Why Europe is investing in semiconductor autonomy for secure and resilient supply chains

The COVID-19 pandemic and geopolitical tensions of recent years have laid bare a stark reality: the global semiconductor supply chain, which underpins everything from consumer gadgets to advanced defense systems, is vulnerable. For Europe, which currently produces only a fraction of the world’s semiconductors, this has been a wake-up call. The result is a concerted shift toward European strategic autonomy in the semiconductor industry – a movement to reduce dependence on foreign chip suppliers and to ensure secure, resilient supply chains for critical technologies. Central to this push is the EU Chips Act, a major EU initiative that aims to bolster Europe’s semiconductor ecosystem through massive investments and policy support Here, we explore how this shift is unfolding and its implications for supply chains and defense technology.

The EU Chips Act: Ambitions and Impact

Unveiled in early 2022, the EU Chips Act represents Europe's declaration of intent to become a bigger player in semiconductors. In numbers, the Act seeks to mobilise €43 billion (roughly $48B USD) in public and private investments and double Europe’s share of global chip production from ~10% to 20% by 2030​. This is a tall order, considering Asia (Taiwan, South Korea, China) and the US currently dominate fabrication capacity. However, European policymakers view it as essential for strategic autonomy – a term referring to Europe’s ability to sustain and develop key technologies without over-reliance on external (often non-aligned) powers​.

The Chips Act is part of a broader realisation in Europe: “amid heightened geopolitical tensions… policymakers are seeking ways to strengthen the continent’s strategic autonomy”​. Just as the US passed its CHIPS and Science Act in 2022 for similar reasons, Europe’s initiative spans building new fabs, advancing R&D (through the “Chips for Europe” program), and establishing mechanisms to monitor and intervene in chip supply emergencies. The Act is expected to be fully adopted by 2023, and even before that, it has begun influencing company decisions – for instance, Intel announced plans for new fabs in Germany, citing anticipated support, and STMicroelectronics teamed up with GlobalFoundries to expand capacity in France​.

One key aspect of the EU Chips Act is that it’s not just about throwing money at fabs, but also about “joining up political, industrial, technological, and financial support” to rebuild the ecosystem​. This includes workforce development (Europe faces a shortage of semiconductor talent), support for upstream research (Europe has strength in research and equipment via companies like ASML, but has lagged in manufacturing), and coordination with allied countries. In fact, strategic autonomy doesn’t imply total isolation: the Act supports partnering with “like-minded countries” to enhance supply chain resilience​, meaning Europe will still collaborate with partners like the U.S., Japan, and others – but on a more equal footing.

Will it pay off? In the short term, challenges abound. Building fabs takes years and tens of billions of euros each, and competing with established giants is difficult. An analysis by industriAll Europe (a federation of industrial trade unions) welcomed the Chips Act but cautioned it “will not pay off in the short term,” though in the long run it can “strengthen the chip value chain and foster European strategic autonomy.”​ We’re already seeing early progress: by 2025-2026, Intel aims to have at least one fab module operational in Magdeburg, and TSMC and Samsung have both been in talks about potential EU facilities. The goal of 20% global share also means leading in some specialty areas (Europe likely won’t make the next smartphone CPU at 3nm soon, but it could lead in automotive or industrial chips where it has expertise). In effect, the Act is about de-risking: ensuring that if another global disruption or export ban occurs, European industries (and militaries) aren’t left in the lurch for chips.

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Defense Technology: Reducing Dependency and Enhancing Security

Perhaps nowhere is the need for secure semiconductor supply chains more evident than in defense. Modern defense systems are extremely electronics-intensive – from precision munitions to secure communication radios to the computing in fighter jets. A report by IPC in 2025 highlighted that electronics now account for about 17% of the value of defense equipment (up from 10% in 2000) and are projected to reach 25% by 2035​. Yet, Europe’s ability to manufacture these electronics has declined, with only ~11.6% of global electronics output (a 35% drop in two decades) coming from Europe​. The IPC report bluntly warns that without action, Europe could be “critically vulnerable to supply chain disruptions for important equipment including drones, radar systems and secure communications”​. In other words, if Europe must import many of the critical chips or components, it risks those supplies being cut off in a crisis or subject to leverage by others.

Currently, an estimated 40% of EU defense equipment imports originate from the United States. This includes not just complete systems but also key components like microelectronics. While transatlantic ties are strong (and the US is an ally), European leaders are uneasy with that level of dependency. Josep Borrell, the EU’s High Representative, has emphasised that European sovereignty in defense tech is vital to act independently when needed​. The war in Ukraine further underlined issues: when Europe suddenly needed to ramp up production of certain weapons (like anti-tank missiles, drones, artillery shells), they found global supply chains strained and slow. The EU’s recent ASAP initiative (Act in Support of Ammunition Production) is one example of trying to quickly boost defense production capacity in Europe.

