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European Union Plans to Fix Semiconductors Shortage With European Chips Act

When Adam Smith wrote “The Wealth of Nations” in 1776, he defended that countries would produce what they made best. That would make them specialize in certain goods, which they would sell to other countries. After a pandemic and the semiconductor crisis, Ursula Von der Leyen does not think that idea worked well. To prevent Europe from ever missing Asian chips again, the president of the European Commission proposed the European Chips Act.
Ursula Von der Leyen 6 photos
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According to a tweet she shared, this law would help to link “world-class research, design and testing capacities, coordinate EU and national investments, create a favorable climate for advanced chip manufacturing in Europe,” and “develop new markets in future industries,” whatever that means.

Although the idea is noble, it fails to investigate why Europe is not a chip-production leader at this point. Was it cheaper to buy from Asian manufacturers? Could the European industry compete in prices and technology with what Asian countries do? If it could, why hasn’t it? Perhaps Adam Smith’s theory worked well until COVID-19 made it stop working, as it halted multiple other things.

If creating a law was the solution for the situation, other questions would impose themselves. The main one is why this law was not approved before a pandemic showed Europe was too dependent on Asian countries for these semiconductors. U.S. lawmakers may make the same question with the crisis American companies are also facing.

Whatever the answer is for these questions, it seems Adam Smith was right about how some countries are better at doing some products than others. It is not only a matter of natural resources but also the expertise some countries acquire, the investments they make in education, the taxes they charge, and the plans they make for the economy to work.

It will be great for Europe if the European Chips Act manages to turn Europe into a relevant chip producer in the near future. However, if that were supposed to happen, we would see other countries discussing how not to be so dependent on European chips.



 
 
 
 
 

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