Chapter IV Pillar Three: Monitoring and crisis response

Article 12 – Application First-of a-kind

Summary of Paragraph

The Commission shall, in consultation with the

European Semiconductor Board, choose and deselect the facilities. Facilities which are no longer Integrated Production Facilities and Open

EU Foundries shall lose all rights linked to the recognition of this status arising from this Regulation.

Evaluation

We recommend clarifying the status of the European Semiconductor Board within the decision process. Moreover, it is not clear whether a loss of rights includes repayment obligations for state aid, that has already been granted.

Article 13, paragraph 2 and Article 14 – Public Interest and support & permit granting procedures

Summary of Paragraphs

In order to reach security of supply in the Union, Member States may, without prejudice to the state aid provisions in Articles 107 and 108 of the Treaty, apply support schemes and provide for administrative support to Integrated Production Facilities and Open EU Foundries in accordance with Article 14 (each member state must have an authority for the facilities; facilities must have the most rapid treatment legally possible).

Evaluation

We welcome the article as the first-of-a-kind principle creates attractive framework conditions for establishing new production and development sites in Europe, which can have catalytic effects. We need to establish a level playing field in funding in regard to third countries and regions. This includes the introduction of efficient fast track procedures to enable a quick realisation. In order to create a global level playing field, Articles 13.2. and 14 create the necessary legal framework. It must be ensured, however, that the EU state aid framework remains intact and that a subsidy race inside the Single Market is avoided. A focus on international competitiveness is imperative for a proper investment review. Location factors such as infrastructure as well as energy and wage costs must be considered in this context. To avoid permanent subsidies, market-oriented viability in the medium to long term is required for all state support.

Chapter IV Pillar Three: Monitoring and crisis response

Article 15, Paragraph 1-4 and Article 16 – Monitoring and early warning indicators

Summary of Paragraphs

Member States shall carry out regular monitoring of the semiconductor value chain and report their findings to the European Semiconductor Board regularly. In particular, information from undertakings on significant fluctuations in demand and known disruptions, as well as an early warning for crisis are relevant. Therefore, the

Evaluation

Above all, a monitoring process for collecting information about the value chain makes sense in order to identify requirements and risks at an early stage. To do so, the process of setting up the necessary mechanisms and administration for monitoring by the Member States must be accompanied by consultations with user industries, associations and manufacturers. However, a quantitative monitoring mechanism based on

Commission and the European Semiconductor Board must identify early warning indicators. current figures alone will not really help to avoid shortages, as it will always be far too late. Instead, the strong involvement of experts from industry is required to make a much earlier qualitative assessment and a simulation of potential future shortages. In addition, the semiconductor industry is open to many risks, inter alia geopolitical and natural which are difficult to forecast and collecting data on chip supply/demand only, will not help to avoid supply chain vulnerabilities. It should also be understood that the current chip shortage has various reasons, one is misled procurement strategies and “just-in-time” supply chains. Putting the focus on the semi-conductor industry alone will not help avoiding future disruptions since a lot of factors and not in their control. Due to the decentralised monitoring and information collection by Member States, there is a high risk of defragmentation and double bureaucratic burden for the undertakings with locations in several Member States. Therefore, the national monitoring processes should be harmonised.

Article 17 – Key market actors

Summary of Paragraph

Member States shall identify and monitor key market actors along the semiconductor supply chains. These are primarily informative on a number of undertakings that rely on market actors, market shares and importance of key actors, as well as the impact of the disruption by the market actor.

Evaluation

The German industry understands the need to identify and monitor key market actors. Unfortunately, the monitoring processes (timeline, scope, format) on the availability and integrity of the services or goods are not clearly enough defined. Asking or urging manufacturers to prioritise specific industries in Europe is a powerful intrusion into the market and must be implemented with a great deal of care and prudence. Industry must be strongly involved in developing these processes. We are also faced with the question of the supply chain disclosure obligation - how are supply chains and innovation partnerships treated that are based on the division of labor (market economy) and extend globally.

Article 15, paragraph 5-7 and article 18 – Crisis stage

Summary of Paragraphs

Where the Commission becomes aware of a potential semiconductor crisis, the European Semiconductor Board assesses whether the activation of the crisis stage is warranted and whether joint procurement should be initiated. Moreover,

Evaluation

In general, we take a rather critical stance on this pillar and the crisis stage. Primary responsibility for finding ways out of a semiconductor shortage lies with the industry. Public crisis management must not undermine free trade. It is also

consultations with relevant third countries are carried out. The duration of the crisis stage is set during the implementing act and can be extended arbitrarily.

