Europe’s semiconductor ambitions face mounting geopolitical and structural challenges that could leave the region dangerously exposed in the global technology race unless urgent action is taken to strengthen domestic supply chains, according to a new EU-backed report.
The report, published by the European Union Institute for Security Studies in partnership with French think tank Institut Montaigne, warns that the bloc is being squeezed between China’s tightening control over critical minerals and the United States’ growing willingness to weaponize advanced technology exports. Together, those pressures threaten Europe’s ability to build a resilient semiconductor ecosystem at a time when chips have become central to artificial intelligence, defense, cloud computing and economic competitiveness.
The findings come as governments around the world race to secure semiconductor supply chains, with chips increasingly viewed as strategic assets rather than ordinary commercial products. Artificial intelligence has intensified that competition, driving unprecedented demand for advanced semiconductors and exposing vulnerabilities across global supply networks.
The report identifies China’s export restrictions on critical minerals and the possibility of military conflict in the Taiwan Strait as two of the most immediate threats to Europe’s semiconductor supply chain.
China dominates the global processing of many rare earth elements and critical minerals essential for semiconductor manufacturing. In recent years, Beijing has increasingly used export controls as a strategic tool in response to Western trade restrictions, highlighting how geopolitical tensions can rapidly disrupt supplies of materials needed for advanced chip production.
Meanwhile, any conflict involving Taiwan, home to the world’s largest contract chipmaker and the overwhelming majority of cutting-edge semiconductor production, would send shockwaves through global technology markets and severely disrupt European industries that rely on advanced chips.
Beyond China’s growing leverage, the report argues that Europe’s dependence on American technology has become an equally significant strategic concern.
While the United States remains Europe’s closest technology partner, Washington’s current aggressive export control policies have introduced new uncertainties for European companies. One example is Dutch semiconductor equipment giant ASML, Europe’s most valuable technology company and the world’s only supplier of extreme ultraviolet (EUV) lithography machines used to manufacture the most advanced chips.
ASML has already faced restrictions on exporting its most sophisticated equipment to China under pressure from Washington. The report warns that proposed legislation currently being debated in the U.S. Congress could significantly expand Washington’s authority to impose export controls not only on American companies but also on allied nations and their firms.
That growing reach of U.S. export policy has raised concerns across Europe that the bloc’s industrial strategy could be shaped by geopolitical decisions made in Washington.
“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, policy analyst at the EU Institute for Security Studies and co-author of the report
The assessment reflects a broader shift in European strategic thinking. While concerns over China’s technological ambitions have dominated policymaking for years, analysts believe Europe also needs greater strategic autonomy from the United States as Washington prioritizes its own industrial and national security objectives.
The report argues that Europe’s response cannot rely solely on closer cooperation with allies. Instead, it says the bloc must build on areas where it already possesses global competitive advantages, particularly semiconductor manufacturing equipment, where European firms such as ASML occupy dominant positions.
“In addition to cooperating with allies to counter China, Europe’s only viable path is to build on its existing pockets of strength, such as in chipmaking equipment, to improve leverage,” Teer said.
The report arrives as Brussels steps up efforts to revive Europe’s semiconductor industry. In June, the European Commission proposed the Chips Act 2.0, a follow-up to its earlier semiconductor strategy, aimed at stimulating demand for domestically manufactured chips while encouraging greater investment in Europe’s semiconductor ecosystem.
The European Union also recently joined Pax Silica, a U.S.-led initiative bringing together allied countries to strengthen semiconductor and artificial intelligence supply chains, covering areas including critical minerals, advanced manufacturing, energy infrastructure and AI technologies.
Industry leaders broadly support the report’s recommendations.
Laith Altimime, president of the semiconductor industry association SEMI Europe, said resilient access to raw materials has become fundamental to Europe’s technological ambitions.
“Without reliable access to critical raw materials, Europe’s chip ecosystem cannot compete, innovate or grow,” he said.
However, the report argues that supply chain vulnerabilities represent only part of Europe’s broader competitiveness problem. It points to persistently high energy prices, limited availability of private investment capital, and the gradual decline of several European manufacturing industries that traditionally consume large volumes of semiconductors as additional structural weaknesses undermining the sector.
These challenges come as governments across the United States, China, Japan, South Korea and India are committing hundreds of billions of dollars to semiconductor manufacturing, AI infrastructure and advanced chip research in a global contest for technological leadership.
The report concludes that without decisive investment and industrial policy, Europe risks falling further behind in a sector increasingly viewed as the foundation of economic growth, artificial intelligence, advanced manufacturing, and national security.
