The Global Race for Microchips: A Study of the EU Chips Act as a Reshoring Incentive

Recent signs of deglobalization and newly revealed vulnerabilities in global value chains have increased interest among Western companies to reshore parts of their overseas sourcing. Governments of developed economies realize the potential of strengthening local industries by reshoring strategic assets and increasing supply chain resilience by reducing dependence on other regions. One essential asset is semiconductors, or microchips. In light of this, the EU announced the EU Chips Act in February 2022. The relationship between the Act and reshoring effects has not yet been studied through a scientific lens. Therefore, we study and attempt to assess the viability of reshoring semiconductor sourcing to Europe and better understand the implications for European economic and political conditions. The study adopts a theory-guided qualitative abductive approach using both primary and secondary data. The primary data were gathered from semi-structured interviews with individuals from different organizations representing relevant knowledge and expertise. The secondary data consist of archival descriptive sources, reports and thematic articles. The study finds that reshoring semiconductor sourcing to Europe as a risk mitigation strategy is not viable as of today due to a lack of supply within the region. This could change if the EU Chips Act effectively incentivizes increased fabrication in Europe, thus providing an option for European companies to source semiconductors locally. However, while such a development could benefit Europe in several ways, there is a risk of these benefits being outweighed by negative economic and political effects with reduced efficiency and a danger of Europe ending up in a trade war. While the study suffers from methodological limitations, mainly related to sample size, which affects generalizability, it makes several theoretical and practical contributions. Most importantly, it emphasizes political incentives as necessary to drive reshoring, highlights ambiguities in the EU Chips Act and identifies a new area for future research.