SEMICONDUCTORS AS KEY STRATEGIC ASSETS: NAVIGATING GLOBAL AND EUROPEAN SECURITY CHALLENGES

This paper traces the evolution of semiconductors from technical components to strategic assets, with a focus on how global leadership has shifted, particularly towards East Asia, through the logic of comparative advantage. The introductory section focuses on the historical roots and evolution of the supply chain, from the initial dominance of the United States to the rise of China and Taiwan as key global players. The second section shifts the focus to the European Union’s structural dependencies in three strategic sectors: civil technology, military defence and artificial intelligence. It then assesses recent EU policy initiatives, such as the Chips Act and IPCEI, aimed at reducing foreign dependency and enhancing technological sovereignty. 

INTRODUCTION 

A remarkably small, yet largely misunderstood, component in miniaturised electronics fundamentally shapes every facet of our modern existence.  They are an essential part of our devices, found buried in satellites, vehicles and data centres; microchips power the digital world we live in. They are the engines behind our communication, computation, mobility and even military strength. At the heart of these chips lies a class of material known as semiconductors, mainly silicon, formerly germanium (Guzzi, 2004). New generations of chips are evolving and emerging rapidly. The importance of chips for our economic production can be compared to that of oil or energy, due to the increasing digitisation of everyday practices (Varas et al., 2021).

As the US computer scientist Mark Weiser stated in the 1990s, “the most impactful technologies are often invisible, embedded in the fabric of everyday life, until they become indistinguishable”. As general-purpose technologies, chips are central to the global knowledge economy. Their ubiquity has enabled what is now referred to as “ubiquitous computing,” where computational capacity is seamlessly integrated across every layer of society and industry. This pervasive spread of chips has contributed to the increasing attention from policymakers towards the semiconductor industry. These components are perceived by governments as strategic assets, given the crucial role of technological leadership in ensuring both economic and national security.  It is precisely around the notion of “strategic assets” that this research develops. 

This paper aims to analyse how and why certain technologies, with particular reference to chips and semiconductors, play a strategic role, having become pillars of national security and geopolitical power. The introductory section traces the evolution of the global semiconductor industry. The analysis focuses mainly on the organisation of its supply chain through the concept of comparative advantage. The purpose of this initial analysis is to understand the role of the industry in question in the current geopolitical and global security context. The second section of the paper focuses mainly on the geopolitical implications of the semiconductor sector for the European Union, adopting a strategic autonomy perspective, with a focus on the European Union’s structural dependencies within the global supply chain. The analysis refers to three strategic sectors closely linked to the semiconductor industry: military defence, civil technology and artificial intelligence. Finally, the analysis will focus on the European response, assessing the main policy initiatives aimed at strengthening technological sovereignty and reducing dependence on external sources.

LITERATURE REVIEW

Evolution of the Global Semiconductor Supply Chain

Recent studies emphasise how semiconductor manufacturing is a highly specialised industry that operates across many countries. The United States dominates high-value R&D – leading chip design, electronic design automation (EDA) and intellectual property (IP) (European Commission. n.d.A). For example, US firms capture over 40% of global intellectual property (IP) design market share and supply most advanced EDA tools, with US/UK firms accounting for over 90% of core IP (Center for Strategic and International Studies n.d.A; Center for Strategic and International Studies n.d.B). By contrast, manufacturing (wafer fabrication, assembly, test, and materials) is concentrated in East Asia. Taiwan holds roughly a quarter of the global materials supply market (versus ~9% for Europe and 15% for China). Japanese, Taiwanese, and South Korean firms dominate wafer equipment and materials (e.g., Japanese Shin‑Etsu supplies ~29% of silicon wafers) (Center for Strategic and International Studies  n.d.B; Reuters, 2025). Indeed, analysts stress that “no single country is currently capable of performing all roles” in the semiconductor value chain (European Commission, n.d.a) Leadership in semiconductors has changed over time. The United States emerged as a world leader, and a milestone was marked by the discovery of the transistor in 1947, a crucial device for the establishment of solid-state electronics and the advancement of integrated circuits and microelectronics (Guzzi,2004). Starting in the 1980s, Japan began its rise in the semiconductor world, especially in the DRAM memory sector, causing trade tensions with the US; in the 1990s, three of the four leading chip companies were Japanese (Ciani & Nardo, 2022). Subsequently, Korea (Samsung leading DRAM) and Taiwan (with TSMC leading especially in foundries) also emerged with industrial strategies (Centre for Economic Policy Research n.d.). Europe remains marginal, but is strong in niches such as ASML and STMicro (Centre for Economic Policy Research, n.d.). Asia’s advance was possible mainly due to specific industrial policies and a focus on exports, which triggered strong competition and innovation in the sector (Centre for Economic Policy Research, n.d.). While the US –focused on defence– missed the consumer chip train.

EU Dependency and EU Policy Responses: Chips Act and National Initiatives:

The EU consumes about 20% of global chips but produces only ~9% (European Commission, 2024). Several studies emphasise this reliance as both an economic and strategic risk. Europe’s shortage has left its auto, telecom and defence sectors scrambling (European Commission, 2024; Patrick, 2016). Regarding AI and digital infrastructure, EU officials warn that dependence on foreign chipmakers limits “Europe’s digital resilience and security” (Carnegie Europe, n.d.). Similarly, Carnegie scholars argue that Europe’s reliance on external chips (especially from Asia) exposes it to pressures from both China and the US. In response, the EU and member states have launched a suite of measures. The EU Chips Act (2023) is the centerpiece. It commits approximately €43 billion (public and private) to boost Europe’s semiconductor sector (Ciani et al., 2022; Carrapico et al., 2025). It has three pillars: (1) R&D and innovation (via a Joint Undertaking), (2) capacity building for large-scale fabs, and (3) crisis preparedness (European Commission, n.d.b).

Debates and Critiques

Despite broad support for these initiatives, several critiques appear in the literature. One thread concerns feasibility. Some question whether catching up to 2 nm nodes is realistic, since advanced fabs cost $15–20 billion and only a few firms (TSMC, Intel, Samsung) are able to do so. Even EU officials stress that “no country, and even no continent, can be entirely self-sufficient” (Patrick, 2016). Critics suggest Europe should also pursue and support “trusted supply chains” rather than focus on reshoring (the process of relocating production back to the home country or region).

A second critique targets strategy. Analysts argue that the Chips Act lacks a coherent long-term plan beyond the 20% target for global semiconductor manufacturing capacity by 2030. This target refers to the EU’s goal to double its current 10% share of the global semiconductor market to 20% within the next decade. There is also debate over which chips matter most, as merely producing 20% may not improve resilience if Europe does not prioritise the right technologies.

Some analysts observe that past EU policies emphasised design and pilot R&D but neglected fab capacity, which is crucial, considering the geopolitical value and risks associated with the resilience of the semiconductor supply chain. For instance, German industry group ZVEI warns that current programs “hardly contribute” to actual fabrication and that new production remains underfunded (Varas, et al., 2021).  Funding is also debated. Unlike the US, much of the EU’s Chips Act budget was reallocated from other sources, notably Horizon Europe and Digital Europe (European Commission 2022). The EU Court of Auditors and several MEPs criticised this approach for undercutting other priorities such as cybersecurity and scientific research (European Commission 2022).

Lastly, the very notion of “strategic autonomy” is contested. Some experts warn that striving for full independence in the chip supply chain may be unattainable and even wasteful. Instead, they advocate for the concept of “open strategic autonomy,” securing domestic production in critical areas while maintaining international partnerships  (Patrick, 2016; Varas, et al., 2021). 

METHODOLOGY:

This paper is based on a two-step approach: first, it develops a solid theoretical framework, analysing the structure of the semiconductor industry and the concept of strategic technologies through academic sources and theoretical contributions. Then it focuses on empirical and institutional sources, such as Semiconductor Industry Association  reports and official EU documents, to examine current industrial strategies and policies. To ensure a concrete and accurate analysis, the paper refers to specific case studies, primarily how the Taiwan and China rivalry and their key role in the global semiconductor industry clearly highlight the strategic nature of chips. Examples of commercial rivalry between the US and China are also provided, analysed through the concept of sanctions and trade restrictions. The importance of chips for Europe is explained through three concrete examples from three strategic sectors whose existence is closely linked to the semiconductor industry: military defence, civil technology, and artificial intelligence. The analysis of these areas, chosen for their systemic relevance, provides concrete and concrete examples. This approach validates the research question, demonstrating how semiconductors directly impact the security, innovation, and competitiveness of the European Union, confirming their role as a strategic asset.

