Dr Luigi Capoani and Alberto Corso of the European Youth Think Tank (EYTT) dissect Europe’s semiconductor industry, its global dependencies, and the challenges shaping Europe’s future in chip production.
Europe made 13% of the world’s chips in 2010. By 2030, it is forecast to make 8% (European Court of Auditors, 2025). A semiconductor is a material that sits between a conductor and an insulator: it blocks current until something makes it conduct. Adding trace impurities to silicon, or varying the voltage across it, does exactly that. This is how a chip can hold billions of switches without mechanical parts at all. Almost everything electronic now depends on them.
Europe’s semiconductor industry is characterised by complex production structures: designing, manufacturing and commercialising chips involves multiple stages, each requiring highly specialised expertise. Research, equipment production, wafer fabrication, assembly, packaging and testing are frequently carried out in different countries. While this highly specialised model has historically driven unprecedented technological advancement and cost efficiency, it has also forged deep, cross-regional dependencies. As the global economy becomes increasingly digitised, these complex supply networks are now revealing structural vulnerabilities that extend far beyond mere economic concerns (Poitiers & Weil, 2021).
An increasingly fragmented semiconductor production system
Governments have started to treat chips as strategic assets. Once regarded primarily as components for consumer electronics, they are now recognised as enabling technologies for artificial intelligence (AI), digital infrastructure, renewable energy systems and defence. The response has been a push to build capacity at home and rely less on distant suppliers.
The semiconductor supply chain has delivered economic value but has also concentrated critical stages of production in very few places. As the figure shows, six regions account for more than 90% of the world’s chipmaking capacity, with a small remainder scattered across the rest of the world.
Around three-quarters of the world’s chipmaking capacity sits in East Asia, and the balance within that region keeps shifting. China’s share rose from 11% in 2010 to 18% in 2020 and is forecast to reach 22% by 2030, overtaking Taiwan, whose share is falling. Europe moved the other way: its share halved from 13% in 2010 to 7% in 2020 and is forecast to recover only to 8% by 2030 (European Court of Auditors, 2025).
Europe’s role in the global semiconductor value chain
Europe’s position depends a lot on what you measure. The EU set itself the goal of reaching 20% of world chip production by 2030, starting from what it called a 10% baseline. But the European Court of Auditors found that this baseline was misleading: it counted the revenues of European companies, not the chips made in Europe, and this difference is important (European Court of Auditors, 2025).
In 2020, the EU had no plant capable of producing chips below 22 nanometres, while the most advanced factories were all in Taiwan and South Korea. Reaching 20% would mean roughly quadrupling European capacity in under a decade. The auditors call this very unlikely, and the Commission’s own forecast points to just 11.7% by 2030 (European Court of Auditors, 2025).
At the same time, designing without building means relying on someone else to make what you invent. Advanced chips are produced in Asia, as are many of the components that underpin European industry. In fact, of the $2.3 trillion projected in new plant investments between 2024 and 2032, European companies will invest approximately $47bn, or about 2% (Boston Consulting Group & Semiconductor Industry Association, 2024). Brussels can set a capacity target, but it cannot make the investment happen.
Recent developments in European policy
In response to structural vulnerabilities and the rapid evolution of the global market, the European Union is moving on new legislation. The centrepiece is the Chips Act 2.0, proposed by the European Commission in June 2026 and currently under legislative discussion (European Commission, 2026b).
The global semiconductor market is expected to reach €1.37 trillion by 2030, and approximately 70% of that increase is expected to come from AI-related components. The proposal is built around capturing a large share of this expansion. To achieve this, the act would set up “Grand Challenges” aimed at supporting the industrial production that the EU considers strategic, such as AI chips (European Commission, 2026a).
The first Chips Act has already produced results: in 2024 the European Commission approved a €5bn German State aid measure to support the European Semiconductor Manufacturing Company (ESMC). ESMC is a joint venture between Taiwan’s TSMC and three European industrial leaders: Bosch, Infineon, and NXP. The joint venture is establishing a new large-scale microchip manufacturing plant in Dresden. The plant will run as an open foundry, so it will work for outside clients rather than for a single owner and it is aimed at the automotive and industrial applications sectors that European industry depends on (European Commission, 2024).
What will decide Europe’s chip future
Beyond the factories, three constraints will shape how far Europe gets.
Europe’s semiconductor workforce is about to shrink. Roughly 114,000 workers, some 30% of the total, will retire between 2024 and 2030. Graduates in the relevant fields are growing at 1% a year. The arithmetic leaves Europe’s semiconductor industry short by around 10,800 skilled workers annually, and no plant can open without them (DECISION Études & Conseil, 2025).
Gallium goes into the chips behind telecoms and defence systems, and China makes 99% of it. That is not about geology: Germany and Hungary both produced it until the mid-2010s, then stopped. Beijing has cut the flow before, and rebuilding what Europe dismantled would take years (US Geological Survey, 2026).
The third constraint is political rather than industrial. Full self-sufficiency would be expensive, would slow innovation rather than accelerate it, and would undermine the very resilience it was meant to create (Boston Consulting Group & Semiconductor Industry Association, 2024).
Europe will not stop depending on others for chips and should not try. The realistic question is who it depends on, and how badly it would hurt if they stopped.
References
- Boston Consulting Group & Semiconductor Industry Association. (2024). Emerging resilience in the semiconductor supply chain. https://www.bcg.com/publications/2024/emerging-resilience-in-semiconductor-supply-chain
- DECISION Études & Conseil. (2025). ECSA skills strategy report 2025. European Chips Skills Academy. https://chipsacademy.eu/news/ecsa-skills-strategy-2025/
- European Commission. (2024, August 20). Commission approves €5 billion German State aid measure to support ESMC in setting up a new semiconductor manufacturing facility [Press release]. https://ec.europa.eu/commission/presscorner/detail/en/ip_24_4287
- European Commission. (2026a). Chips Act 2.0. https://digital-strategy.ec.europa.eu/en/policies/chips-act-2
- European Commission. (2026b). European Chips Act. https://digital-strategy.ec.europa.eu/en/policies/european-chips-act
- European Court of Auditors. (2025). Special report 12/2025: The EU’s strategy for microchips. Publications Office of the European Union. https://www.eca.europa.eu/en/publications/SR-2025-12
- Poitiers, N., & Weil, P. (2021). A new direction for the European Union’s half-hearted semiconductor strategy (Policy Contribution No. 17/2021). https://www.bruegel.org/policy-brief/new-direction-european-unions-half-hearted-semiconductor-strategy
- U.S. Geological Survey. (2026). Gallium. In Mineral commodity summaries 2026 (pp. 82–83). https://pubs.usgs.gov/periodicals/mcs2026/mcs2026-gallium.pdf
About the authors
Luigi Capoani is an economist, researcher, and lecturer in International Economics at Ca’ Foscari University of Venice. He holds a PhD in Economics from the University of Salerno and conducted part of his doctoral research at the University of Birmingham. His research focuses on international economics, industrial policy, technological innovation, and regional development.
Alberto Corso is an analyst at the European Youth Think Tank. His research interests include technological innovation, geopolitics, migration dynamics and their consequences for the labour market, as well as international trade policies such as tariffs and protectionism.
