EU Backers of Chip Subsidies Want Limits on Foreign Firms

(Bloomberg) -- Key European Union countries support Brussels' push to become a semiconductor superpower, but are reluctant about giving too much state aid to chip producers.

Representatives from Belgium, France, Germany, Italy and the Netherlands are worried that excessive government investment in chip production could lead to a subsidy race between EU countries or even an overproduction of chips, according to people familiar with discussions among the countries.

Those nations backed the effort toward creating cutting-edge chips but stressed that state aid should go toward innovation more than production, according to the people. The countries don't want to veto the use of state aid, but rather make sure money is spent wisely. Some of these countries also stressed that state aid should go toward bolstering European companies.

The five capitals acknowledged that while the EU should become more competitive and autonomous, they warned against so-called reshoring, or bringing production that moved abroad back to its country of origin. Instead, they agreed that the EU needs to work with other continents to keep their markets open and secure access to semiconductor components elsewhere.

The five countries have been meeting before the publication of the EU's upcoming Chips Act proposal, which will lay out the European Commission's ideas for becoming a world leader in semiconductor production — a move that could make the continent less dependent on Asia and the U.S. for vital components for cars, smartphones and washing machines. The EU wants to make 20% of the world's chips by 2030, a target that requires the continent quadruple its semiconductor production.

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The capitals are likely to scrutinize the commission's plans Feb. 8, as Thierry Breton, the EU's internal market chief, told reporters last week that the act would include plans to use state aid for cutting-edge production plants. The plan could be backed by tens of billions of euros in funding from both the EU budget and EU countries, but even countries that stand to gain from foreign investment are stressing caution.

Representatives of the five nations did not immediately respond to a request for comment Monday night.

Both Intel Corp. and Taiwan Semiconductor Manufacturing Co., according to news reports, are looking at Germany as part of their European expansion plans. Intel has made it clear that it wants, possibly, billions in state aid to set up shop in the EU.