From US Dominance to Global Interdependence: An analysis of the logic of comparative advantage in the semiconductor market

Currently, electronic products play an indispensable role in all production chains. The incorporation of semiconductors in these systems continues to rise consistently. The increasing use of semiconductors comes from years of technological progress that have transformed modern industry and daily life. The invention of the integrated circuit (IC) during the 1950s set the United States on the path to early leadership in design and manufacturing (SIA, 2024). In fact, microelectronics companies and innovation were at the heart of US technological power between 1940 and 1960. This allowed American microelectronics firms to propel the United States to a leading position in the global semiconductor industry. However, the Silicon Valley giants were not destined to remain on the throne indefinitely. 

The real turning point occurred in the 1980s. It marked the era of competitive advantage in manufacturing, determined mainly by strength in process technology (Brown & Linden, 2011). After 1980, the US semiconductor industry experienced a significant decline in its global market share. At the beginning of that decade, US manufacturers ruled the industry with over 50% of semiconductor sales worldwide. However, due to fierce competition from Japanese companies, the impact of illegal “dumping,” and a severe industrial recession between 1985 and 1986, the US industry lost a total of nineteen percentage points of global market share, ceding its leading position in the global semiconductor market to Japan. 

The rapid rise of Japan alarmed Washington, leading to political and trade tensions. This period is remembered as the first semiconductor war, in which technological progress was intertwined with aggressive trade tactics and political pressure. One of the most egregious incidents was the 1984 arrest of Hitachi and Mitsubishi employees by the FBI for attempting to steal IBM’s chip designs, an act of industrial espionage that underscored the stakes of the rivalry (Aresu, 2022 pp. 12-14).  Meanwhile, the US authorities intensified the use of sanctions. In 1986, when Fujitsu considered acquiring the American company Fairchild Semiconductor, the US government blocked the agreement, citing national security concerns. Just a year later, the Reagan administration imposed steep 100% tariffs on certain Japanese products, with the aim of forcing Japan to open the semiconductor market to foreign competition, in line with a trade agreement signed the previous year (Aresu, 2022 pp. 12-14). 

Contested Leadership: From US Dominance to Asian Supremacy

Despite frictions, by the 1990s the United States had regained its leading position thanks to strategic government support, a strong R&D ecosystem, and key innovations by firms like Intel. Nevertheless, this period also marked the consolidation of the comparative advantage logic, which would shape the global semiconductor landscape in the decades to follow.  

Against this backdrop is the current rise of China, which has significantly narrowed the gap with the US in terms of total R&D expenditure over the past two decades. Through strong government support, Beijing has also started funding pre-competitive research, strengthening the foundations of its domestic technology ecosystem. According to OECD data, China was already the second-largest research investment country in the world in 2018, with total expenditure only 5% lower than that of the US when measured in purchasing power parity (Varas et al., 2021). 

To fully understand this global leadership in the field, it is useful to examine how the semiconductor supply chain is organised internationally: what are the most relevant steps, the most cost-sensitive steps, and the competitive advantages developed by each area over time. Today, the global semiconductors supply chain is based on a strong geographical specialisation. Such an industry requires large financial investments, in most cases supported by government incentives, solid infrastructure and a highly qualified workforce. (Varas et al., 2021). The heart of global production is East Asia, especially China, Taiwan, South Korea and Japan, with more than 75% of the world’s production capacity (Varas et al., 2021). This final phase of the supply chain, chip assembly, packaging, and testing, requires significant investment in specialised facilities, with companies in this segment spending over 15% of their annual revenue on building and upgrading plants. It is traditionally a less costly phase as it is less capital-intensive and mainly labour-intensive; but the introduction of advanced packaging technologies is transforming the sector. This is making assembly, packaging and testing increasingly sophisticated, increasing both the technological complexity and the investment costs required to remain competitive. 

An extremely relevant factor in the geographical division of the supply chain is labour costs, especially for the assembly, packaging and testing stages –which require less capital investment. These activities are more sensitive to labour costs, which is why they are concentrated in countries such as China, where wages, even for more skilled workers, are much lower than in the US. Significantly, wages can be up to 80% lower in China, Taiwan, Singapore and Malaysia. 

Taiwan, while remaining in a relatively neutral position in the geopolitical rivalry between China and the US, is home to around 90% of the world’s advanced-chip production. This dominance is due to both its competitive cost advantage over China, Singapore and Japan, and its ability to reinvest revenues in the industry itself (Palma et al., 2022). TSMC is the leading company representing Taiwan’s value in the supply chain. The Taiwanese giant was listed on the Taiwan Stock Exchange in 1994 and subsequently on the New York Stock Exchange in 1997, establishing itself as one of the few manufacturers capable of producing the most advanced chips (CNBC, 2022). Starting in 2013, Apple also started using TSMC to produce the A-series chips for iPhones, abandoning Samsung, its direct competitor in the smartphone market. Moreover, given that building a semiconductor factory requires at least two years and investments of around 10 billion dollars, companies such as Apple, Qualcomm and Nvidia have chosen not to produce directly, but to outsource production to TSMC, which specialises exclusively in foundry activities (CNBC, 2022). 

These developments, including differences in labour costs, investment requirements, and regional reinvestment capacity, explains the wide geographical specialisation mentioned above, with regions focusing primarily on different activities within the semiconductor supply chain, based on the comparative advantage developed over decades of industry history (Palma et al., 2022). 

The reason behind the structure of the semiconductor industry –presenting a highly specialised global supply chain and integrated transnational production system– is the need for strong technical expertise and adequate scale. Take, for example, a mid-range automobile that incorporates around fifty chips, distributed across various electronic boards. The manufacturer of one of these boards, based in Europe, must source components from suppliers scattered around the globe, in Japan, Taiwan, South Korea, the US, and Europe. Then, the production of each chip, with its specific characteristics, involves a sequence of manufacturing and intellectual contributions. This entails dedicated chip design utilising sophisticated CAD tools. Additionally, third-party innovations such as Intellectual Properties (IP) may be employed in the chip structure, such as the structure of a processor (Lacaita, 2022).

This dense network of global interdependencies –which makes it impossible for any single country to control the entire production chain– has increased the attention of governments and policy makers towards the semiconductor sector, prompting them to recognise the industry as a strategic sector of national interest. This attention reflects an increasingly widespread awareness: control of the most advanced technologies is no longer just a matter of economic competitiveness, but is, above all today, a matter of national security.

Semiconductors: The Backbone of Technological Security and Europe’s Quest for Strategic Autonomy

Technological supremacy is a determining factor in the global balance of power and is capable of profoundly affecting a state’s ability to protect its sovereignty and strategic interests. The notion of national security linked to technological supremacy is not a novel concept. Technology stands as one of the most potent factors capable of reshaping the balance of power among nations, with a direct impact on a state’s fundamental existence and its pursuit of national interests on the international stage (Sadjuk, 2021).

The example of Taiwan, as cited above, is perfectly suited to understanding this scenario. Taiwan’s geopolitical importance stems above all from China’s constant threats and expansionist ambitions, which sees Taiwan not as an independent state but as a province to be assimilated as soon as possible. Taiwan is precisely a strategic defensive asset: its production capacity is often referred to as a “silicon shield”, the island’s technological protection against possible attacks. In the event of a Chinese invasion, the repercussions on the global economy would be enormous, similar to those caused by the pandemic, which led to the temporary closure of factories in China and a severe chip shortage, increasing car delivery times by 70%. The consequences would extend to the entire Western world, including the European Union (CNBC,2022).

The case of Taiwan clearly demonstrates how semiconductors represent a strategic asset of global significance, capable of propelling an island without international political weight to the centre of contemporary geopolitical dynamics. 

Since 2018, Washington has introduced restrictions on the export of advanced technologies to Chinese companies, such as Huawei, for national security reasons, later extending the controls to the entire chip supply chain (Aresu, 2022, p. 43.). The aim was to slow down China’s technological rise, particularly in areas such as artificial intelligence and defence. This strategy has extended throughout the semiconductor supply chain, affecting software, design and production tools. A key move, considering that the United States holds a monopoly on key technologies such as EDA (Electronic Design Automation) and some essential production equipment. 

In 2020, the FBI and CISA denounced Chinese informational attacks against research institutes engaged in the fight against COVID-19 with the aim of obtaining health data and information on tests and vaccines, and in the same year Donald Trump introduced visa restrictions for Chinese students and researchers involved in “military-civilian fusion” activities, but this measure was later withdrawn following strong pressure, including from universities such as Harvard (Aresu, 2022, p. 43).

In response Beijing accelerated its “Made in China 2025” initiative, a national strategy announced by the Chinese State Council in 2015, with investments of up to $200 billion to achieve technological autonomy (Kennedy, 2015). The main goal was to promote local innovation, achieve self-sufficiency in key sectors and strengthen the country’s international leadership. This involves gradually replacing foreign technology in Chinese industry through significant investments (Trejo & Balderrama, 2018). 

