Europe is in a race against time to rebuild its semiconductor sovereignty beyond ASML. The urgency of this task cannot be overstated. Let’s explore the gaps, strategic options, and policy moves that are essential for Europe to compete globally in this rapidly evolving landscape.
Europe’s semiconductor story is often reduced to one name, and that is ASML. The Dutch company is unquestionably a crown jewel and the world’s unrivalled supplier of EUV lithography machines, but sovereignty is more than a single champion. If Europe truly wants resilient chip supply chains and an industrial foothold in the AI age, it needs a strategy that goes far beyond selling tools. We must look forward to a cohesive industrial policy, patient capital, robust supply-chain infrastructure, and a robust talent pipeline. Here’s how the continent can move from dependence to durable capability.
The Lay of the Land
As of the European Chips Act, which comes into force in September 2023, the target established in Brussels is ambitious, aiming to achieve 20 per cent of the worldwide semiconductor output by 2030. This objective is indicative of an increasing geopolitical urgency, whether through the shortages of the pandemic itself or the threat that the supply chains might get weaponised.
However, the present presence that Europe has in the semiconductor production is nowhere near its size dreams. Experts note that Europe’s share of the global output has decreased over the decades and now accounts for less than 10 per cent. At the same time, advanced-node fabrication, packaging, and materials are among the critical areas that continue to rely significantly on Asian countries.
Why ASML Alone Isn’t Enough
ASML is a technical marvel. Its EUV lithography systems are the foundation of the state-of-the-art chip fabrication plants. However, it is not the only step in the process of making the tool. The current semiconductor industry involves a network of both upstream and downstream activities, including wafer production (foundries), raw materials in the form of precursors, photomasks, and substrates, as well as packaging, testing, and assembly.
Most of these capabilities are either lacking or underdeveloped in Europe, which exposes the region to vulnerability. State-of-the-art lithography does not guarantee that chips require mature-node manufacturing and robust back-end infrastructure, which Europe currently lacks.
How sovereignty remains aspirational- The Policy Gap
The EU push for the Chips Act of 43 billion euros is a severe move, but it already suggests that it is straining:
- Fragmented funding: The European Court of Auditors pointed out that investments initiated under the Chips Act are too decentralised amongst member states and schemes, which is weakening the size required to compete internationally.
- Ambitious targets, shaky delivery: Industry objections to the 20 per cent goal claim that it might not be achievable without more profound supply-chain measures.
- Missing value-chain components: The Act places little emphasis on design, materials, and packaging, despite these being essential points of congestion.
- Skills deficit: The industry requires additional engineers, designers and technicians. Although the Act contains talent goals, performance remains skewed.
What strategies to use for a Real Semiconductor Sovereignty
Europe needs to reassess its strategy in five key areas to achieve its aspirations and establish genuine resilience.
Construct Balanced Foundry Landscape
Europe must not put all its eggs in a few of these mega fabs. Instead, strive to achieve a diversified mix of foundries that constitute Premium AI, HPC, and enhanced electronic nodes, as well as automotive, power, and industrial chip fabs based on mature technology. Additionally, establish regional packaging and test centres to lessen dependence on Asia. This multi-level system will enhance resilience and will match the core industrial demand in Europe.
Enhance the Supply Chain Backbone
Serious attention should be paid to the upstream ecosystem, including gases and substrates, as well as photomasks, etc. Europe already possesses strengths (e.g., in speciality chemicals, ECIPE), but to mobilise them on industrial scales, they must be coordinated through consortia between the public and the private sector. On the downstream side, the packaging and testing cluster should be constructed near fabs to minimise transportation hazards and geopolitical risks.
Work out the Bottleneck of Incentives and Approvals
Bureaucracy is one of the inhibitors of investment. Fabs are capital-intensive and require certainty. Europe needs to simplify the permission process, harmonise state assistance, and harmonise incentives among the member states. An industry-desired Chips Act 2.0 can fix these loopholes. Momentum is indicated by recent EU country requests that they revive a semiconductor programme.
Turn Talent into an Industrial Strategic Pillar
Tens of thousands of workers specialising in chips and research and development laboratories must have high qualifications. The EU should thus scale vocational training, also associated with fabs, to include visa upgrades for semiconductor workers, as well as support for PhDs in semiconductor materials, device physics, microelectronics design, and industry-wide placements. Strategic industrial planning should involve education rather than a pipeline.
SMEs and Innovation along the Value Chain
Major fabs are essential, as are the tiny specialty companies in packaging, niche materials, design automation, and other areas. Innovation-driven grants, simplified access to procurement (particularly of the public and regulated sectors), and equity plans can be assisted by the EU. A more decentralised industrial base is also less risky.
Risks, Trade-Offs, and Political Realities
There are obstacles. By far, the time taken to develop fabs is a significant loss for Europe in a rapidly expanding global contest. The Greenfield fab projects are energy- and water-consuming, and they pose environmental concerns. Such ambition demands patient capital, supported by public banks, sovereign funds, and large industry players.
On the other hand, everything is being complicated by geopolitics. Sovereignty in a crisis cannot imply complete self-sufficiency, but rather a strategic independence, the ability to retain the capacity to supply necessary goods even in a turbulent global trade situation. Notably, funding is fragmented with overly ambitious targets, as the European Court of Auditors warns that this is likely to derail progress. Europe will not be able to leave without course correction and a more integrated Chips Act. The need for a more integrated Chips Act is pressing, and it’s a crucial step towards achieving semiconductor sovereignty.
Why This Matters and Why It’s Achievable
The digital future of Europe is based on chips. Semiconductors are the basis of electric cars, data centres, and defence systems. And when Europe outsources vital components of that ecosystem, it remains vulnerable to the uncertainties of supply chain disruptions, foreign political machinations, and lost industrial opportunities. Nevertheless, there is a cause for hope. Other world-leading segments can already be found in Europe, including research (IMEC, LETI, Fraunhofer), equipment (ASML), and niche materials. With clever coordination, selective investment, and strategic policies, Europe will be able to weave its strengths into a more robust asset.
Using nothing but a real semiconductor sovereignty plan will not be cheap, easy, but it is not a short race. It is a matter of creating resiliency within the next ten years. Europe needs to behave like an independent semiconductor region, rather than just a tool-maker.