Chips, batteries and other technologies: A US-EU partnership is crucial

Europe and the United States face shared climate, health and human welfare challenges that require technological innovation to overcome. This will require money, scientific talent and a sufficiently large market to justify that effort. Only through working together can governments on both sides of the Atlantic overcome these existential problems and develop the technologies needed for the 21st century. 

In June 2021, Brussels and Washington launched a Trade and Technology Council (TTC) to coordinate approaches to key trade, economic and technology issues. While this is a necessary initiative, the TTC falls far short of meeting the technology challenges facing societies on both sides of the Atlantic and around the world. 

To meet these needs, Europe and the United States should cooperate in pre-competitive research and development and testing on a range of new technologies through the creation of a Transatlantic Advanced Research Project Agency (TARPA), with designated funding streams for specific technologies. TARPA would be modeled after the highly successful Defense Advanced Research Project Agency (DARPA), which was instrumental in creation of the internet, GPS and the computer mouse, among other things.

The global semiconductor shortage exemplifies the most immediate technological challenge Washington and Brussels are facing. The shortfall has impacted everything from cars to cell phones, imperiling the economic recovery on both sides of the Atlantic. 

President Biden and Commerce Secretary Gina Raimondo highlighted the strategic importance of reversing the chip shortfall at an event on Jan. 21, urging House passage of the Senate-approved U.S. Innovation and Competition Act.

While the United States government invests approximately $1.5 billion annually in semiconductor-specific research, this is less than a third of what experts  think is necessary. The Innovation and Competition Act includes $52 billion in federal investments for domestic semiconductor research, design and manufacturing.

Europe produces only 10 percent of global semiconductor output. To double its share, Brussels has proposed its own EU Chips Act, which it hopes to enact in 2022.

The chips of the future must be smaller and denser. The estimated research and development cost of moving from a 10nm chip to a 5nm chip is $650 million, even before manufacturing, testing and packaging.

If European and American firms are to keep pace with Taiwanese, South Korean and, most importantly, Chinese chip makers, Brussels and Washington need to help shoulder some of the financial burden for innovation. There is no contradiction between efforts to increase domestic production, while pursuing transatlantic cooperation in pre-competitive research and development.

A Transatlantic Advanced Research Products Agency-Chips (TARPA-C) effort should be jointly created to fund pre-competitive R&D for next-generation chips. To enrich the pot of available funds, this might even be done as a public-private partnership. At the same time, since testing new designs requires multimillion-dollar facilities, the EU and the Biden administration should jointly create a testing commons where both European and American firms could assess the feasibility and commercial potential of materials and chip designs.

But the world currently faces myriad other technological challenges that extend beyond the headline-grabbing digital world. And some have even more dire implications.

Batteries are one of the key strategic components for the future. Think of anything from cordless phones to electric cars. For this, we need small, powerful, rapidly rechargeable batteries. This field is currently dominated by Asian — especially Chinese — producers. The European Union has taken steps to increase its battery supply through the European Battery Alliance, supported by the European Commission and the European Investment Bank. The United States has created a Federal Consortium for Advanced Batteries. Washington and Brussels should take their efforts to the next level and create a Transatlantic Advanced Research Products Agency-Batteries (TARPA-B) to pursue joint pre-competitive research and development, lest we both have a replay of the current chip supply crisis and find ourselves even more dependent on Asian battery production.

A new era of transatlantic governmental engagement to bolster needed technology through joint support of pre-competitive research and development is desperately needed. Given the growing cost and complexity of innovation and humanity’s pressing needs, even economies as large and as talented as Europe and the United States cannot, on their own, develop the technologies necessary to meet the needs of the digital economy, to combat climate change, to overcome future pandemics, and to feed the hungry. Americans and Europeans require new collaboration between Brussels and Washington to meet those challenges. The need is great. The time is now.

Bruce Stokes is a visiting senior fellow at the German Marshall Fund of the United States, with expertise in trade, economics and business.