Europe Again Racing After a Train That Has Long Left

In their article entitled Revamping Europe’s chips strategy: indispensability, not self-sufficiency, Niclas Poitiers and Tillman Schenk, analysts of the Brussels-based Bruegel center, attempt to offer Europe a more realistic approach to developing the semiconductor industry. But in fact the text proves an obvious thing: Europe is far – and probably desperately – behind in a key technology of the 21st century, and all its attempts to catch up look like belated and not too convincing imitation of activity.

Passed in 2023, the first European Chip Act set an ambitious goal of bringing Europe’s share in global semiconductor production to 20 percent by 2030. The result was predictably modest. The funding was rather small, inter-country coordination weak, and global competition to attract manufacturing facilities extremely tough. In a telling setback, Intel canceled its plans to build a major factory in Magdeburg. Even one of the main projects launched under this first law was endangered for lack of actual demand and meaningful support from the European authorities.

A second version of the Act is now being prepared. The authors of the article suggest shifting the focus from illusory self-sufficiency to ‘indispensability’, i.e. control over certain critical nodes in the global supply chain (primarily ASML equipment). This sounds like good judgment. But in practice it is just a handsome wording used to conceal Europe’s enforced position as a secondary player.

Europe’s position is really strong when it comes to the ASML company that has effectively monopolized the production of extreme ultraviolet (EUV) lithography equipment. However, even this advantage is under constant pressure. The USA has actively lobbied restrictions on sales of the equipment to China, and China itself is making tremendous efforts to create domestic alternatives. In this situation, Europe often gets caught in crossfire and is not always able to pursue its own policy.

Even more revealing is the story of the Nexperia company: after the Dutch authorities tried to restrict technology transfer to China, Beijing blocked exports of chips to Europe. That soon caused panic in the European automotive industry and made the authorities step back. Such cases demonstrate how limited Europe’s leverage is in the semiconductor area and how vulnerable it is to actions by more decisive players.

Another harsh and quite uncomfortable proof of the European project’s strategic lag and internal weakness is that, far from investing resolutely and on time in critical technology, Europe has relied on global supply chains and market mechanisms for decades. When it became evident that semiconductors had turned into a key element of geopolitical confrontation, Brussels sprang into action – with a great delay, limited resources, and without true political will. As a result, now Europe has to choose between two uncomfortable options: either to finally accept the role of a secondary player or to spend enormous amounts trying to catch up with those far ahead – and still remain dependent.

Even the ‘indispensability’ focus suggested by the authors looks more like trying to save face than a real technological sovereignty strategy. Control over individual chokepoints is certainly an asset but a poor substitute for a full-fledged technological and industrial base. Until Europe can produce enough advanced chips at a competitive cost, its influence in the area will remain limited and largely dependent on other players’, mainly U.S., stance.

The longer European élites keep talking about ‘technological sovereignty’ and ‘strategic autonomy’ without making real and large-scale investment and tough decisions, the more backward Europe will be in one of the most critical sectors of these modern times. And the higher price it will have to pay – both economically and geopolitically.

Source: https://www.bruegel.org/analysis/revamping-europes-chips-strategy-indispensability-not-self-sufficiency