Europe’s chip industry trapped between US and China, report warns
A joint study warns Europe’s semiconductor sector is now as vulnerable to American technology controls as to Chinese mineral restrictions, forcing a retreat from self-sufficiency goals.
A report published on Thursday by the EU Institute for Security Studies and Institut Montaigne argues that Europe’s semiconductor sector faces a bleak future. The bloc is caught between two competing powers, with external threats now compounding deep structural weaknesses in its domestic industry.
For years, Brussels viewed Beijing as the primary danger to its chip supply chain. That calculus is shifting. “While Beijing still appears to be the biggest threat, dependence on Washington seems to have become of much greater concern under the second Trump administration,” said Joris Teer, a co-author and policy analyst at EUISS.
The American risk is structural rather than immediate. European chip design relies heavily on US-origin software and tooling. A bill moving through Congress, the MATCH Act, could let Washington impose unilateral export controls on allies that fail to align their China policies within a set window. This poses an acute risk to ASML, Europe’s most valuable listed company, whose lithography exports to China are already a major point of transatlantic friction.
China’s leverage is blunter but faster. Beijing can restrict exports of critical minerals and rare-earth magnets needed for chipmaking equipment within weeks. A sudden cutoff would force emergency stockpiling, while any escalation of Taiwan Strait tensions would disrupt the advanced manufacturing Europe cannot replace domestically.
Faced with this dual pressure, the report’s authors reject broad chip self-sufficiency. Teer said Europe’s “only viable path” is to build on existing strengths like ASML. This reflects a clear pivot in EU policy: the Chips Act 2.0 proposal revealed in June abandoned the bloc’s previous target of capturing a 20% global market share by 2030, opting instead for demand-side incentives.
The study lands just weeks after the EU joined Pax Silica, a US-led chip pact that France criticised as technological colonisation. This captures the core dilemma: Europe wants access to US-aligned supply chains but resents the leverage that dependence grants Washington. High energy costs, limited private risk capital, and a shrinking base of chip-consuming industries further weaken the bloc’s hand. Progress like Infineon’s €5 billion Dresden fab shows the massive investment required just to maintain the current pace.
