Chips are essential components for a wide range of products. Think cars, smartphones, and medical devices. But the Covid-19 pandemic and the war in Ukraine have reduced the supply of raw materials and components, including chips. The acute shortage of chips has led to huge economic losses.
More resilient supply chains
To turn the tide, the European Commission created the EU Chips Act in 2021. This should increase the autonomy and competitiveness of the European semiconductor industry.
The EU Chips Act’s focus on security of supply and more resilient chains also helps reduce the risk of supply chain disruptions. Those disruptions have become a major concern for many companies. By encouraging greater transparency and cooperation among stakeholders, the EU Chips Act should lead to greater predictability and reliability of supply chains and their associated logistics service providers.
Indeed, in the past, the EU relied heavily on imported chips, especially from Taiwan. That drove up transportation costs and created a shortage of shipping containers. As the prices of shipping containers started to decrease again, however, there was not a corresponding increase in logistic stability (read more about this in our article ‘Impact of falling container prices on maritime logistics’.
Improved competitiveness
By boosting investment in the semiconductor industry, the EU Chips Act could help to improve the competitiveness of European logistics service providers. This could allow them to offer more advanced and efficient services, differentiating themselves in the highly competitive market.
Shortage mitigation
To make European supply chains more resilient and reduce the risk of disruptions in the chain, the EU Chips Act is pushing on several fronts. Think of diversifying suppliers, stocking more critical components, and improving visibility throughout the supply chain.
By the end of 2030, the EU aims to double its share of the global chip market. That would amount to a 20% market share. To achieve this goal, the EU plans to increase investment in the semiconductor industry to around €5 billion. In addition, Europe will also encourage private investment to support and promote the European Chips Act.
Enhanced innovation
Furthermore, the EU Chips Act would strengthen the EU’s technological independence. Innovation in the semiconductor industry could lead to the development of new and better chips that better meet the needs of the logistics sector, for example, chips that enable real-time tracking of goods, improve energy efficiency, or enhance security.
Cost implications
However, the EU Chips Act also presents some challenges for European companies and supply chains. For example, the increased focus on European manufacturing and supply chains could lead to protectionism and trade tensions, particularly with established semiconductor industries in the US and China.
The latter could have significant implications for the logistics industry in Europe. If the cost of chips were to rise as a result of greater investment and innovation, it is quite possible that logistics service providers will face higher costs for the components they need to keep their business running.
In addition, as the Act encourages the development of new manufacturing facilities, it cannot be ruled out that European companies might face more competition from new players entering the market. This would put pressure on logistics providers to deliver products more efficiently and at lower prices.
Sea of opportunities
Overall, the European Chips Act brings both opportunities and challenges for European companies and supply chains. By promoting investment, research, and cooperation within the semiconductor industry, Europe is making a push to become a leading player in this critical sector. At the same time, significant challenges and risks lurk around the corner, which must be carefully managed to ensure a successful transition.
Stay tuned for further developments
Would you like more information on this topic or a more in-depth analysis of anything we cover above? Our experts are here to help. Do not hesitate to contact our experts. We would be more than happy to explore the issues with you.
>
