The European Union’s plan to boost computer chip production is ready to move ahead after the so-called Chips Act was given the green light by politicians today.

The Chips Act is a range of measures that is designed to boost the EU’s share of the global semiconductor value chain from less than 10% now to 20% by the end of the decade. Negotiating teams from the European parliament, the Swedish Council presidency and the EU Commission finally hammered out the exact terms of the deal, which gives approval for increased government subsidies for advanced chipmaking facilities, a bigger budget for chip research and development, and tools to monitor potential supply shortages.

Legislators were able to agree on the terms of the deal earlier than expected, paving the way for a subsidy splurge that is aimed at helping the EU catch up with other semiconductor design and manufacturing hubs, such as the United States and Taiwan. The Chips Act was first cobbled together during the wake of the coronavirus pandemic, when the region was severely hurt by chip shortages. Those supply problems have since been resolved, but tensions between China and Taiwan have renewed the EU’s sense of urgency to become less reliant on global supply chains.

The EU is also concerned that its existing chip production facilities are all geared toward older semiconductors. The most advanced chips, such as those that go in the world’s fastest supercomputers, are exclusively made in Taiwan, South Korea and the U.S. Under the Chips Act, the EU aims to entice chipmakers to build leading-edge process facilities in the region.

“We have a Chips Act,” Margrethe Vestager, executive vice president of the European Commission for a Europe fit for the Digital Age — that’s her official title — said in a Twitter post. “We need chips to power digital and green transitions or healthcare systems. Lots of promise and a lot of day-to-day convenience. Today’s Trilogue agreement boosts EU capacity to produce our own chips. And to be a partner in the global chips supply chain.”

Chipmakers such as Intel Corp., STMicroelectronics NV and GlobalFoundries Inc. have each committed to building multibillion-euro chip factories in the EU, and the passing of the Chips Act will allow them to seek approval for huge subsidies under its new state aid rules. Taiwanese firm Taiwan Semiconductor Manufacturing Co., the world’s biggest chipmaker, is said to be considering investing in Europe but has not made any official announcement yet.

The EU’s Chips Act will free up €43 billion ($47.1 billion) in subsidies for chipmakers, which must be approved under new state aid rules. Intel is looking to build a €17 billion advanced chip factory in Germany’s state of Sachsen-Anhalt, and is reportedly asking for an initial €6.8 billion in subsidies, though talks about the support package are currently ongoing.

“The Chips act puts Europe in the first line of cutting-edge technologies which are essential for our green and digital transitions,” Ebba Busch, industry minister for Sweden, which holds the rotating EU presidency, said in a statement.

Constellation Research Inc. analyst Holger Mueller said the coronavirus pandemic highlighted the vulnerability of semiconductor supply chains and how dependent western societies are on them, so it’s not surprising the EU is desperate to address these issues.

“Near-shoring is the solution and the EU has ambitious plans to increase its global market share of chip production from 10% to 20%,” Mueller said. “That will require a lot of investment, hence the EU is making over €40 billion available to get the attention of chipmakers. Building chip factories takes time as well as money though, which explains why the EU has moved so fast to get the necessary approvals in place.”

The EU’s Chips Act is not the only subsidy package that chipmakers are currently sniffing around. In the U.S., lawmakers are moving ahead with their own legislation, the CHIPS and Science Act, which will set aside $52 billion worth of subsidies to entice semiconductor firms. Companies such as Intel and TSMC have already begun work on new production facilities in Ohio and Arizona, respectively.

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