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Chip Industry Calls on EU to Drop Outbound Investment Screening Effort

A trade association representing ASML, Applied Materials and other major semiconductor companies called on the EU to keep any new export controls narrowly targeted and abandon its plans for an outbound investment screening mechanism, saying new restrictions would be a “major interference” for the chip industry. It also cautioned European lawmakers about introducing new supply chain reporting obligations that would place too big a burden on industry.

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SEMI, a microelectronics industry association, said it “welcomes” the economic security strategy released by the EU in June (see 2306200052), calling it a “positive step” that can help address rising geopolitical tensions and the EU’s dependencies on foreign nations for critical materials. But it also criticized portions of the follow-up proposals released by the European Commission in January, which previewed efforts to potentially restrict exports of a broader range of dual-use technologies and screen more investment transactions (see 2401240078).

The industry group, in a position paper released this month on the EU strategy, said a possible EU outbound investment screening tool, which the bloc is still studying, “is not the right policy path to achieve economic security.” New restrictions “would constitute a major interference within the realm of companies’ business decisions and international investment flows.”

Outbound investments allow European semiconductor firms to access new markets, expand production and “engage in innovative partnerships,” which strengthens the European economy and leads to “greater economic security in the long term,” SEMI said. These investments are “particularly important” for the chip industry, it said, because the semiconductor supply chain depends on a “high level” of collaboration across countries.

“Our companies must be as free as possible in their investment decisions or otherwise risk losing their agility and relevance in the global markets,” SEMI said.

The group specifically asked the EU to clarify how any potential investment measures would restrict investments between a company and its affiliates or subsidiaries. Those “intra-company investments” are important for the global semiconductor supply chain because they can help transfer “skills, knowledge, technology and innovation” within a company, it said. “The European Commission should not infringe on the ability of European multinational companies to carry out the necessary intra-company investments.”

Instead of new outbound investment restrictions, the EU should use export controls as the “primary instrument to prevent technology leakage,” SEMI said. It said other measures should only be “assessed as a last resort, in close collaboration with industry stakeholders.”

It also asked the EU to keep any new dual-use export controls “very targeted” and focused only “on clearly identified risks.” They should also be harmonized across member states, SEMI said, adding that a “multiplication of national export controls across the EU would largely undermine the effectiveness of the EU export controls framework and the integrity of the single market.”

SEMI also stressed that export control regulators need “an alternative forum” to the multilateral Wassenaar Arrangement, which “is no longer able to define and determine multilaterally agreed export control rules.” Experts have called on the U.S. and other countries to replace Wassenaar (see 2403060042 and 2402160056) -- which is consensus-based and still includes Russia as a member -- and Commerce Department officials have said they are working on it (see 2312080053).

SEMI said there should be “more coordinated action at the European level” on export control decisions. The economic security strategy should “support the efforts of the European Commission towards achieving greater convergence across all EU member states, in order to minimize the margin for different interpretations at the national level, and to preserve the level-playing field.”

The group also said it’s “increasingly concerned” about new supply chain reporting requirements that will be introduced as part of the European Chips Act, the Net Zero Industry Act and the Critical Raw Materials Act. “This poses a wide range of challenges for our sector, considering the higher structural complexity of the semiconductor industry, the supply chain opacity due to trade secrets and confidentiality of data, and the administrative burden of carrying out supply chain assessments,” SEMI said.

Any new reporting rules “must be in line” with what SEMI said should be a “positive approach” to the EU’s economic security strategy, which should focus less on new trade restrictions and more on industry “support and incentives,” like new free trade deals and supply chain partnerships with other nations. This would help in “reducing administrative burden and preserving the confidentiality of data.”

Although SEMI used the paper to argue for fewer restrictions, it also applauded the EU economic security strategy’s approach to investment screening for inbound investments. The commission is hoping to force all member states to put in place a foreign direct investment screening tool, and SEMI said it “welcomes a more harmonized approach.”

But the trade group also warned the EU about requiring FDI screening for greenfield investments, where a foreign investor begins a new venture within the EU by setting up new production facilities. The bloc should try to avoid “excessive screening mechanisms that may discourage non-EU investors” SEMI said, and instead pursue a “balanced approach in order to maintain the necessary levels of FDI flows into Europe that can preserve the global competitiveness of our industry.”