This policy brief examines the European semiconductor industry, highlighting its strategic importance for economic security, industrial competitiveness and technological sovereignty. Within this context, the European Union has identified semiconductors as a key priority, as reflected in the EU Chips Act, which aims to strengthen Europe’s capabilities across the semiconductor value chain.
Europe’s position in the global semiconductor ecosystem is characterised by a combination of strong technological assets and structural dependencies. On the one hand, the European Union hosts globally competitive firms in specific segments of the value chain. Most notably, ASML holds a dominant global position in extreme ultraviolet (EUV) lithography systems, a critical technology for advanced chip manufacturing. In addition, Europe has established capabilities in semiconductor equipment, materials, and specialised components, supported by a strong research base across universities and research institutes.
The European semiconductor landscape is also closely linked to key industrial sectors, particularly automotive and industrial manufacturing. European companies are leading producers of power semiconductors and sensors used in automotive, energy, and industrial applications. This specialisation reflects the broader structure of Europe’s industrial economy, where semiconductors are deeply embedded in downstream sectors.
At the same time, analyses by the European Commission and international organisations highlight structural challenges that constrain Europe’s global competitiveness. A primary issue is the fragmentation of the ecosystem. Semiconductor activities are distributed across multiple Member States, each characterised by distinct industrial policies, funding schemes, and strategic priorities. While regional clusters contribute to innovation, limited coordination at the European level can reduce efficiency and constrain scale.
Another widely documented constraint is the shortage of skilled labour. The semiconductor industry requires highly specialised engineers, technicians, and researchers, and demand for these profiles is increasing globally. Reports from the European Commission and industry associations consistently identify skills shortages as a key bottleneck for expansion, particularly in advanced manufacturing and design.
In addition, Europe remains dependent on external partners for several critical segments of the semiconductor value chain. These include advanced fabrication capacity, certain design capabilities, and parts of the upstream supply chain such as raw materials and components. This reliance reflects the highly globalised nature of the semiconductor industry, while also exposing the European Union to potential supply disruptions and geopolitical risks, as observed during recent global supply chain shocks.
The EU Chips Act represents a coordinated policy response to these challenges. It aims to mobilise public and private investment, strengthen research and innovation, and increase Europe’s share of global semiconductor production. The initiative also seeks to improve coordination between Member States and support the development of large-scale industrial projects.
Building on this framework, three strategic priorities emerge consistently across institutional analyses and stakeholder consultations:
- First, strengthening human capital remains essential. This includes expanding education and training programmes in semiconductor-related fields, improving alignment between academia and industry, and facilitating the mobility of skilled workers within the European Union. Addressing the skills gap is a prerequisite for scaling both research and manufacturing activities.
- Second, enhancing governance and coordination at the European level is critical to reducing fragmentation. This involves improving alignment between national and EU-level initiatives, simplifying funding mechanisms, and fostering cross-border collaboration, particularly for small and medium-sized enterprises (SMEs). More integrated governance structures can increase efficiency and support economies of scale.
- Third, reinforcing Europe’s position within global value chains requires a targeted and pragmatic approach. Rather than pursuing full self-sufficiency, policy discussions increasingly focus on identifying critical dependencies and strengthening capabilities in strategic segments. This includes supporting key technologies, securing access to essential inputs, and developing partnerships with trusted international partners.
In conclusion, the European semiconductor industry is characterised by a combination of strong technological capabilities and structural constraints that reflect the global nature of the sector. The key policy challenge is not only to build on existing strengths, but also to address fragmentation, skills shortages, and external dependencies in a coordinated manner. The effectiveness of current policy initiatives, including the EU Chips Act, will depend on implementation, governance, and sustained cooperation between public and private stakeholders.
