BERLIN (Reuters) - The production of computer chips and batteries in Europe should be excluded from EU rules on state aid, German Chancellor Angela Merkel said on Tuesday.

Speaking at an economics conference in Berlin, Merkel said such a move was necessary to ensure Europe did not cede its leading global position in making machines for chip production.

"We need to have certain capabilities in Europe," she said, alluding to competition from the United States and China.

Merkel said she considered battery technology a strategic investment that should be excluded from the state aid rules.

Germany's biggest carmaker Volkswagen <VOWG_p.DE> has said it will invest billions of euros in electric cars and is considering whether to develop a dedicated battery factory in Germany.

(Reporting by Andreas Rinke; Writing by Caroline Copley)