For semiconductors specifically, having indigenous capability means European defense projects (like the next-generation fighter jet program FCAS or the Eurodrone UAV) can use European-made critical chips, reducing concerns about export controls or hidden backdoors. It also means the maintenance of these systems over decades can be secured (no risk of a foreign company suddenly deciding to stop making a needed component). Strategic autonomy in chips thus translates to greater operational autonomy in defense: you can deploy your systems when and how you need, with confidence in their supply and security. EU officials have explicitly linked the Chips Act to sovereignty, as noted by Brookings: the Act is meant to “safeguard European sovereignty and strategic autonomy” in a field that’s essential for the digital and defense future​.

In practice, we might see Europe invest in specific areas critical for defense: radiation-hardened chips (for space and nuclear-hardened systems), encrypted secure communication ASICs, advanced microcontrollers for avionics, etc. Some of these are niche markets that European specialty fabs or “pilot lines” (supported by the Chips Act) can address without competing with mass-market producers. Already, European companies like Infineon (Germany), STMicro (France/Italy), and NXP (with strong EU presence) have capabilities in power electronics, automotive chips, and security chips that can be leveraged. The Chips Act can further spur them to include defense-specific production in Europe that might otherwise have been outsourced. In essence, it’s about having at least a baseline capacity in-country (or in-continent) for the most critical semiconductor needs of defense and infrastructure.

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Supply Chain Resilience and the Global Context

Strategic autonomy does not mean isolation. Europe will still be part of the global semiconductor supply chain, but the aim is to reduce one-sided dependencies. For example, Europe might still import leading-edge logic chips from Taiwan or Korea for commercial needs, but if it has local fabs for, say, 28nm or 14nm nodes, it could produce many types of chips domestically in a pinch (28nm is sufficient for a wide array of chips, including many defense chips, and does not require EUV lithography which is a pinch point).

The push also involves diversifying supply sources. Europe may not make all its chips, but it wants more balanced imports (not 80% from one country). This is why European leaders have been engaging with TSMC about a plant in Europe – diversifying away from heavy reliance on Asia’s tightly concentrated manufacturing. It also involves stockpiling or onshoring packaging and testing capabilities, an often overlooked part of the supply chain dominated by Asia.

One cannot ignore that the strategic autonomy drive is partly spurred by US export controls on chips to China and the potential of a conflict over Taiwan. Europe realises that in a Taiwan contingency, chip supply could be severely disrupted worldwide. Also, while the US is an ally, its recent protectionist moves (like “Buy American” provisions) prompted President Macron of France to call for a “Buy European Act” in response.​ There’s a recognition that each region is looking out for itself, and Europe must do the same to some extent. The Brookings analysis notes this trend as a “reversal of decades of globalisation… why have the US and EU been reshoring?”​. The reason largely comes down to risk management and technological sovereignty in an era of geostrategic competition.

From a supply chain perspective, building up local fabs doesn’t mean everything is solved. Semiconductors rely on complex equipment and materials – an area where Europe actually has strength (ASML in the Netherlands for lithography, for example, and various specialty chemical companies). The Chips Act also addresses that by supporting the whole chain, not just the fabs. It’s about creating an ecosystem: universities producing engineers, suppliers of wafers/chemicals, fab construction expertise, etc., all within Europe.

The impact on defense technology will be gradual but significant. In a decade’s time, European fighter jets, tanks, satellites, etc., could be running primarily on European-designed and -fabbed chips, from processors to FPGAs to RF components. This would reduce concerns like ITAR restrictions (US International Traffic in Arms Regulations) which currently complicate some European programs using US-made chips. It also opens possibilities for European-specific innovations, since having local fabs can encourage designs optimised for European needs (for instance, ultra-low-power chips for long-life surveillance sensors, or high-temperature electronics for space probes).

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Challenges and Outlook

While the strategy is clear, there are many challenges. Building a competitive semiconductor industry is expensive and time-consuming. Europe will have to attract or train tens of thousands of skilled workers and ensure energy and water resources for fabs (ironically, Europe’s energy prices have been high, a consideration for fabs). It also needs to sustain political will across changes in government and avoid bureaucratic delays. Critics have pointed out that funding must reach companies efficiently and not be mired in red tape.

Nonetheless, the urgency is understood. The fact that strategic autonomy in semiconductors has been mentioned alongside autonomy in defense and energy in EU strategy documents shows its importance​. In the defense realm, initiatives like the European Defence Fund are also encouraging cross-border collaboration to develop advanced electronics and reduce duplication. The Chips Act complements this by ensuring that if European defense firms develop new tech, they can also manufacture it in Europe.

In conclusion, Europe’s shift towards semiconductor autonomy is a pivotal strategic project. If successful, it will lead to more resilient supply chains – meaning European industries (including defense contractors) can weather global shocks or political trade restrictions with less disruption. For defense technology, it means greater control over the components that go into weapons and systems, bolstering security and independence. It’s often said that “semiconductors are the new oil”​ in terms of strategic importance, and Europe is treating them as such: investing in domestic capacity to ensure it can keep the engines of its economy and its defenses running no matter what the global climate. The next decade will reveal how far these efforts go, but the direction is set: Europe intends to secure its own silicon future, and by extension, the capabilities that silicon enables in both commercial and military domains.