To counter the Chinese rise, the US passed the Chips Act in 2022, allocating 52.7 billion to relocate production and strengthen research and innovation (USA Congress, 2022).  The purpose of the Biden administration was precisely to “win the race of the 21st century,” by strengthening the manufacturing industry, supply chains, and national security, and by increasing research to address the fact that 75% of global production is entrusted to East Asia (The White House, 2022).

In today’s constant race for supremacy, analysis of ESIA data shows that the European Union has the lowest share of wafer production among the major producers. In 2020 the EU accounted for 9.4%, compared with Taiwan 18.8%, Korea 18.4%, China 14.4%. Only Singapore lags behind, with 6.5% of production (ESIA, 2021).

The following sections focus on how Europe intends to strengthen its geopolitical security by reducing dependence on foreign chip suppliers and enhancing domestic production. The analysis will cover the three main sectors affected by this dependence: civil technology, military defence and artificial intelligence. 

Analysis: The EU’s Geopolitical Security over Chips

Enhancing geopolitical security requires countries to protect themselves from external shocks and act independently of them. Although accentuated in 2025 with Trump’s “Liberation Day” tariffs, geopolitical risks have been increasing for more than a decade. The rise in these risks is most likely a result of weakened global economic cooperation after the 2008 financial crisis and the disregard of global and regional powers of international norms (Bremmer & Roubini, 2011; Patrick, 2016).

Therefore, countries seek to mitigate these threats, especially for sectors which are crucial for their survival. The EU has realised its need to enhance its geopolitical security in the chip market, which not only underpins the functioning of technological infrastructure and modern electronics but is also heavily concentrated in the hands of foreign countries (Bouwmeester, 2023; Ferrand, 2025).

Even if some foreign countries are fellow democracies such as Taiwan and the US, changes in their foreign policy or an internal shock could trigger a slowdown in chip design and chip manufacturing. If the EU can reduce this foreign dependency, the EU can be more confident in the development of its new continental military strategy and its technology market, without being swayed by international affairs.

Dependency in Three Sectors

The dependency problem is reflected in three key sectors which depend on semiconductors: civilian technology, military defence, and AI. It is the result of Europe’s liberal market philosophy, originating from the rise of globalisation (Sprokholt, 2024). As mentioned earlier in the introductory section of this paper, Europe decided to rely on the endowed characteristics of other nations (highly technical skilled workers, capital and land) to innovate and fabricate semiconductors. Since that moment, the EU remains especially reliant on the United States designers and East Asian producers, Taiwan’s TSMC, South Korea’s Samsung, Japan’s Toshiba, and China’s SMIC, as domestic capacity accounts for less than 10 percent of global output (Dauvé, 2025). Its chip designer industry is dwarfed by East Asia and the US (Bouwmeester, 2023).

TSMC’s Dresden fab, backed by €5 billion in German and EU aid, exemplifies this dependence: despite local production, key process technologies and IP remain under Taiwanese control, while ASML’s Dutch lithography machines are indispensable for manufacturing advanced nodes worldwide (EC, 2024). Coupled with the still present issue of foreign dominance in the chip supply chain, any disruption along the designer to shipping chain could prove detrimental to the three sectors most reliant on chips.

While the EU does possess 11 out of 100 of the top tech firms in the world, the presence of foreign companies coupled with its dependency on semiconductors for its own industries makes the EU vulnerable (Digital Europe, 2024). For the automobile-tech sector, the 2020 pandemic resulted in a chip shortage, and a shortfall of 18 million vehicles (Allianz Trade, 2022). The chip shortage cost Europeans around 100 billion euros. The pandemic’s effect on global chip supply chains can also be extrapolated to other industries relying on technology such as construction, aerospace and other industries (de Vet et al., 2021). 

Outside the automobile industry, chips are ubiquitous in consumer and industrial technology. European telecom gear, industrial robots, medical devices and “smart” appliances all rely on imported chips. For example, 5G and future 6G networks require advanced RF and baseband chips, none of which Europe mass-produces (Ciani & Nardo, 2022). Technology-reliant sectors make up a large part of Europe’s modern economy and reducing foreign dependency on chips is thus at the forefront to secure the growth prospects of European companies (Mensi & Pie, 2022). 

For European military defence, the dependency on chips from Taiwan is an important concern in case of a disruption coming from a future Chinese invasion (EC, 2025). Military equipment and weapons such as missile guidance systems and military communication have semiconductors as their backbone. With Europe reinvigorating its home ground defence capabilities, a chip disruption from Taiwanese manufactured chips could likely hinder further production of such military technologies. 

In recent months, many EU countries such as France, Germany –but also their close neighbour, the UK– have committed to increasing their defence capabilities, many of which rely on semiconductors to run many technological components (Sipri, 2025). However, under the current regime, European defence companies utilise stocking of inventories and other means to secure their semiconductor stock, which largely come from Taiwan and South Korea (Reuters, 2022; Bressa et al., 2025). 

Aside from relying on allied nations, the EU’s biggest threat regarding its military use of semiconductors could be the increasing presence of China in chip manufacturing. Although not currently at the same level as Taiwan and other leaders in the chip market, the recent geopolitical uncertainty caused by the US from tariffs and China’s central role in the resource supply of semiconductors has started to push the EU to cooperate with the nation (Cytera, 2025).

Similarly to military and technology, the development of European AI also hinges on semiconductors. Europe’s AI initiatives rely overwhelmingly on externally manufactured semiconductors: EU facilities only produce mature-node chips (>14 nm), whereas leading-edge AI accelerators require sub-7 nm processes available only from Taiwan’s TSMC and South Korea’s Samsung (Di Giovanni, 2024). Consequently, over 90% of GPUs and AI ASICs deployed in European data centres and research clusters are sourced from Nvidia (US) and TSMC (Taiwan) (ECA, 2025).

This reliance embeds strategic risks: US export controls on AI chips can instantly throttle European access, as seen when proposed restrictions prompted urgent EU–US negotiations to exempt key member states (EP 2025). A cross-strait conflict could likewise disrupt TSMC’s Taiwanese fabs, jeopardising continental supercomputing programmes under EuroHPC (Ramesh, 2025; EuroHPC Joint Undertaking, 2021).

Despite the European Processor Initiative’s successful Phase I –which delivered the Rhea prototype CPU and EPAC accelerator framework– these remain limited to validation boards rather than mass production, perpetuating dependence on off-the-shelf Nvidia and AMD accelerators for large-scale model training (EPI, 2021). Even with the €43 billion Chips Act aiming to double EU chip market share by 2030, expert audits warn that sub-7 nm capacity cannot be achieved in time, meaning next-generation AI hardware will remain predominantly offshore (ECA, 2025; EC, 2022). Thus, Europe’s home-grown AI tools and research ecosystems will continue to hinge on semiconductor design, IP, and fabrication controlled by non-EU foundries, underscoring a deep structural vulnerability in the bloc’s digital sovereignty strategy (Bureau of Industry and Security, 2025).

Resolving the Geopolitical Insecurity

The EU has been pushing to reduce this dependency as part of a larger EU initiative for more than a decade: strategic autonomy (Mario, 2022). The purpose of strategic autonomy is to reduce dependency not only on chips but also on most digital services and products from foreign companies and allow European equivalents to develop and compete. This way, if global disruptions occur, European companies could help safeguard the EU’s economy and military. In terms of semiconductors themselves, France, Germany and Italy have been signing agreements since 2018 to boost public investment into the private production of chips in the EU. This move is a stark shift from previous decades of EU economic and foreign policy which had been more economically liberal and trustworthy in the supply of chips from third countries.

Major EU initiatives since 2018 include Important Projects of Common European Interest (IPCEIs) on microelectronics, the Chips Act, and national schemes. For example, the first IPCEI –approved in December of 2018– involved France, Germany, Italy, and later Austria, investing up to €1.9 billion public –while unlocking €6.5B private– in R&D for chips, sensors and power electronics (EC, 2023). In June 2023 a second, wider IPCEI “Microelectronics & Communication Technologies” was approved under EU law, with 14 EU states pledging €8.1B, to leverage €13.7B in industry funds, for innovation spanning 5G/6G, AI chips, autonomous driving and energy systems (European Commission, 2023). In sum, EU-level measures now emphasise pan-European R&D consortia and novel fabs, alongside supply‐chain monitoring (see Table 1 Below).

