The European Union’s semiconductor industry is at risk of decline due to Chinese export restrictions, heavy reliance on U.S. technology, and economic challenges, according to a new report by EU and French research institutes.
- China’s export controls limit key materials critical to chip manufacturing.
- EU relies heavily on U.S. tech and faces risk from potential American export restrictions.
- High energy costs and insufficient private funding weaken Europe’s chip industry.
What happened
An independent report funded by the European Union and conducted by the EU Institute for Security Studies alongside Institut Montaigne outlines severe risks threatening Europe's chip industry. It emphasizes Chinese export controls on critical minerals and magnets crucial for semiconductor production as well as geopolitical concerns around Taiwan as significant supply disruptions.
Furthermore, the report highlights Europe’s technological dependence on the United States, particularly regarding design software and chip-making equipment. The concern is elevated by legislative proposals in the U.S. that may allow export controls affecting allied nations and companies, including the Dutch chip equipment giant ASML, which plays a key role in the European semiconductor ecosystem.
Why it matters
The EU’s strategic autonomy in chip manufacturing is compromised by its heavy reliance on foreign technology and supplies. This dependency increases vulnerability to geopolitical tensions and trade restrictions that could disrupt production. The semiconductor industry's decline could affect diverse sectors in Europe reliant on chips, from automotive to consumer electronics.
The EU’s ability to compete globally in chip production is also undermined by structural challenges such as high energy costs, insufficient private capital investment, and the fading presence of traditional chip-using industries. Together, these factors threaten long-term competitiveness and economic resilience in a technology-driven future.
What to watch next
The European Commission’s proposed Chips Act 2.0 aims to address these vulnerabilities by incentivizing the growth of domestic chip manufacturing and fostering stronger supply chain cooperation with allied countries. Monitoring the legislative progress of this act and its impact on investment and industrial capacity will be crucial.
Attention will also focus on geopolitical developments, including U.S. export controls legislation and China’s export policies, along with efforts by European companies like ASML to maintain operational leverage. How the EU balances cooperation with global partners against the risks of overdependence will shape the sector’s trajectory in the coming years.