The first regulation known as the ‘Chips Act 1’ on semiconductors, proposed by the European Commission in 2022 in the wake of the Covid-19 pandemic, had initial positive effects, generating €52 billion in investment in the European semiconductor industry and allowing for the creation of 16,000 direct jobs and 30,000 indirect jobs.
It was also intended to raise Europe’s market share to 20% of global production in this field by 2030. However, at present, the EU produces barely 10.5% of the world’s semiconductors and depends almost entirely on the United States and Asia for the most advanced, cutting-edge microchips of less than 5 nanometres, particularly those for artificial intelligence (AI). And these structural dependencies, which heighten the risks for the EU of supply disruptions and systemic shocks affecting sectors such as automotive, energy, aerospace and defence, are no longer sustainable in the current geopolitical context.
That is the entire purpose of the draft regulation ‘Chips Act 2.0’, presented on Wednesday 3 June, which, in cooperation with the other instruments proposed on the same day - such as the Cloud and AI development Act (see EUROPE 13880/1, 13880/2) - will have to “stimulate the Union’s demand” for semiconductors, accelerate permits for the creation of semiconductor companies and, above all, reduce the EU’s external dependence, “which has a major impact on our economy”, explained the Executive Vice-President for Tech Sovereignty, Henna Virkkunen.
Microchips are “the third most traded product in the world, just after oil and vehicles”, the Executive Vice-President explained. In 2025, the market was valued at around €595 billion and is expected to exceed €1 trillion by 2030, with AI-related components accounting for more than 70% of the global semiconductor market. And the EU wants to take its full share and make itself less vulnerable to supply disruptions, even if it must also, as reality requires, accept a certain degree of “interdependence”, a European source explained on Tuesday 2 June.
“Overall, semiconductors illustrate the urgency of Europe’s technological sovereignty challenge”, the Commission explains in its draft regulation.
The incident in late 2025 involving Nexperia, the leading Chinese manufacturer of microcircuit components, which had temporarily halted its exports due to the trade war between Beijing and Washington, left a particularly bitter taste, as some European companies were forced to temporarily suspend production due to a lack of alternative suppliers.
The ‘Chips Act 2.0’ will therefore have to improve the investment framework and competitiveness, stimulate demand for European chips, strengthen capacities throughout the value chain and improve the resilience of the semiconductor value chain.
To achieve this, the draft calls on governments to accelerate the industrial deployment of research and innovation. Stimulating demand is closely linked to the ‘CADA’ text, which aims to stimulate demand for cutting-edge microchips for AI through the development of new data centres.
The ‘Chips Act 2.0’ also provides for the deployment of strategic projects that will be supported by a coordinated set of public and private investments. In particular, support will be provided for the Union’s first semiconductor facility combining cutting-edge manufacturing with microchip integration and advanced 3D packaging capabilities, the Commission explains.
The scope of the provisions relating to innovative initiatives eligible for funding is also clarified. These provisions cover the entire semiconductor value chain, including manufacturing-centred chip design activities, specialty materials, manufacturing equipment, printed circuit boards and advanced packaging and assembly.
Public procurement involving semiconductors intended for infrastructures, equipment or systems may also incorporate a security of supply criterion, in addition to price considerations, where these technologies are deployed in essential services or critical infrastructures. European subsidies or national public aid that certain strategic projects may benefit from would also be conditional on a contribution of “added value to Europe”. Preferential access to ‘Made in Europe’ chips will be created in public procurement.
The ‘Chips Act 2.0’ also aims to create regional leadership in the semiconductor value chain through a ‘European Semiconductor Region of Excellence’ label, signalling to international investors that the region has a high-potential ecosystem.
A Business-to-Business Semiconductor Supply Chain Platform (‘the Platform’) will also be launched to detect and anticipate possible supply problems. In 2027, an EU Blueprint for semiconductor crisis management will be presented.
The Commission hopes to mobilise €120 billion in public and private investment by 2035 for the semiconductor sector, including around €30 billion to create first cutting-edge European foundry for semiconductor manufacturing.
For example, the TSMC plant in Germany (Dresden), to manufacture chips engraved at advanced nanometre levels, will cost more than €10 billion.
For more information: https://aeur.eu/f/m5j (Original version in French by Solenn Paulic)