Table  1: EU-level Chip Measures

Policy/Initiative	Date	Aim	Funding (public)
EU Chips Act (3 pillars)	Sept 2023	Boost EU chip R&D (2nm, quantum), fab capacity, supply monitoring to reach 20% share by 2030	~€43B (EU+MS+private), incl. €11B R&D and ~€30B for first-of-kind fabs
IPCEI on Microelectronics (1st)	Dec 2018	Cross-border R&D in chips, sensors, power devices	€1.9B (EU member states)
IPCEI on Microelectronics & Comm. Tech.	Jun 2023	Chips for AI, comms, EVs, green tech (5G, 6G, quantum)	€8.1B (14 states)
France: “Electronique 2030” (France 2030)	2022	Double France’s chip output by 2030; support fabs/R&D	~€5B (by 2030)
Germany: Chips Initiative	2022–24	Subsidies to attract major fabs (incl. TSMC/JV)	~€2–3B (announced)

Note: Table adapted and compiled by the author.

As Monsees (2024) observes, semiconductors are now “core” to the EU’s digital sovereignty agenda, but globalised production means Brussels must balance aspirations for self-sufficiency with acceptance of interdependence (Carrapico & Ferrand, 2025). In practice, EU policy legitimises large subsidies and public‐private consortia to rebuild local capacity. The 2023 European Chips Act explicitly frames its goal as ensuring Europe’s “strategic autonomy” by securing a stable supply of critical chips (European Commission, 2023). 

It sets an ambitious target (doubling EU share to 20% of global output by 2030) with about €43 billion in mobilised public and private funds. Critics note that unlike the new US CHIPS Act, most EU funding is reshuffled from existing programs (e.g. Horizon Europe) fuelling debate about trade-offs (some worry that diverting €2.7B from Horizon and €1.4B from Digital Europe weakens other priorities) (A.U. Lsip, 2024).

Likewise, national governments launched plans: France’s “Electronique 2030” (part of France 2030) earmarks €5B to double French manufacturing capacity and train engineers (Gouvernement Français, 2025); Germany is preparing its own semiconductor strategy and has put out calls for projects requiring modern production capacities, especially to get ahead on artificial intelligence, although more recently this past push for modernisation is being redirecting its funds instead to repairing roads (Kyriasoglou, 2025).

Notably, a group of ten EU states recently urged revising the Chips Act’s 20% target, citing a Court of Auditors warning that available resources might be insufficient. The Commission responded that the target itself is “essential to mobilise large amounts of money” (Kroet, 2025), underscoring that even ambitious goals serve as political instruments to catalyse investment.

This EU-level push has required active member-state involvement. In many cases, France and Germany have been the vanguard. France, with its strong sovereigntist discourse, pushed early to frame semiconductors as strategic assets. Macron’s government tied chips to national autonomy, deploying France’s state investment bank (Bpifrance) to co-fund fabs (e.g. supporting the now-stalled STMicro/GF fab in Crolles) and partnering in pan-European R&D. For example in summer 2022 Macron highlighted that EU dependence on chips was “no longer acceptable”. 

Germany, with its export-oriented economy (especially automobiles), has also rallied behind chips. It rapidly constructed a €10B “Chips made in Europe” program, inviting TSMC (which opened a 12 nm fab in Dresden with EU aid) and supporting Infineon/Bosch expansions. German officials have spoken of providing “needs-based funding” for fabs. Both countries seek to leverage their industrial bases (automotive, equipment, defence) and large R&D sectors to make EU semiconductor policy succeed. Other countries (Italy, the Netherlands, Poland, etc.) participate in IPCEIs or plan their own strategies, but the Franco-German engine has dominated the discourse.

CONCLUSIONS

The paper highlights the centrality of semiconductors as real strategic resources, the control of which is crucial for economic and national security. They are now the engine powering vital sectors like artificial intelligence, automotive, defence, and telecommunications. The Union’s structural dependence on non-European suppliers, in particular the United States and East Asia, is the result of industrial choices made in a changed global context.  One of today’s main challenges lies in the fragmentation of this global supply chain, which marks the dependence on outsourced production, with Taiwan representing the vital centre of production due to its low-cost efficiency and significant technological expertise. This situation has been further emphasised since the pandemic, which has highlighted Europe’s vulnerabilities and fragilities in this crucial sector. Moreover, the growing global interdependence within the semiconductor supply chain has made the sector particularly vulnerable to geopolitical shocks and economic conflicts, with repercussions felt worldwide. Any disruptions in the supply chain would compromise military capabilities and jeopardise national security. In this context, the global geopolitical balance has never been more important. What we are facing today is a highly polarised geopolitical context, in which the rivalry between the US and China has further accentuated the strategic nature of semiconductors.

Considering this scenario, the challenge for Europe is twofold: to strengthen its strategic autonomy without giving up global cooperation. Rather than a return to autarky, it is a matter of building a resilient technological sovereignty, able to protect vital interests in the event of a crisis but also to remain competitive and connected in an increasingly fragmented world economy.

REFERENCES

AlThis paper traces the evolution of semiconductors from technical components to strategic assets, with a focus on how global leadership has shifted, particularly towards East Asia, through the logic of comparative advantage. The introductory section focuses on the historical roots and evolution of the supply chain, from the initial dominance of the United States to the rise of China and Taiwan as key global players. The second section shifts the focus to the European Union’s structural dependencies in three strategic sectors: civil technology, military defence and artificial intelligence. It then assesses recent EU policy initiatives, such as the Chips Act and IPCEI, aimed at reducing foreign dependency and enhancing technological sovereignty. 

INTRODUCTION 

A remarkably small, yet largely misunderstood, component in miniaturised electronics fundamentally shapes every facet of our modern existence.  They are an essential part of our devices, found buried in satellites, vehicles and data centres; microchips power the digital world we live in. They are the engines behind our communication, computation, mobility and even military strength. At the heart of these chips lies a class of material known as semiconductors, mainly silicon, formerly germanium (Guzzi, 2004). New generations of chips are evolving and emerging rapidly. The importance of chips for our economic production can be compared to that of oil or energy, due to the increasing digitisation of everyday practices (Varas et al., 2021).

As the US computer scientist Mark Weiser stated in the 1990s, “the most impactful technologies are often invisible, embedded in the fabric of everyday life, until they become indistinguishable”. As general-purpose technologies, chips are central to the global knowledge economy. Their ubiquity has enabled what is now referred to as “ubiquitous computing,” where computational capacity is seamlessly integrated across every layer of society and industry. This pervasive spread of chips has contributed to the increasing attention from policymakers towards the semiconductor industry. These components are perceived by governments as strategic assets, given the crucial role of technological leadership in ensuring both economic and national security.  It is precisely around the notion of “strategic assets” that this research develops. 

This paper aims to analyse how and why certain technologies, with particular reference to chips and semiconductors, play a strategic role, having become pillars of national security and geopolitical power. The introductory section traces the evolution of the global semiconductor industry. The analysis focuses mainly on the organisation of its supply chain through the concept of comparative advantage. The purpose of this initial analysis is to understand the role of the industry in question in the current geopolitical and global security context. The second section of the paper focuses mainly on the geopolitical implications of the semiconductor sector for the European Union, adopting a strategic autonomy perspective, with a focus on the European Union’s structural dependencies within the global supply chain. The analysis refers to three strategic sectors closely linked to the semiconductor industry: military defence, civil technology and artificial intelligence. Finally, the analysis will focus on the European response, assessing the main policy initiatives aimed at strengthening technological sovereignty and reducing dependence on external sources.

LITERATURE REVIEW

Evolution of the Global Semiconductor Supply Chain

Recent studies emphasise how semiconductor manufacturing is a highly specialised industry that operates across many countries. The United States dominates high-value R&D – leading chip design, electronic design automation (EDA) and intellectual property (IP) (European Commission. n.d.A). For example, US firms capture over 40% of global intellectual property (IP) design market share and supply most advanced EDA tools, with US/UK firms accounting for over 90% of core IP (Center for Strategic and International Studies n.d.A; Center for Strategic and International Studies n.d.B). By contrast, manufacturing (wafer fabrication, assembly, test, and materials) is concentrated in East Asia. Taiwan holds roughly a quarter of the global materials supply market (versus ~9% for Europe and 15% for China). Japanese, Taiwanese, and South Korean firms dominate wafer equipment and materials (e.g., Japanese Shin‑Etsu supplies ~29% of silicon wafers) (Center for Strategic and International Studies  n.d.B; Reuters, 2025). Indeed, analysts stress that “no single country is currently capable of performing all roles” in the semiconductor value chain (European Commission, n.d.a) Leadership in semiconductors has changed over time. The United States emerged as a world leader, and a milestone was marked by the discovery of the transistor in 1947, a crucial device for the establishment of solid-state electronics and the advancement of integrated circuits and microelectronics (Guzzi,2004). Starting in the 1980s, Japan began its rise in the semiconductor world, especially in the DRAM memory sector, causing trade tensions with the US; in the 1990s, three of the four leading chip companies were Japanese (Ciani & Nardo, 2022). Subsequently, Korea (Samsung leading DRAM) and Taiwan (with TSMC leading especially in foundries) also emerged with industrial strategies (Centre for Economic Policy Research n.d.). Europe remains marginal, but is strong in niches such as ASML and STMicro (Centre for Economic Policy Research, n.d.). Asia’s advance was possible mainly due to specific industrial policies and a focus on exports, which triggered strong competition and innovation in the sector (Centre for Economic Policy Research, n.d.). While the US –focused on defence– missed the consumer chip train.

