GoKawiilThis story was originally published by Tech Policy Press.
The European Union’s push for technological sovereignty faces an uncomfortable contradiction.
As the EU rolls out AI factories, gigafactories, and new data centers, it is creating a surge in demand for the advanced semiconductors that underpin artificial intelligence. Yet Europe produces fewer than 10 percent of the world’s chips and remains heavily dependent on U.S. designers and Asian manufacturers for the most advanced processors.
That tension sits at the heart of Chips Act 2.0, the European Commission’s planned overhaul of its flagship semiconductor strategy.
The original Chips Act, adopted in 2023, sought to raise Europe’s share of global semiconductor production to 20 percent by 2030. But the European Court of Auditors has warned that target is unlikely to be met, while the Commission’s own projections put Europe’s market share at about 11.7 percent.
The Commission now wants to correct what officials see as a major weakness in the first law: It focused on expanding supply without doing enough to stimulate demand. To address that gap, Chips Act 2.0 is expected to introduce demand-side measures, including public procurement tools, demand accelerators, and closer coordination between semiconductor producers and industrial users. The Commission’s calculation is straightforward: Stronger domestic demand will encourage companies to invest in designing and manufacturing chips in Europe.
But the strategy carries a paradox. The AI infrastructure that the Commission hopes will anchor a European semiconductor ecosystem will initially rely almost entirely on advanced processors designed by U.S. companies and manufactured in Asia.
“Key positions are held by a small number of firms, mostly outside Europe,” Claire Godfrey, executive director of the Balanced Economy Project, told Tech Policy Press.
AI factories create a demand trap
The European Commission’s AI Continent action plan includes 19 AI factories, computing facilities that integrate energy sources, specialized chips, and other infrastructure for running AI models and applications, plans for up to five AI gigafactories (since upgraded to seven), and a proposal to at least triple the bloc’s data center capacity within five to seven years under the Cloud and AI Development Act. That expansion will require a large supply of advanced AI processors.
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