Summary

• A report warns that Europe’s semiconductor strategy remains exposed to China, Taiwan, and the US.
• The pressure sits across design software, equipment, export controls, raw materials, and manufacturing capacity.
• Europe’s AI and digital infrastructure ambitions depend on more than new chip factories.

European Commission ambitions to make Europe more self reliant in semiconductors are running into a harder reality: the continent cannot build chip sovereignty with manufacturing targets alone.

A new EU funded study has warned that Europe’s chip sector remains strategically exposed to China, Taiwan, and the United States. The warning cuts through one of the more optimistic assumptions behind recent industrial policy — that public subsidy and new fabrication capacity can, by themselves, give Europe meaningful control over the technologies underpinning AI, cloud infrastructure, defence systems, industrial automation, and connected vehicles.

The study, published by the Istituto Affari Internazionali, argues that dependencies remain embedded across the semiconductor value chain. Europe has strengths, including ASML’s position in lithography equipment and important research, automotive, and industrial chip capabilities, but the supply chain that turns those strengths into strategic autonomy remains highly exposed.

The EU Chips Act set a political target for Europe to reach 20% of global chip production by 2030. That target has always been difficult because other regions are also subsidising aggressively, but production share is only one measure of control. Advanced semiconductor capability depends on electronic design automation software, wafers, advanced materials, lithography, packaging, process knowledge, energy, chemicals, and committed customer demand.

US export controls add a particular layer of complexity. European companies selling sensitive equipment or technology into China may find themselves constrained not only by European policy, but by Washington’s strategic priorities. ASML, based in the Netherlands, has become one of the most visible examples of how European technology can be pulled into US China competition. Even where a company is European, access to markets and parts of the technology stack can still be shaped elsewhere.

China’s role is different but no less important. Beijing’s influence over raw materials, mature node capacity, manufacturing ecosystems, and supplier networks means Europe is not choosing between dependence and independence in any simple sense. A semiconductor strategy that reduces one dependency may expose another, especially where European demand is fragmented and private capital remains cautious about projects with long payback periods.

The business consequences reach far beyond chipmakers. European car manufacturers, cloud operators, defence suppliers, industrial automation vendors, telecoms equipment makers, and AI infrastructure providers all depend on reliable semiconductor supply. Shortages during the pandemic showed how quickly chip constraints can move from an engineering problem to a production, revenue, and inflation problem.

AI has raised the stakes further. The semiconductor conversation is no longer centred on general digital transformation or automotive electronics. It now sits inside a competition for compute capacity, model training, inference efficiency, and energy performance. Countries and companies with dependable access to advanced chips can train, deploy, and commercialise AI systems faster; those without it depend on imported compute, foreign cloud platforms, or constrained supply.

Europe’s policy response has so far combined subsidy, state aid flexibility, research support, and a push to attract fabrication investment. Those measures may help, but the report suggests the continent also needs a more granular view of where leverage actually sits. Building capacity in one part of the chain does not solve dependence in design tools, packaging, materials, or equipment servicing.

The risk is that Europe mistakes activity for autonomy. A new fab announcement can be politically useful, but chip sovereignty is measured during stress: when export licences are delayed, raw materials are restricted, Taiwan tensions rise, or a supplier prioritises another market. The more strategic the technology becomes, the more those stress points matter.

European industry needs semiconductor policy to become an investable, coordinated industrial system. That requires demand aggregation, long term procurement signals, cross border coordination, and closer alignment between defence, cloud, automotive, and AI infrastructure needs. Without that, Europe may have expensive projects but limited control over the value chain that determines digital resilience.

The report does not argue that Europe should abandon its chip strategy. It argues, more uncomfortably, that Europe has to stop treating semiconductor sovereignty as a slogan and start treating it as a dependency map.