France eyes control over chip agenda in EU-US tech alliance – POLITICO

France eyes control over chip agenda in EU-US tech alliance – POLITICO



As Europe and the U.S. forge a new tech alliance, France is looking to take control over a key aspect of the pact — semiconductors.

Top EU and U.S. officials are set to meet in Pittsburgh on Wednesday to inaugurate the new Trade and Tech Council (TTC), amid ongoing disruption to the global supply chain of microchips.

But as EU governments sought to agree this week on a draft joint statement for the meeting, which covers everything from AI to export controls, France blocked progress on the draft over microchips, asking fellow European governments and the U.S. to postpone talks on structural changes to the sector.

At the heart of Paris’ push is a plan to put Frenchman Thierry Breton, the EU’s internal market commissioner and a former tech CEO, in control of transatlantic discussions on semiconductors, three diplomats and officials told MediaFrolic, as he seeks to buy time and provide for more microchip production capacity on EU soil.

Breton is expected to take charge of discussions on chips in months to come, after this week’s inaugural meeting that put the European Commission’s tech and trade supremos, Margrethe Vestager and Valdis Dombrovskis, center stage.

France wants “to keep Breton in charge of semiconductors at the cost of Dombrovskis and Vestager,” said one of the diplomats who asked not to be named to discuss internal deliberations.

The French push comes days after the country lost a major contract to sell submarines to Australia due to a new security pact between Washington, Canberra and London, triggering outrage from Paris.

Echoing France’s frustrations, Breton aired doubts about the transatlantic relationship during a trip to Washington last week, days after the deal’s collapse, saying the EU and U.S. should “pause and reset” their “broken” relationship.

Those misgivings have bled into EU negotiations over a draft joint statement for the Pittsburgh meeting, as France demanded that the TTC focus on “short-term supply chain issues” rather than deeper cooperation, which would be discussed later.

The change would grant Breton a bigger chance to steer the process, which until now has been in the hands of his superiors in the EU hierarchy — Vestager and Dombrovskis, the Commission’s executive vice presidents.

That may well stir up tensions between the French commissioner and Vestager, who’s in charge of Brussels’ mighty competition regulators and approaches many files from a free trading, competition-friendly perspective at odds with France’s more interventionist views.

Paris is eyeing a second meeting in the spring of 2022, according to the latest draft Pittsburgh statement, obtained by MediaFrolic, and officials expect it to come up with mid- and long-term solutions to fix the semiconductor supply chain. During a meeting of EU ambassadors on Monday, Paris asked to leave that timing out of the Pittsburgh text because it would coincide with the French presidency of the EU Council and this could be wrongly interpreted, according to one of the participants. Instead, Paris proposed saying that a second meeting will be held next year.

France kept up pressure on EU officials as late as Tuesday with the clock ticking down to the first meeting of the EU-U.S. alliance.

Europe’s industrial policy test

Breton’s push comes amid global disruptions to microchip supply chains that have rocked car makers, TV manufacturers, game console producers and electronics suppliers, among other sectors.

The French and German car industries, in particular, have suffered major production setbacks due to the shortage of chips, with French brands Renault, Citroën and Peugeot among the victims.

In the short term, European industry and governments hope to negotiate more chips from global semiconductor manufacturers that are scrambling to keep up with demand.

But in the longer term, the European Union also wants to diversify its supply chain by working with partners like the U.S. on access to chip technology and talent, but also reshore chip manufacturing to the bloc by luring in the industry’s champions to set up cutting-edge facilities with public support.

The push coincides with a broader Paris-led campaign to beef up Europe’s technological sovereignty by building up its own tech sector rather than relying on a global, often U.S.-dominated tech industry.

French diplomats this week warned the EU shouldn’t count too much on the U.S. to solve its problems, pushing to scrap mentions of “mutual dependencies” from the Pittsburgh draft because the U.S. had no interest in being dependent on Europe, according to the participant.

The EU has cooked up plans in the past year to strengthen Europe’s domestic chips production, aiming to grow its share of the global market from 10 percent now to 20 percent in 2030.

Breton is in charge of that push and is working with European industry and governments to come up with a multibillion-euro fund to support local chip designers such as Infineon, STMicro and NXP, Dutch chips printing giant ASML and leading research institutes like Belgium’s Imec, Germany’s Fraunhofer and France’s CEA-Leti.

Breton is also trying to win over chip giants Intel, TSMC and Samsung to set up cutting-edge foundries in Europe, in an attempt to grow less reliant on Taiwanese factories run mostly by TSMC.

The EU commissioner has met with Intel’s new Chief Executive Officer Pat Gelsinger in person at least twice this year to discuss how European countries can support the U.S. giant’s pledge to open a new, state-of-the-art chips foundry potentially worth up to €80 billion. Breton is also visiting South Korea Thursday and Friday to meet with lawmakers and executives including leadership at chip manufacturing giant Samsung.

Breton vs. US

Yet Breton’s industrial ambitions could compete in many ways with U.S. plans to support domestic chip production.

Washington lawmakers are finalizing a new bill called the Chips for America Act, which would come with $52 billion in funding to attract new investment in manufacturing — largely from the same players that Breton wants to get to spend money in Europe.

Breton is also in charge of a new “European Chips Act” presented by Commission President Ursula von der Leyen in her annual address to the European Parliament earlier this month.

According to the French commissioner, Europe’s plans together would amount to “roughly the same figure for the EU, together with our member states” as the U.S. $52 billion fund. “We are discussing a comparable amount of money,” he told an online audience on a visit to the U.S. last week.

Diplomats working on the Pittsburgh meeting said in the draft agreement, the two sides say they “share the aim of avoiding a subsidy race,” in an apparent attempt to ease tension over public spending.

Barbara Moens and Mark Scott contributed reporting.

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Rachel Meadows

Rachel Meadows

Trending topics news writer who enjoys cooking, walking her dog and travel.

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