EU Dependency and EU Policy Responses: Chips Act and National Initiatives:

The EU consumes about 20% of global chips but produces only ~9% (European Commission, 2024). Several studies emphasise this reliance as both an economic and strategic risk. Europe’s shortage has left its auto, telecom and defence sectors scrambling (European Commission, 2024; Patrick, 2016). Regarding AI and digital infrastructure, EU officials warn that dependence on foreign chipmakers limits “Europe’s digital resilience and security” (Carnegie Europe, n.d.). Similarly, Carnegie scholars argue that Europe’s reliance on external chips (especially from Asia) exposes it to pressures from both China and the US. In response, the EU and member states have launched a suite of measures. The EU Chips Act (2023) is the centerpiece. It commits approximately €43 billion (public and private) to boost Europe’s semiconductor sector (Ciani et al., 2022; Carrapico et al., 2025). It has three pillars: (1) R&D and innovation (via a Joint Undertaking), (2) capacity building for large-scale fabs, and (3) crisis preparedness (European Commission, n.d.b).

Debates and Critiques

Despite broad support for these initiatives, several critiques appear in the literature. One thread concerns feasibility. Some question whether catching up to 2 nm nodes is realistic, since advanced fabs cost $15–20 billion and only a few firms (TSMC, Intel, Samsung) are able to do so. Even EU officials stress that “no country, and even no continent, can be entirely self-sufficient” (Patrick, 2016). Critics suggest Europe should also pursue and support “trusted supply chains” rather than focus on reshoring (the process of relocating production back to the home country or region).

A second critique targets strategy. Analysts argue that the Chips Act lacks a coherent long-term plan beyond the 20% target for global semiconductor manufacturing capacity by 2030. This target refers to the EU’s goal to double its current 10% share of the global semiconductor market to 20% within the next decade. There is also debate over which chips matter most, as merely producing 20% may not improve resilience if Europe does not prioritise the right technologies.

Some analysts observe that past EU policies emphasised design and pilot R&D but neglected fab capacity, which is crucial, considering the geopolitical value and risks associated with the resilience of the semiconductor supply chain. For instance, German industry group ZVEI warns that current programs “hardly contribute” to actual fabrication and that new production remains underfunded (Varas, et al., 2021).  Funding is also debated. Unlike the US, much of the EU’s Chips Act budget was reallocated from other sources, notably Horizon Europe and Digital Europe (European Commission 2022). The EU Court of Auditors and several MEPs criticised this approach for undercutting other priorities such as cybersecurity and scientific research (European Commission 2022).

Lastly, the very notion of “strategic autonomy” is contested. Some experts warn that striving for full independence in the chip supply chain may be unattainable and even wasteful. Instead, they advocate for the concept of “open strategic autonomy,” securing domestic production in critical areas while maintaining international partnerships  (Patrick, 2016; Varas, et al., 2021). 

METHODOLOGY:

This paper is based on a two-step approach: first, it develops a solid theoretical framework, analysing the structure of the semiconductor industry and the concept of strategic technologies through academic sources and theoretical contributions. Then it focuses on empirical and institutional sources, such as Semiconductor Industry Association  reports and official EU documents, to examine current industrial strategies and policies. To ensure a concrete and accurate analysis, the paper refers to specific case studies, primarily how the Taiwan and China rivalry and their key role in the global semiconductor industry clearly highlight the strategic nature of chips. Examples of commercial rivalry between the US and China are also provided, analysed through the concept of sanctions and trade restrictions. The importance of chips for Europe is explained through three concrete examples from three strategic sectors whose existence is closely linked to the semiconductor industry: military defence, civil technology, and artificial intelligence. The analysis of these areas, chosen for their systemic relevance, provides concrete and concrete examples. This approach validates the research question, demonstrating how semiconductors directly impact the security, innovation, and competitiveness of the European Union, confirming their role as a strategic asset.

From US Dominance to Global Interdependence: An analysis of the logic of comparative advantage in the semiconductor market

Currently, electronic products play an indispensable role in all production chains. The incorporation of semiconductors in these systems continues to rise consistently. The increasing use of semiconductors comes from years of technological progress that have transformed modern industry and daily life. The invention of the integrated circuit (IC) during the 1950s set the United States on the path to early leadership in design and manufacturing (SIA, 2024). In fact, microelectronics companies and innovation were at the heart of US technological power between 1940 and 1960. This allowed American microelectronics firms to propel the United States to a leading position in the global semiconductor industry. However, the Silicon Valley giants were not destined to remain on the throne indefinitely. 

The real turning point occurred in the 1980s. It marked the era of competitive advantage in manufacturing, determined mainly by strength in process technology (Brown & Linden, 2011). After 1980, the US semiconductor industry experienced a significant decline in its global market share. At the beginning of that decade, US manufacturers ruled the industry with over 50% of semiconductor sales worldwide. However, due to fierce competition from Japanese companies, the impact of illegal “dumping,” and a severe industrial recession between 1985 and 1986, the US industry lost a total of nineteen percentage points of global market share, ceding its leading position in the global semiconductor market to Japan. 

The rapid rise of Japan alarmed Washington, leading to political and trade tensions. This period is remembered as the first semiconductor war, in which technological progress was intertwined with aggressive trade tactics and political pressure. One of the most egregious incidents was the 1984 arrest of Hitachi and Mitsubishi employees by the FBI for attempting to steal IBM’s chip designs, an act of industrial espionage that underscored the stakes of the rivalry (Aresu, 2022 pp. 12-14).  Meanwhile, the US authorities intensified the use of sanctions. In 1986, when Fujitsu considered acquiring the American company Fairchild Semiconductor, the US government blocked the agreement, citing national security concerns. Just a year later, the Reagan administration imposed steep 100% tariffs on certain Japanese products, with the aim of forcing Japan to open the semiconductor market to foreign competition, in line with a trade agreement signed the previous year (Aresu, 2022 pp. 12-14). 

Contested Leadership: From US Dominance to Asian Supremacy

Despite frictions, by the 1990s the United States had regained its leading position thanks to strategic government support, a strong R&D ecosystem, and key innovations by firms like Intel. Nevertheless, this period also marked the consolidation of the comparative advantage logic, which would shape the global semiconductor landscape in the decades to follow.  

Against this backdrop is the current rise of China, which has significantly narrowed the gap with the US in terms of total R&D expenditure over the past two decades. Through strong government support, Beijing has also started funding pre-competitive research, strengthening the foundations of its domestic technology ecosystem. According to OECD data, China was already the second-largest research investment country in the world in 2018, with total expenditure only 5% lower than that of the US when measured in purchasing power parity (Varas et al., 2021). 

To fully understand this global leadership in the field, it is useful to examine how the semiconductor supply chain is organised internationally: what are the most relevant steps, the most cost-sensitive steps, and the competitive advantages developed by each area over time. Today, the global semiconductors supply chain is based on a strong geographical specialisation. Such an industry requires large financial investments, in most cases supported by government incentives, solid infrastructure and a highly qualified workforce. (Varas et al., 2021). The heart of global production is East Asia, especially China, Taiwan, South Korea and Japan, with more than 75% of the world’s production capacity (Varas et al., 2021). This final phase of the supply chain, chip assembly, packaging, and testing, requires significant investment in specialised facilities, with companies in this segment spending over 15% of their annual revenue on building and upgrading plants. It is traditionally a less costly phase as it is less capital-intensive and mainly labour-intensive; but the introduction of advanced packaging technologies is transforming the sector. This is making assembly, packaging and testing increasingly sophisticated, increasing both the technological complexity and the investment costs required to remain competitive. 

An extremely relevant factor in the geographical division of the supply chain is labour costs, especially for the assembly, packaging and testing stages –which require less capital investment. These activities are more sensitive to labour costs, which is why they are concentrated in countries such as China, where wages, even for more skilled workers, are much lower than in the US. Significantly, wages can be up to 80% lower in China, Taiwan, Singapore and Malaysia. 

