The EU Needs Semiconductor Supply Security to Achieve Digital Sovereignty

With the growing geopolitical tensions, the European Union (EU) will not be able to achieve its goal of maintaining security and digital sovereignty without a stronger focus on semiconductors. The EU is heavily reliant on imports, with 92% of global manufacturing capacity located in Asia, and the US leading high-level chip design. Such dependence can be a more important issue than ever, as advanced semiconductors are almost a prerequisite for Artificial Intelligence (AI) development, leading to problems for competitiveness and supply chain resilience. The heavy concentration of manufacturing capacity in Taiwan may also face disruption from natural disasters and geopolitical risks from China. We argue that the EU should consider producing some chips domestically as a safety net and climb the supply chain participation ladder by R&D, especially in design, meaning industrial policy is necessary. In this regard, China’s policies to reduce its external dependence on semiconductors were introduced before the US, and therefore, more lessons can be drawn about their effectiveness. The comparison with the world will help in analysing the current EU measures, namely the Chips Act. We conclude that a clearer distribution of responsibilities at the EU and the national level is needed to avoid excessive competition among member states through subsidies. A good model could be the Airbus project applied to the semiconductor supply chain, not only because it is pan-European but also open to the rest of the world. Finally, partnerships with existing high-end chip producers from like-minded governments and guaranteeing access to abundant critical raw materials are equally important.