State aid: Commission approves French measure to support STMicroelectronics and GlobalFoundries to set up new microchips plant

The European Commission has approved, under EU State aid rules, a French aid measure to support STMicroelectronics (‘ST’) and GlobalFoundries (‘GF’) in the construction and operation of a new microchips manufacturing facility in France. The measure will strengthen Europe’s security of supply, resilience and digital sovereignty in semiconductor technologies, in line with the objectives set out in the European Chips Act Communication. The measure will also contribute to achieving both the digital and green transition.

The French measure

France notified the Commission of its plan to support ST and GF’s project to build and jointly operate a front-end semiconductor production facility in Crolles, France. The project builds among others on technologies developed as part of the Important Project of Common European Interest (“IPCEI”) for research and innovation in microelectronics that was approved by the Commission on 18 December 2018.

The aid will take the form of direct grants to ST and to GF, to support their investments in the project worth totally €7.4 billion.

The project, which is planned to be operating at full capacity by 2027, will enable the development of a large-scale manufacturing site in Europe for high performance chips, particularly dedicated to FD-SOI (Fully Depleted Silicon On Insulator) technology. This technology has been developed in Europe and exhibits substantially reduced power consumption. The project will allow to mass produce energy-efficient and secure chips addressing current and future key European markets from automotive to industrial, 5G/6G roll-out, security, defence, and space industries. The plant is expected to produce per year 620,000 wafers of 300mm diameter based on technologies and production processes not yet present in Europe.

Under the measure, ST and GF agreed to:

satisfy EU priority rated orders in the case of a supply shortage;
continue investing in the development of the next generation of FD-SOI technologies; and
make available some capacity for small and medium enterprises (‘SMEs’) and third parties to test and develop their products in a real industrial production environment, thereby supporting research and development (‘R&D’) activities and further contributing to the strengthening of the European semiconductor ecosystem.
The Commission’s assessment

The Commission assessed the French measure under EU State aid rules, in particular Article 107(3)(c) of the Treaty on the Functioning of the European Union (‘TFEU’), which enables Member States to grant aid to facilitate the development of certain economic activities subject to certain conditions, and based on the principles set out in the European Chips Act Communication.

The Commission found that:

The measure facilitates the development of certain economic activities, by enabling the establishment of a new mass-production facility for innovative technologies and chips in Europe.
The facility is first-of-a-kind in Europe. There is currently no mass-production facility in Europe for the planned technologies and the production process envisaged is based on advanced technologies and tools that considerably enhance performance, including environmental performance.
The aid had an ‘incentive effect’, as the beneficiaries would not carry out this joint investment without public support.
The measure has a limited impact on competition and trade within the EU. The measure is necessary and appropriate to ensure the resilience of Europe’s semiconductor supply chain. In addition, the aid is proportionate and limited to the minimum necessary based on a proven funding gap (i.e. the aid amount necessary to attract the investments that otherwise would not take place). Finally, ST and GF have agreed to share potential additional profits beyond current expectations with France.
The measure will have wide positive effects for the European semiconductor ecosystem and contributes to strengthening Europe’s security of supply. It contributes to the EU objective of strengthening the European chip ecosystem, including by providing an R&D corridor for SMEs and third parties to test and scale up their R&D in an industrial environment. In addition, the project will support the development of EU highly skilled workforce, as well as environmentally performant technologies.
On this basis, the Commission approved the French measure under EU State aid rules.