Brussels: Europe's semiconductor industry is facing an increasingly uncertain future as rising tensions between China and the United States threaten global supply chains and expose the continent's dependence on foreign technology and critical materials. A new report released by the European Union Institute for Security Studies and French think tank Institut Montaigne warns that Europe could struggle to remain competitive unless it strengthens its own chip industry and reduces reliance on both global powers.
The report says Europe is caught in the middle of a growing technology rivalry between China and the United States. While China controls the supply of many important raw materials needed for semiconductor production, the United States dominates key technologies, software and export rules that European companies rely on. This combination leaves Europe vulnerable to political decisions and trade restrictions from both sides.
According to the study, Europe lacks enough domestic manufacturing capacity for advanced semiconductors and continues to depend heavily on foreign suppliers for essential parts of the production process. The authors argue that unless Europe builds a stronger and more independent semiconductor ecosystem, its long term economic and technological ambitions could face serious setbacks.
One of the biggest concerns raised in the report is China's strong position in the global supply of critical minerals and rare earth materials that are essential for producing semiconductors and other advanced electronic products. Beijing has already introduced export restrictions on several strategic materials in recent years as part of its response to trade measures imposed by Western countries. Analysts say any further tightening of these controls could disrupt chip production across Europe and affect industries ranging from automobiles to artificial intelligence and telecommunications.
The report also points to the growing dependence of European companies on American technology. Much of the software used to design advanced chips comes from companies based in the United States, while many semiconductor manufacturing tools contain American technology that is subject to Washington's export control rules. As a result, European firms can be affected by United States policy decisions even when operating outside American territory.
Dutch chip equipment maker ASML is highlighted as one example of this challenge. Although the company is based in Europe and is a global leader in advanced chip manufacturing equipment, it has faced restrictions on exporting some of its most advanced machines to China because of United States export policies. Industry experts say such measures illustrate how geopolitical tensions are increasingly shaping commercial decisions in the global semiconductor sector.
The report also expresses concern over proposed legislation in the United States that could expand Washington's ability to impose export controls on allied countries and companies. Researchers say this creates additional uncertainty for European businesses that depend on both American technology and access to the Chinese market.
To address these risks, the European Union has been investing heavily in strengthening its semiconductor industry. Through its Chips Act and related industrial policies, Brussels hopes to increase Europe's share of global semiconductor production and encourage new investments in manufacturing, research and innovation. European leaders believe expanding domestic production is essential for improving economic security and reducing dependence on external suppliers.
However, the report notes that Europe faces strong competition from other regions that are also investing aggressively in semiconductor production. China continues to expand its domestic chip manufacturing capabilities despite export restrictions, while the United States is supporting its industry through large scale government incentives. South Korea has also announced major investments in semiconductor manufacturing and artificial intelligence infrastructure as it seeks to maintain its position as one of the world's leading chip producers.
The semiconductor industry has become one of the most strategically important sectors in the global economy because chips are used in almost every modern technology, including smartphones, computers, electric vehicles, defence systems, medical equipment and artificial intelligence. Any disruption in the supply of semiconductors can have wide ranging effects on industries and consumers around the world.
The report concludes that Europe must move quickly to strengthen its technological independence while continuing to work with international partners. Without greater investment in domestic manufacturing, secure supply chains and research, Europe risks remaining vulnerable to geopolitical tensions that are increasingly reshaping the global semiconductor industry.