is amended to add one general and four specific additional objectives of the Chips Joint Undertaking. The general objective focuses on the increase large-scale capacity throughout the Union in cutting-edge and next-generation semiconductor technologies, while the four specific objectives focus on building up large-scale design capacities for integrated semiconductor technologies, enhancing existing and developing new pilot lines, building advanced technology and engineering capacities for accelerating the development of quantum chips, and creating a network of competence centres across Europe.

Article 128 is amended in order to reflect the increased budget, from two different Programmes (Horizon Europe and the Digital Europe Programme).

Article 129 is amended in order to determine the contribution to administrative costs of the private members of the Chips Joint Undertaking.

Article 133 (Functioning of the Governing Board) is amended to specify that the Governing Board solely includes the Commission and public authorities from Member States when voting on the part of the work programme related to capacity building activities.

Article 133a (Rules applicable to the activities funded under the Digital Europe Programme) is added to clarify that rules related to the Digital Europe Programme apply to the Chips Joint Undertaking.

Article 134 (Limitations and conditions to participation in specific actions) is amended to allow for the possibility to limit the participation in specific actions funded under the Digital Europe programme. Furthermore, the new third paragraph 3 of Article 134 indicates that certain actions may be carried out by legal entities cooperating within a consortium of at least three eligible legal entities which are established in at least three different Member States or countries associated to the Initiative. It specifies that this consortium may be structured in the form of a European Chips Infrastructure Consortium, as laid down in the Chips Act.

Article 134a (Additional tasks of the Executive Director) specifies that the Executive Director needs to take into account the definition made by the Public Authorities Board on the part of the work programme related to capacity building activities and research and innovation activities, including their corresponding expenditure estimates.

Article 136 (Functioning of the Public Authorities Board) is amended to add four further situations in which the Public Authorities Board solely includes the Commission and public authorities from Member States.

Article 137 (Tasks of the Public Authorities Board) is amended in order to add two additional tasks to the Chips Joint Undertaking’s Public Authorities Board, namely the definition of the part of the work programme related to capacity building activities and research and innovation activities and the selection of projects related to these activities. For both tasks, the Public Authorities Board includes only the Commission and public authorities from Member States.

Article 141 (funding rates) is amended in order to allow, for activities funded under the Digital Europe programme, the Chips Joint Undertaking to apply different funding rates for the Union funding within an action depending on the type of participant, in particular SMEs and non-profit legal entities, and the type of action. Furthermore, a new paragraph is added in order to allow a single legal entity established in a Member State or associated country or consortia not meeting the condition laid down in Article 22(2) of the Horizon Europe Regulation to be eligible to participate in indirect actions funded by the Chips Joint Undertaking.

Finally, point 17 of this regulation indicates that references to “Key Digital Technologies Joint Undertaking” should be understood as referring to “Chips Joint Undertaking”.