The European Commission is set to gain authority to invest directly in cross-border semiconductor manufacturing under a proposed overhaul of the bloc's Chips Act, Bloomberg reported, citing sources familiar with the draft.

The revised legislation, known as Chips Act II, is expected to be formally presented in late May.

Under the original 2022 framework, the commission was restricted to funding research and approving state aid provided by individual member states.

The draft revision would enable it to direct money into large cross-border projects through grants, with those initiatives organised as public-private partnerships.

Plans in the draft also broaden the scope to cover technologies supporting chip production, including manufacturing equipment, raw materials and circuit boards.

The changes follow wider acknowledgement that the original act did not meet its objectives.

The EU’s European Court of Auditors has said the bloc’s goal of securing a 20% share of global chip output by 2030 is unlikely to be achieved, with Europe’s share now forecast at about 12% by that year.

In its first version, the Chips Act mobilised up to €86bn in possible incentives from state aid and private investment, while the commission directly managed €4.5bn of that amount.

Recipients criticised that system, citing cumbersome administrative procedures and long approval timelines.

Those issues became more visible when US chipmaker Intel halted construction at planned sites in Poland and Germany in 2024, including a flagship €30bn plant in Dresden.

Germany later cut its reserved semiconductor funding allocation by €3bn.

Before publication, the draft may still be amended.

It must also be approved by EU member governments and the European Parliament, in a legislative process expected to last several months.