Taiwan, while remaining in a relatively neutral position in the geopolitical rivalry between China and the US, is home to around 90% of the world’s advanced-chip production. This dominance is due to both its competitive cost advantage over China, Singapore and Japan, and its ability to reinvest revenues in the industry itself (Palma et al., 2022). TSMC is the leading company representing Taiwan’s value in the supply chain. The Taiwanese giant was listed on the Taiwan Stock Exchange in 1994 and subsequently on the New York Stock Exchange in 1997, establishing itself as one of the few manufacturers capable of producing the most advanced chips (CNBC, 2022). Starting in 2013, Apple also started using TSMC to produce the A-series chips for iPhones, abandoning Samsung, its direct competitor in the smartphone market. Moreover, given that building a semiconductor factory requires at least two years and investments of around 10 billion dollars, companies such as Apple, Qualcomm and Nvidia have chosen not to produce directly, but to outsource production to TSMC, which specialises exclusively in foundry activities (CNBC, 2022). 

These developments, including differences in labour costs, investment requirements, and regional reinvestment capacity, explains the wide geographical specialisation mentioned above, with regions focusing primarily on different activities within the semiconductor supply chain, based on the comparative advantage developed over decades of industry history (Palma et al., 2022). 

The reason behind the structure of the semiconductor industry –presenting a highly specialised global supply chain and integrated transnational production system– is the need for strong technical expertise and adequate scale. Take, for example, a mid-range automobile that incorporates around fifty chips, distributed across various electronic boards. The manufacturer of one of these boards, based in Europe, must source components from suppliers scattered around the globe, in Japan, Taiwan, South Korea, the US, and Europe. Then, the production of each chip, with its specific characteristics, involves a sequence of manufacturing and intellectual contributions. This entails dedicated chip design utilising sophisticated CAD tools. Additionally, third-party innovations such as Intellectual Properties (IP) may be employed in the chip structure, such as the structure of a processor (Lacaita, 2022).

This dense network of global interdependencies –which makes it impossible for any single country to control the entire production chain– has increased the attention of governments and policy makers towards the semiconductor sector, prompting them to recognise the industry as a strategic sector of national interest. This attention reflects an increasingly widespread awareness: control of the most advanced technologies is no longer just a matter of economic competitiveness, but is, above all today, a matter of national security.

Semiconductors: The Backbone of Technological Security and Europe’s Quest for Strategic Autonomy

Technological supremacy is a determining factor in the global balance of power and is capable of profoundly affecting a state’s ability to protect its sovereignty and strategic interests. The notion of national security linked to technological supremacy is not a novel concept. Technology stands as one of the most potent factors capable of reshaping the balance of power among nations, with a direct impact on a state’s fundamental existence and its pursuit of national interests on the international stage (Sadjuk, 2021).

The example of Taiwan, as cited above, is perfectly suited to understanding this scenario. Taiwan’s geopolitical importance stems above all from China’s constant threats and expansionist ambitions, which sees Taiwan not as an independent state but as a province to be assimilated as soon as possible. Taiwan is precisely a strategic defensive asset: its production capacity is often referred to as a “silicon shield”, the island’s technological protection against possible attacks. In the event of a Chinese invasion, the repercussions on the global economy would be enormous, similar to those caused by the pandemic, which led to the temporary closure of factories in China and a severe chip shortage, increasing car delivery times by 70%. The consequences would extend to the entire Western world, including the European Union (CNBC,2022).

The case of Taiwan clearly demonstrates how semiconductors represent a strategic asset of global significance, capable of propelling an island without international political weight to the centre of contemporary geopolitical dynamics. 

Since 2018, Washington has introduced restrictions on the export of advanced technologies to Chinese companies, such as Huawei, for national security reasons, later extending the controls to the entire chip supply chain (Aresu, 2022, p. 43.). The aim was to slow down China’s technological rise, particularly in areas such as artificial intelligence and defence. This strategy has extended throughout the semiconductor supply chain, affecting software, design and production tools. A key move, considering that the United States holds a monopoly on key technologies such as EDA (Electronic Design Automation) and some essential production equipment. 

In 2020, the FBI and CISA denounced Chinese informational attacks against research institutes engaged in the fight against COVID-19 with the aim of obtaining health data and information on tests and vaccines, and in the same year Donald Trump introduced visa restrictions for Chinese students and researchers involved in “military-civilian fusion” activities, but this measure was later withdrawn following strong pressure, including from universities such as Harvard (Aresu, 2022, p. 43).

In response Beijing accelerated its “Made in China 2025” initiative, a national strategy announced by the Chinese State Council in 2015, with investments of up to $200 billion to achieve technological autonomy (Kennedy, 2015). The main goal was to promote local innovation, achieve self-sufficiency in key sectors and strengthen the country’s international leadership. This involves gradually replacing foreign technology in Chinese industry through significant investments (Trejo & Balderrama, 2018). 

To counter the Chinese rise, the US passed the Chips Act in 2022, allocating 52.7 billion to relocate production and strengthen research and innovation (USA Congress, 2022).  The purpose of the Biden administration was precisely to “win the race of the 21st century,” by strengthening the manufacturing industry, supply chains, and national security, and by increasing research to address the fact that 75% of global production is entrusted to East Asia (The White House, 2022).

In today’s constant race for supremacy, analysis of ESIA data shows that the European Union has the lowest share of wafer production among the major producers. In 2020 the EU accounted for 9.4%, compared with Taiwan 18.8%, Korea 18.4%, China 14.4%. Only Singapore lags behind, with 6.5% of production (ESIA, 2021).

The following sections focus on how Europe intends to strengthen its geopolitical security by reducing dependence on foreign chip suppliers and enhancing domestic production. The analysis will cover the three main sectors affected by this dependence: civil technology, military defence and artificial intelligence. 

Analysis: The EU’s Geopolitical Security over Chips

Enhancing geopolitical security requires countries to protect themselves from external shocks and act independently of them. Although accentuated in 2025 with Trump’s “Liberation Day” tariffs, geopolitical risks have been increasing for more than a decade. The rise in these risks is most likely a result of weakened global economic cooperation after the 2008 financial crisis and the disregard of global and regional powers of international norms (Bremmer & Roubini, 2011; Patrick, 2016).

Therefore, countries seek to mitigate these threats, especially for sectors which are crucial for their survival. The EU has realised its need to enhance its geopolitical security in the chip market, which not only underpins the functioning of technological infrastructure and modern electronics but is also heavily concentrated in the hands of foreign countries (Bouwmeester, 2023; Ferrand, 2025).

Even if some foreign countries are fellow democracies such as Taiwan and the US, changes in their foreign policy or an internal shock could trigger a slowdown in chip design and chip manufacturing. If the EU can reduce this foreign dependency, the EU can be more confident in the development of its new continental military strategy and its technology market, without being swayed by international affairs.

Dependency in Three Sectors

The dependency problem is reflected in three key sectors which depend on semiconductors: civilian technology, military defence, and AI. It is the result of Europe’s liberal market philosophy, originating from the rise of globalisation (Sprokholt, 2024). As mentioned earlier in the introductory section of this paper, Europe decided to rely on the endowed characteristics of other nations (highly technical skilled workers, capital and land) to innovate and fabricate semiconductors. Since that moment, the EU remains especially reliant on the United States designers and East Asian producers, Taiwan’s TSMC, South Korea’s Samsung, Japan’s Toshiba, and China’s SMIC, as domestic capacity accounts for less than 10 percent of global output (Dauvé, 2025). Its chip designer industry is dwarfed by East Asia and the US (Bouwmeester, 2023).

TSMC’s Dresden fab, backed by €5 billion in German and EU aid, exemplifies this dependence: despite local production, key process technologies and IP remain under Taiwanese control, while ASML’s Dutch lithography machines are indispensable for manufacturing advanced nodes worldwide (EC, 2024). Coupled with the still present issue of foreign dominance in the chip supply chain, any disruption along the designer to shipping chain could prove detrimental to the three sectors most reliant on chips.

While the EU does possess 11 out of 100 of the top tech firms in the world, the presence of foreign companies coupled with its dependency on semiconductors for its own industries makes the EU vulnerable (Digital Europe, 2024). For the automobile-tech sector, the 2020 pandemic resulted in a chip shortage, and a shortfall of 18 million vehicles (Allianz Trade, 2022). The chip shortage cost Europeans around 100 billion euros. The pandemic’s effect on global chip supply chains can also be extrapolated to other industries relying on technology such as construction, aerospace and other industries (de Vet et al., 2021). 

Outside the automobile industry, chips are ubiquitous in consumer and industrial technology. European telecom gear, industrial robots, medical devices and “smart” appliances all rely on imported chips. For example, 5G and future 6G networks require advanced RF and baseband chips, none of which Europe mass-produces (Ciani & Nardo, 2022). Technology-reliant sectors make up a large part of Europe’s modern economy and reducing foreign dependency on chips is thus at the forefront to secure the growth prospects of European companies (Mensi & Pie, 2022). 

