In September 2023, the European Union (EU) introduced its first Chips Act to enhance the region’s semiconductor ecosystem. This legislative framework aimed to increase the EU’s global competitiveness and resilience in semiconductor technologies, which are essential for both digital and green transitions.
Despite contributing just 10% to global microchip production in 2020, the EU sought to expand its footprint in this strategically vital sector. The Act was a response to growing calls from member states for more robust regulation and investment in chip manufacturing capabilities.
Rising Chip Demand and Geopolitical Tensions Drive EU Toward Strategic Semiconductor Expansion
Semiconductors are increasingly vital to a wide range of industries, including automotive, defense, connectivity, and supercomputing. The European Commission’s survey revealed that demand for microchips is expected to double by 2030.
However, supply shortages persist globally, as manufacturing capacity struggles to keep pace with demand. This situation has underlined the urgency for the EU to boost its semiconductor production and innovation capacity to avoid dependency on external suppliers and ensure technological sovereignty.
EU Faces Pressure to Fast-Track Chips 2.0 as Semiconductor Delays Undermine Tech Sovereignty Goals
In March, nine EU nations formed a Semiconductor Coalition to foster collaboration on research, workforce development, and production capacity. Additionally, the European Parliament pushed for expanded regulation to include advanced technologies like AI chips.
Lawmakers criticized the initial Chips Act for being too slow and called for accelerated efforts to make the EU a more attractive location for research, development, and investment in semiconductor technologies. Geopolitical tensions, particularly between the U.S. and China, added urgency to these efforts.
Industry Demands Comprehensive Chips 2.0 Act Amid Delays and Strategic Investment Urgency
Leading European semiconductor companies and industry groups urged the EU to develop a second, more comprehensive Chips Act. This proposed legislation would focus not only on manufacturing but also on chip design, materials, equipment, and R&D.
Industry leaders called for more direct subsidies and targeted financial support, especially for small and medium-sized enterprises, to enhance competitiveness and innovation. The call reflects a need for a more holistic and proactive approach to sectoral development.
Despite initial investments, the Chips Act has struggled to deliver the expected impact, with delays and insufficient attraction of advanced manufacturers like Intel. Intel’s postponement of a $33 billion German factory project highlighted the need for faster and more effective policy implementation.
The EU is now expected to roll out new investment packages in 2025, including those targeting AI and chips. The semiconductor industry awaits these changes, hoping for more decisive action that aligns with current technological trends and geopolitical realities.
