A newly released report funded by the European Union is painting a grim picture for the continent’s computer chip industry, warning that pressures from both China and the United States are pushing the sector toward a difficult road ahead.
The independent study, produced by the EU’s Institute for Security Studies and French think-tank Institut Montaigne, was released Thursday. It concluded that Chinese export controls on critical minerals and magnets — along with the threat of armed conflict in the Taiwan Strait — represent serious dangers to the semiconductor supply chain.
The report also flagged Europe’s heavy dependence on the United States for key technology, including chip design software. Adding to that concern is the possibility that Washington could force ASML, Europe’s most valuable company and a major chipmaking equipment supplier, to halt exports to China.
That scenario is not far-fetched. The U.S. Congress is currently debating legislation that would give Washington the authority to unilaterally impose export restrictions on allied countries and their companies.
“While Beijing still appears to be the biggest threat, dependence on Washington seems to have become of much greater concern under the second Trump administration,” said Joris Teer, a policy analyst at the Institute for Security Studies and co-author of the report.
In response to these challenges, the European Commission has been working to strengthen the bloc’s chip industry. In June, it put forward a Chips Act 2.0 proposal that EU lawmakers are now tasked with reviewing. The proposal includes incentives to boost demand for chips made within Europe and also aligns the EU with Washington’s “Pax Silica” initiative, a cooperative effort among allied nations to secure semiconductor supply chains.
Teer said that beyond working with allies to counter China, Europe’s “only viable path” is to capitalize on areas where it already holds strength — such as the chipmaking equipment sector anchored by ASML — to improve its negotiating leverage.
The report drew from industry, political, and academic sources and also pointed to additional factors dragging down Europe’s competitiveness, including persistently high energy costs, a shortage of private investment capital, and a decline in the industries that rely on chips.