For European military defence, the dependency on chips from Taiwan is an important concern in case of a disruption coming from a future Chinese invasion (EC, 2025). Military equipment and weapons such as missile guidance systems and military communication have semiconductors as their backbone. With Europe reinvigorating its home ground defence capabilities, a chip disruption from Taiwanese manufactured chips could likely hinder further production of such military technologies. 

In recent months, many EU countries such as France, Germany –but also their close neighbour, the UK– have committed to increasing their defence capabilities, many of which rely on semiconductors to run many technological components (Sipri, 2025). However, under the current regime, European defence companies utilise stocking of inventories and other means to secure their semiconductor stock, which largely come from Taiwan and South Korea (Reuters, 2022; Bressa et al., 2025). 

Aside from relying on allied nations, the EU’s biggest threat regarding its military use of semiconductors could be the increasing presence of China in chip manufacturing. Although not currently at the same level as Taiwan and other leaders in the chip market, the recent geopolitical uncertainty caused by the US from tariffs and China’s central role in the resource supply of semiconductors has started to push the EU to cooperate with the nation (Cytera, 2025).

Similarly to military and technology, the development of European AI also hinges on semiconductors. Europe’s AI initiatives rely overwhelmingly on externally manufactured semiconductors: EU facilities only produce mature-node chips (>14 nm), whereas leading-edge AI accelerators require sub-7 nm processes available only from Taiwan’s TSMC and South Korea’s Samsung (Di Giovanni, 2024). Consequently, over 90% of GPUs and AI ASICs deployed in European data centres and research clusters are sourced from Nvidia (US) and TSMC (Taiwan) (ECA, 2025).

This reliance embeds strategic risks: US export controls on AI chips can instantly throttle European access, as seen when proposed restrictions prompted urgent EU–US negotiations to exempt key member states (EP 2025). A cross-strait conflict could likewise disrupt TSMC’s Taiwanese fabs, jeopardising continental supercomputing programmes under EuroHPC (Ramesh, 2025; EuroHPC Joint Undertaking, 2021).

Despite the European Processor Initiative’s successful Phase I –which delivered the Rhea prototype CPU and EPAC accelerator framework– these remain limited to validation boards rather than mass production, perpetuating dependence on off-the-shelf Nvidia and AMD accelerators for large-scale model training (EPI, 2021). Even with the €43 billion Chips Act aiming to double EU chip market share by 2030, expert audits warn that sub-7 nm capacity cannot be achieved in time, meaning next-generation AI hardware will remain predominantly offshore (ECA, 2025; EC, 2022). Thus, Europe’s home-grown AI tools and research ecosystems will continue to hinge on semiconductor design, IP, and fabrication controlled by non-EU foundries, underscoring a deep structural vulnerability in the bloc’s digital sovereignty strategy (Bureau of Industry and Security, 2025).

Resolving the Geopolitical Insecurity

The EU has been pushing to reduce this dependency as part of a larger EU initiative for more than a decade: strategic autonomy (Mario, 2022). The purpose of strategic autonomy is to reduce dependency not only on chips but also on most digital services and products from foreign companies and allow European equivalents to develop and compete. This way, if global disruptions occur, European companies could help safeguard the EU’s economy and military. In terms of semiconductors themselves, France, Germany and Italy have been signing agreements since 2018 to boost public investment into the private production of chips in the EU. This move is a stark shift from previous decades of EU economic and foreign policy which had been more economically liberal and trustworthy in the supply of chips from third countries.

Major EU initiatives since 2018 include Important Projects of Common European Interest (IPCEIs) on microelectronics, the Chips Act, and national schemes. For example, the first IPCEI –approved in December of 2018– involved France, Germany, Italy, and later Austria, investing up to €1.9 billion public –while unlocking €6.5B private– in R&D for chips, sensors and power electronics (EC, 2023). In June 2023 a second, wider IPCEI “Microelectronics & Communication Technologies” was approved under EU law, with 14 EU states pledging €8.1B, to leverage €13.7B in industry funds, for innovation spanning 5G/6G, AI chips, autonomous driving and energy systems (European Commission, 2023). In sum, EU-level measures now emphasise pan-European R&D consortia and novel fabs, alongside supply‐chain monitoring (see Table 1 Below).

Table  1: EU-level Chip Measures

Policy/Initiative	Date	Aim	Funding (public)
EU Chips Act (3 pillars)	Sept 2023	Boost EU chip R&D (2nm, quantum), fab capacity, supply monitoring to reach 20% share by 2030	~€43B (EU+MS+private), incl. €11B R&D and ~€30B for first-of-kind fabs
IPCEI on Microelectronics (1st)	Dec 2018	Cross-border R&D in chips, sensors, power devices	€1.9B (EU member states)
IPCEI on Microelectronics & Comm. Tech.	Jun 2023	Chips for AI, comms, EVs, green tech (5G, 6G, quantum)	€8.1B (14 states)
France: “Electronique 2030” (France 2030)	2022	Double France’s chip output by 2030; support fabs/R&D	~€5B (by 2030)
Germany: Chips Initiative	2022–24	Subsidies to attract major fabs (incl. TSMC/JV)	~€2–3B (announced)

Note: Table adapted and compiled by the author.

As Monsees (2024) observes, semiconductors are now “core” to the EU’s digital sovereignty agenda, but globalised production means Brussels must balance aspirations for self-sufficiency with acceptance of interdependence (Carrapico & Ferrand, 2025). In practice, EU policy legitimises large subsidies and public‐private consortia to rebuild local capacity. The 2023 European Chips Act explicitly frames its goal as ensuring Europe’s “strategic autonomy” by securing a stable supply of critical chips (European Commission, 2023). 

It sets an ambitious target (doubling EU share to 20% of global output by 2030) with about €43 billion in mobilised public and private funds. Critics note that unlike the new US CHIPS Act, most EU funding is reshuffled from existing programs (e.g. Horizon Europe) fuelling debate about trade-offs (some worry that diverting €2.7B from Horizon and €1.4B from Digital Europe weakens other priorities) (A.U. Lsip, 2024).

Likewise, national governments launched plans: France’s “Electronique 2030” (part of France 2030) earmarks €5B to double French manufacturing capacity and train engineers (Gouvernement Français, 2025); Germany is preparing its own semiconductor strategy and has put out calls for projects requiring modern production capacities, especially to get ahead on artificial intelligence, although more recently this past push for modernisation is being redirecting its funds instead to repairing roads (Kyriasoglou, 2025).

Notably, a group of ten EU states recently urged revising the Chips Act’s 20% target, citing a Court of Auditors warning that available resources might be insufficient. The Commission responded that the target itself is “essential to mobilise large amounts of money” (Kroet, 2025), underscoring that even ambitious goals serve as political instruments to catalyse investment.

This EU-level push has required active member-state involvement. In many cases, France and Germany have been the vanguard. France, with its strong sovereigntist discourse, pushed early to frame semiconductors as strategic assets. Macron’s government tied chips to national autonomy, deploying France’s state investment bank (Bpifrance) to co-fund fabs (e.g. supporting the now-stalled STMicro/GF fab in Crolles) and partnering in pan-European R&D. For example in summer 2022 Macron highlighted that EU dependence on chips was “no longer acceptable”. 

Germany, with its export-oriented economy (especially automobiles), has also rallied behind chips. It rapidly constructed a €10B “Chips made in Europe” program, inviting TSMC (which opened a 12 nm fab in Dresden with EU aid) and supporting Infineon/Bosch expansions. German officials have spoken of providing “needs-based funding” for fabs. Both countries seek to leverage their industrial bases (automotive, equipment, defence) and large R&D sectors to make EU semiconductor policy succeed. Other countries (Italy, the Netherlands, Poland, etc.) participate in IPCEIs or plan their own strategies, but the Franco-German engine has dominated the discourse.

CONCLUSIONS

The paper highlights the centrality of semiconductors as real strategic resources, the control of which is crucial for economic and national security. They are now the engine powering vital sectors like artificial intelligence, automotive, defence, and telecommunications. The Union’s structural dependence on non-European suppliers, in particular the United States and East Asia, is the result of industrial choices made in a changed global context.  One of today’s main challenges lies in the fragmentation of this global supply chain, which marks the dependence on outsourced production, with Taiwan representing the vital centre of production due to its low-cost efficiency and significant technological expertise. This situation has been further emphasised since the pandemic, which has highlighted Europe’s vulnerabilities and fragilities in this crucial sector. Moreover, the growing global interdependence within the semiconductor supply chain has made the sector particularly vulnerable to geopolitical shocks and economic conflicts, with repercussions felt worldwide. Any disruptions in the supply chain would compromise military capabilities and jeopardise national security. In this context, the global geopolitical balance has never been more important. What we are facing today is a highly polarised geopolitical context, in which the rivalry between the US and China has further accentuated the strategic nature of semiconductors.