Article 19 – Emergency toolbox

Summary of Paragraph

At the crisis stage, the commission can introduce measures for specific critical sectors or in general. In particular, an export permit for crisis-related products can be introduced. undefined what a crisis is. The determination of a semiconductor crisis must be based on distinct and transparent criteria. Moreover, the crisis stage can be extended but the article does not mention the option to end the crisis stage early. Besides, there must be a clear definition of when and why the crisis stage is extended. In addition, one must also consider the effects of this mechanism on MNCs’ willingness to invest in EU. If MNC players invest in EU, it must be clear under which circumstances market interventions (“crisis stage”) are planned and how they affect the investing company. German industry is recommended to consult the Commissioners' Group Trade in depth on the measures mentioned as part of the crisis stage, which, due to their relevance to trade, also clearly fall under Article 207 TFEU. In addition, German industry questions the legal certainty of the measures, since freedom of foreign trade outside of national security considerations can also result in an interpretation by the BVerfG. As the EU Commission itself admits, self-sufficiency in a European semiconductor value chain is not an achievable target. The EU Chips Act should therefore put more emphasis on international alliances with like-minded partners beyond the mere exchange of information on semiconductor supply chains, for instance by means of trade agreements based on mutual dependencies.

Evaluation

Export bans are a powerful market intervention. In this way, a planned economy for “crisis-relevant products” can lead to customer lobbying. Such an instrument would be a deep intervention in market openness, private property and freedom of contract, the foundations of our innovative market economy. Plans for export permissions fail to recognise that investments in a market economy are made with the aim of making a profit. The prospect of an export ban in a scenario of a shortages in the semiconductor market significantly reduces the incentive to invest in semiconductors. The conditions and the exact permissions must be clarified. This is also in opposition to an open Europe. The proposal is also dangerous because it could provide a template for other states to regulate the export of

important goods as well. Our international economy would be severely affected by this. The best tool to build supply chain resilience is to open markets, not to close them.

Article 20 and 28 – Information gathering

Summary of Paragraphs

Undertakings must inform the Commission about their production capabilities, production capacities, current primary disruptions and provide other existing data necessary to assess the nature of the semiconductor crisis. Deadlines can be set for information supply and penalties can be set for non-compliance. In addition, information required by third countries must always be transmitted to the Commission.

Article 21 – Priority orders Summary of Paragraph

The Commission may oblige Integrated Production Facilities, Open EU Foundries or other semiconductor manufacturers to accept and prioritise an order of crisis-relevant products. This may only be rejected if the production capacity is justified and causes an unreasonable economic burden. In the case of obligation, the company will not be liable for any breach of contract as a result of the prioritisation.

Evaluation

Excessive market surveillance is a significant intervention and is viewed critically by industry. Any data request must be proportionate, appropriate and effective In the best case, the penal regulations must be negotiated jointly with industry and should always be based on the size of the company and the information value. In addition, the sharing of information and the deadlines must be made jointly with the undertaking. The sharing of information must not conflict with applicable IP rules or the unauthorized disclosure of knowledge to third parties. This requires a comprehensive re-sharpening of the section.

Evaluation

A prioritisation of crisis-relevant products is technically very demanding and can hardly be tackled in a very narrow time frame of less than six months, let alone changed. It also needs to be clarified whether there is compensation for products that are not produced or whether there are refunds for capital losses associated with the prioritisation. In order to enforce priority orders, a legal basis would be necessary that clearly defines the products and materials as well as the conditions. In addition, semiconductor products are mostly customised, have certain specifications, certifications etc. that cannot simply be shipped to another customer. Prioritisation of certain industrial sectors is also undesirable from the perspective of the user industry. Prioritising one of the critical industrial sectors will quickly worsen bottlenecks in another, also critical sector. Moreover, it is unclear for how long a particular sector will be classified as prioritised and how often the assessment takes place. The critical sectors affected by the bottlenecks may also differ significantly between Member States. The definition of “critical sector” is also problematic. Article 2.16 refers to the Annex of the NIS2 Directive. So, basically every company would be