The challenge is to play to Europe’s strengths and focus on the parts of the chip industry where it can become indispensable.
A chipmaking machines from the Netherlands, a power chips for an electric car, a new semiconductor factory: Europe is betting on several parts of the chip industry to strengthen its position in the global market.
Member states agree that the bloc needs to reduce its dependence on foreign suppliers. But governments differ over which technologies Europe should prioritise, how much it should produce at home and where investment should go.
The EU’s Chips Act is an effort to strengthen Europe’s semiconductor industry and reduce its dependence on suppliers outside the bloc. The first Chips Act, agreed in 2023, focused heavily on expanding production capacity in Europe.
The Commission’s proposed Chips Act 2.0, presented in June, takes a broader approach, covering everything from chip design and advanced manufacturing to the European industries that buy and use semiconductors. The Commission says the first act has helped mobilise more than €52bn in investment and supported around 46,000 direct and indirect jobs.
The next phase, however, poses a harder question: Where does Europe actually need to be indispensable?
Europe does not want to make everything
There is broad support in Europe for reducing strategic dependencies. There is much less appetite for trying to reproduce the entire global semiconductor industry inside Europe.
“Resilience is not self-sufficiency,” said Dutch ambassador Pieter Jan Kleiweg de Zwaan during last week’s Council debate on the issue. “Europe must not be the world leader in everything,” he said. “It takes too much time and will be too expensive.”
He argued Europe should reduce its dependencies and diversify its supply chains while continuing to work with international partners. According to him, Europe should instead invest in areas where it can become indispensable, pointing to semiconductor equipment makers such as ASML, photonic chips and European scale-ups.
France, for example, pushed the balance further towards domestic capacity. Benjamin Haddad, France’s minister for Europe, argued that a European “domestic entity” should be defined primarily by where production takes place, rather than the nationality of its parent company. France also backed targeted European-content requirements in public procurement and public support for digital infrastructure.
The race for the right chips
Then there is the question of which chips Europe should actually be trying to lead in.
Countries such as Germany, the Netherlands, Finland and Italy broadly agree that Europe should concentrate on areas of the semiconductor industry where it already has strong companies, research or infrastructure, rather than trying to compete across the entire arena. Semiconductor equipment, photonics, chip design and power electronics are examples of where European companies already have strong capabilities.
Europe should “play to our strengths until we are indispensable” and focus on areas where it can build companies with a global position, said Germany’s Gunther Krichbaum, Minister of State for Europe. “We are not building copies. We are building European champions.”
Belgium, Malta and Spain stressed that Europe also depends on mature and specialised chips, advanced packaging, testing, materials and other parts of the supply chain. Those technologies may attract less attention than the chips used for AI, but they are important to industries such as cars, energy, healthcare and manufacturing.
Who gets the investment?
Divide also appears when it comes to deciding where European money should go — a debate that resembles the discussions surrounding the allocation of the €234bn Competitiveness Fund.
Countries with established semiconductor industries, such as the Netherlands, Germany and Finland, generally want funding to follow strong projects and companies, arguing that Europe can build capacity more quickly by expanding what already works.
Countries such as Romania, Poland, Portugal and Spain, however, are concerned that this could concentrate funding in the same industrial centres and leave countries with less-developed semiconductor industries behind, and push for broader access to European funding and projects, including for smaller companies and emerging industries.
The Council’s debate was the first political discussion on the Commission’s June proposal. The next step is for member states to work towards a common position on the legislation, before negotiations with the European Parliament and Commission can begin.