Considering this scenario, the challenge for Europe is twofold: to strengthen its strategic autonomy without giving up global cooperation. Rather than a return to autarky, it is a matter of building a resilient technological sovereignty, able to protect vital interests in the event of a crisis but also to remain competitive and connected in an increasingly fragmented world economy.

REFERENCES

1. Allianz Trade. (2025). Missing chips cost EUR100 bn to the European auto sector. https://www.allianz-trade.com/en_global/news-insights/economic-insights/european-automotive-semiconductor-shortage.html
   
2. Aresu, A. (2022). Il dominio del XXI secolo, Cina, Stati Uniti e la guerra invisibile sulla tecnologia. Feltrinelli Editore.
   
3. Bouwmeester, W. (2023). Chips for who? University of Twente.
   
4. Bremmer, I., & Roubini, N. (2025). A G-Zero World: The new economic club will produce conflict, not cooperation. Foreign Affairs, 90(2), 2–7. http://www.jstor.org/stable/25800451
   
5. Brookings Institution. (n.d.). U.S.–China tech competition and semiconductor controls.
   
6. Brown, C., & Linden, G. (2009). Chips and change: How crisis reshapes the semiconductor industry. The MIT Press.
   
7. Bureau of Industry and Security, U.S. Department of Commerce. (2025). Department of Commerce announces rescission of Biden-era artificial intelligence diffusion rule, strengthens chip-related export controls. https://www.bis.gov/
   
8. Carnegie Europe. (n.d.). Strategic technologies and European autonomy.
   
9. Carrapico, H., & Ferrand, B. (2025). EU data sovereignty: An autonomy–interdependence governance gap? Politics and Governance, 13.
   
10. Center for Strategic and International Studies (CSIS). (n.d.). The semiconductor supply chain: Assessing national competitiveness.
    
11. CEPR. (n.d.). Asian semiconductor industrial policy: The cases of South Korea and Taiwan.
    
12. Centre for Economic Policy Research (CEPR). (n.d.). The geopolitics of semiconductors.
    
13. Ciani, A., & Nardo, M. (2022). The position of the EU in the semiconductor value chain: Evidence on trade, foreign acquisitions, and ownership. JRC Working Papers in Economics and Finance, No. 2022/3. European Commission.
    
14. CNBC. (2022). How ASML, TSMC and Intel dominate the chip market.
    
15. Congressional Research Service. (n.d.). China’s semiconductor industry and the U.S. response.
    
16. CSIS. (n.d.). Rebalancing the global semiconductor supply chain.
    
17. Dauvé, S. (2025). Semiconductors: Can European industry regain ground? https://www.polytechnique-insights.com/en/columns/industry/semiconductors-can-europe-regain-ground/
    
18. De Vet, J. M., et al. (2021). Impacts of the COVID-19 pandemic on EU industries. European Parliament, Policy Department for Economic, Scientific and Quality of Life Policies.
    
19. Deloitte. (n.d.). Semiconductors and the global economy: Security, resilience, and strategy.
    
20. Di Giovanni, F. (2024). Europe is convincingly pursuing a path to semiconductor sovereignty. ET Times Europe.
    
21. Digital Europe. (2024). The EU’s critical tech gap: Rethinking economic security to put Europe back on the map. https://cdn.digitaleurope.org/uploads/2024/06/DIGITALEUROPE-EU-CRITICAL-TECH-GAP-REPORT_WEB_UPDATED.pdf

22. European Semiconductor Industry association. (2021). Trends in worldwide semiconductor production capacity.
    
23. European Commission. (2023). Approved IPCEIs in the microelectronics value chain. https://competition-policy.ec.europa.eu/state-aid/ipcei/approved-ipceis/microelectronics-value-chain_en
    
24. European Commission. (2024). Commission approves €5 billion German state aid measure to support ESMC in setting up a new semiconductor manufacturing facility.

25. European Commission. (n.d.a). Digital Compass: Europe’s Digital Decade.

26. European Commission. (2025). Joint White Paper for European Defence Readiness 2030. High Representative of the Union for Foreign Affairs and Security Policy.

27. European Commission. (n.d.b). Joint Research Centre: Strategic Dependencies and Capacities.
    
28. European Commission. (2022–2023). EU Chips Act proposal and implementation documents.
    
29. European Court of Auditors. (n.d.). The EU Chips Act: Challenges and budget implications.
    
30. European Court of Auditors. (2025). The EU’s strategy for microchips. Special Report.
    
31. European Parliament. (2025). US export controls of AI chips: Debate with the Commission. Briefing.
    
32. European Processor Initiative. (2021). Successful conclusion of European Processor Initiative Phase One.
    
33. EuroHPC Joint Undertaking. (2021). The EuroHPC JU supercomputers: Analysis of the petascale and pre-exascale systems.
    
34. Farrand, B. (2025). The economy–security nexus: Risk, strategic autonomy and the regulation of the semiconductor supply chain. European Journal of Risk Regulation, 16(1), 279–293. https://doi.org/10.1017/err.2024.63
    
35. French Government. (n.d.). France Électronique 2030 plan.
    
36. German Federal Ministry for Economic Affairs. (n.d.). Semiconductor strategy and national subsidies.

37. Gouvernement Français. (2025, October 12). Les communiqués et dossiers de Presse [France 2030], https://www.info.gouv.fr/grand-dossier/france-2030/espace-presse
    
38. Guzzi, M. (2004). Principi di fisica dei semiconduttori. Hoepli.
    
39. Kennedy, S. (2015). Made in China 2025. Center for Strategic International Studies.
    
40. Kroet, C. (2025). EU member states ask the Commission to lower targets for microchip strategy. Euronews.

41. Kyriasoglou, C. (2025, October 9). Germany to Spend €3 Billion Emarked for Chip Industry on Roads. Bloomberg. https://www.bloomberg.com/news/articles/2025-10-09/germany-to-spend-3-billion-earmarked-for-chip-industry-on-roads
    
42. Lacaita, A. L. (2022). Il mondo dei chip: Progressi tecnologici e vulnerabilità di una filiera strategica. Istituto Lombardo Rend. Scienze, 156, 169–188.

43. Lsip, A. U. (2024, August 20). A World of Chips Acts: The Future of U.S.-EU Semiconductor Collaboration. CSIS. https://www.csis.org/analysis/world-chips-acts-future-us-eu-semiconductor-collaboration
    
44. Mario, D. (2022). EU strategic autonomy 2013–2023: From concept to capacity. European Parliamentary Research Service.
    
45. Mensi, & Pie. (2022). Conséquences de la législation européenne sur les semi-conducteurs sur les industries manufacturières de l’aérospatial et de la défense. European Economic and Social Committee.

46. Owens T.M. (1999 re-pub. 2015), In Defence of Classical Geopolitics, in Naval War College Review, vol. 52, n.4, article 5 (original) – Foreign Policy Research Institute (new edition), pp. 463-478.
47. Palma, R., & Goodrich, et al. (2022). The growing challenge of semiconductor design leadership. Semiconductor Industry Association.
48. Patrick, S. (2016). World order: What, exactly, are the rules? The Washington Quarterly, 39(1), 7–27. https://doi.org/10.1080/0163660X.2016.1170477
49. Ramesh, R. (2025). US export control rules on AI chips spark backlash. Government Info Security News.
50. RAND Corporation. (n.d.). Securing the semiconductor supply chain: Global risks and policy responses.
51. Reuters. (2025). Germany’s Rheinmetall has a 5-yr supply of semiconductor chips. https://www.reuters.com/world/europe/germanys-rheinmetall-has-5-yr-supply-semiconductor-chips-rheinische-post-2022-05-13/
52. Sadjuk, B. (2021). Geopolitics and technology. In Kloczkowski, J. (Ed.), Geopolitics. Ignatianum University Press.
53. Semiconductor Industry Association. (2023). 2023 State of the U.S. semiconductor industry.
54. Semiconductor Industry Association. (2024). Report.
55. Sipri. (2025). Unprecedented rise in global military expenditure as European and Middle East spending surges. Stockholm International Peace Research Institute.
56. Sprokholt, T. (2024). From globalisation to techno-nationalism: The European Union’s collective securitisation of the chip ecosystem. Utrecht University.
57. The White House. (2022). Statements and releases.
58. Trejo, A., & Balderrama, R. (2018). Made in China 2025. ReVista.
59. Varas, A., Varadarajan, R., et al. (2021). Strengthening the global semiconductor supply chain in an uncertain era. Semiconductor Industry Association.
60. Vytera, C. (2025). Chip challenges: Tariffs, trade restrictions, and China. CEPA. https://cepa.org/article/chip-challenges-tariffs-trade-restrictions-and-china/