Last week, the European Commission presented its draft legislation for the Chips Act 2.0. The goal is to establish Europe’s long-term autonomy in semiconductors. However, before the draft becomes law, there are processes, regulations, and red tape to navigate. For investors, this means that European chip leaders remain attractive, but the political timeline is dampening the enthusiasm.
Those who don’t manufacture chips themselves become dependent on others. The COVID-19 pandemic demonstrated this when disrupted global supply chains brought production lines in Europe to a standstill. The first Chips Act of 2023 was intended to resolve the problem of supply bottlenecks. The promise at the time was to double Europe’s share of global chip production to 20 percent by 2030. The plan didn’t work out. The European Court of Auditors now expects the figure to be just under 12 percent instead of the planned 20 percent. One reason for this lies in the structure of the first Chips Act: It focused almost exclusively on the supply side – that is, the construction of chip factories. Compounding the issue were difficulties in applying for funding due to EU bureaucracy.
The schedule remains the problem
With the Chips Act 2.0, Brussels is attempting to reverse this trend: moving away from simply subsidizing factories and toward stimulating demand. The Commission aims to specifically connect companies in the telecommunications, defense, and mobility sectors with manufacturers in the European chip industry. European products are to be given preference in procurement contracts. In addition, for the first time, the Commission will be able to invest directly in large, cross-border projects, rather than merely funding research.
However, the draft is not yet law. The next step is for it to be negotiated and finally adopted by the European Parliament and the member states in the Council of the EU. Review and deliberation in the Parliament and the Council will follow in the second half of 2026. Trilogue negotiations are expected to begin in early 2027. The final vote in the European Parliament and formal adoption by the Council of the European Union could follow in mid- to late 2027. Publication in the Official Journal of the EU and the regulation’s entry into force would not be expected until late 2027 or early 2028.
This can take up to 18 months. For an industry that thrives on speed, innovation cycles, and investment windows, that is a long time. Processes and regulations are and remain Europe’s biggest problem.
120 billion euros. Where is that money supposed to come from?
In total, the plan is expected to mobilize approximately 120 billion euros in public and private funding by 2035. The largest share will come from industry investments: semiconductor companies such as TSMC, ASML, Infineon, and Bosch are expected to build factories and research centers. Companies in the telecommunications, defense, and mobility sectors are expected to provide planning certainty through long-term purchase agreements.
In addition, funding from the European Commission will come from existing research programs such as Horizon Europe and Digital Europe. For the period after 2028, the Commission is calling for a central budget of around 20 billion euros within the next multiannual EU budget.
Third, national subsidies from member states are intended to support the expansion. Germany is likely to shoulder the largest share due to its existing project pipeline with Intel in Magdeburg and ESMC/TSMC in Dresden. 15 billion euros in funding has already been committed for these projects. France, Italy, the Netherlands, and Ireland follow with their own priorities.
Which sectors can benefit
The Chips Act 2.0 is important, but Europe remains a follower. The real opportunity lies in individual European champions, rather than in relying on Brussels to fix everything.
In many areas, Europe is providing the pickaxes for the global chip gold rush. No one can bypass European global market leaders within this supply chain. It is precisely this strength that the Chips Act 2.0 aims to bring home. Five areas are particularly relevant here:
Equipment for lithography and manufacturing:
This is where Europe’s crown jewel lies. ASML from the Netherlands is the only company in the world that builds the most advanced lithography systems. ASM International leads in a technology that deposits material layers atom by atom. Aixtron from Germany excels in equipment for chips used in electric vehicles.
Specialty wafers:
Before a circuit can be implemented, the perfect substrate is needed. Soitec from France is a pioneer in particularly energy-efficient semiconductor technology. Siltronic from Germany is one of the world’s largest manufacturers of high-purity silicon wafers.
Ultrapure gases and chemicals:
No factory can operate without them. Air Liquide of France supplies the high-purity gases, while Germany’s Merck KGaA, based in Darmstadt, provides the necessary specialty chemicals. Both companies are building their plants right next to new mega-factories, such as the one in Dresden.
Testing and packaging of the finished chips:
Europe has long been weak in this area but is catching up. Besi from the Netherlands is a leader in assembling modern AI chips from multiple components.
The major chip manufacturers:
Infineon from Germany, STMicroelectronics, and NXP from the Netherlands are the European heavyweights in chips for automobiles, energy, and industry. Ultimately, the Chips Act is intended to create demand for them.
Europe has the right companies; it remains to be seen whether Brussels will provide the appropriate framework in time. For investors, this means that European champions remain attractive, but the political timeline calls for patience; too much patience could become a risk. Those who start too late may end up supplying their capacity to a market that is already saturated.
Note: This text was translated using AI and may contain translation errors. The German version of the text is authoritative.