Europe’s semiconductor industry is heading toward a “bleak future” due to mounting geopolitical pressures and structural weaknesses, including Chinese export controls, heavy dependence on US technology, and persistent domestic competitiveness challenges, according to an EU-funded report released on Thursday.
The findings, published by the European Union’s Institute for Security Studies and the French think tank Institut Montaigne, warn that multiple external risks are converging to threaten Europe’s chip supply chains and industrial resilience. The report highlights Chinese restrictions on critical minerals and magnets, alongside the potential disruption from a conflict in the Taiwan Strait, as major vulnerabilities for the sector.
It also points to Europe’s reliance on the United States for essential semiconductor technologies, including design software and advanced manufacturing tools. The report notes concerns that Washington could tighten export controls affecting allied countries and companies, including restrictions linked to equipment produced by the Netherlands-based ASML, Europe’s most valuable semiconductor firm and a key supplier in global chip manufacturing.
The study further cites proposed US legislation that could expand Washington’s authority to impose export controls on allied nations, raising concerns in Europe over reduced autonomy in technology trade policy. According to Joris Teer, a policy analyst at the Institute for Security Studies and co-author of the report, tensions with both Beijing and Washington are shaping Europe’s strategic outlook, with dependence on the United States becoming an increasingly pressing concern under the current US administration.
Teer told Reuters that while China remains the most immediate perceived threat, the growing influence of US export control policy has added a new layer of uncertainty for European industry. The report suggests that these overlapping dependencies are weakening Europe’s ability to secure stable access to critical semiconductor inputs and technologies.
In response to these challenges, the European Commission has proposed a revised industrial strategy, including a Chips Act 2.0 aimed at strengthening domestic production capacity. The proposal seeks to stimulate demand for European-made semiconductors and improve coordination with allied countries through initiatives such as “Pax Silica,” which focuses on securing supply chains among partner nations.
However, the report argues that internal constraints remain significant. High energy prices across Europe, limited availability of private capital, and the long-term decline of chip-consuming industries within the region are all cited as factors undermining competitiveness. These structural issues, the authors warn, limit the effectiveness of policy measures aimed at boosting domestic production.
The study concludes that Europe’s most viable path forward lies in building on its existing strengths within the semiconductor ecosystem, particularly in advanced chipmaking equipment and related technologies. It argues that leveraging these areas could improve Europe’s strategic position, even as global competition intensifies.
