EU Struggles to Meet Microchip Reshoring Goals, Falling Short of Key Targets for Technological Sovereignty
The European Union is facing a growing challenge in reducing its reliance on China for low-tech microchips, according to a recent warning from the European Court of Auditors (ECA). In a report published on Monday, the ECA highlighted a concerning trend in the EU’s dependence on Chinese-made chips, which are crucial for powering everyday devices such as cars, washing machines, and household electronics.
The report pointed out that one-third of the low-tech chips consumed in Europe are imported from China, a figure that underscores the vulnerability of the EU’s technological supply chains. Furthermore, it stressed that the European Union is “nowhere close” to meeting its own ambitious target of capturing 20% of the global microchip market by 2030—a goal set by the European Chips Act. The act was designed to bolster Europe’s microchip production capacity and reduce reliance on foreign regions, especially China.
The EU’s Struggle to Achieve Technological Sovereignty
Despite the European Union’s push for technological sovereignty and self-sufficiency, the auditors’ findings underscore a significant gap between Brussels’ aspirations and reality. The EU has been struggling to achieve its goals of reshoring microchip production to local soil. The European Chips Act, introduced in 2023, aimed to establish Europe as a major player in the global semiconductor supply chain by attracting investment and fostering innovation within the EU. However, according to the report, Europe’s current chip production capacity is insufficient to meet its own growing demand, particularly in sectors such as automotive manufacturing.
While Europe is home to some of the world’s leading companies in the field of less advanced microchips—such as Germany’s Infineon, the Netherlands’ NXP, and France-Italy’s STMicroelectronics—these companies are unable to keep up with the demand. The European automotive industry, a crucial driver of the region’s economy, is facing particular challenges in securing enough microchips to power the next generation of vehicles, including electric cars and autonomous systems.
A Rising Trade Deficit with China and Other Chip-Making Hubs
In 2024, Europe ran a €9.8 billion deficit with China on chip-related trade, underscoring the growing imbalance between Europe’s chip consumption and its production capabilities. The EU also faced deficits with other chip-making hubs, such as Taiwan, which is home to the world’s largest semiconductor foundry, Taiwan Semiconductor Manufacturing Company (TSMC).
The trade imbalance points to a broader problem: Europe’s inability to produce enough chips domestically to meet demand, forcing the region to turn to countries like China and Taiwan. With demand for microchips growing faster than EU-based manufacturers can supply, Europe is at risk of becoming even more reliant on foreign suppliers for essential technology.
Will Europe’s Microchip Strategy Pay Off?
The European Union’s push to develop a more self-sufficient semiconductor industry is not without challenges. A complex global supply chain, geopolitical tensions, and the ever-growing demand for advanced chips make reshoring production a difficult and expensive undertaking. The EU’s reliance on China for low-tech chips is just one part of the problem; more advanced chips, which are also crucial for a range of industries, are similarly dominated by companies in Asia, particularly in Taiwan and South Korea.
Despite these hurdles, the EU continues to pour resources into its microchip strategy, with investments aimed at building new fabrication plants (fabs) and bolstering its research and development capabilities. One of the main goals of the European Chips Act is to increase the EU’s share of global semiconductor production to 20% by 2030, up from just 10% today. Whether this ambitious target is achievable remains to be seen, but for now, Europe’s dependence on China for low-tech chips serves as a stark reminder of the challenges ahead.
Looking to the Future: What’s at Stake?
The stakes in Europe’s microchip strategy are incredibly high, not just for the tech sector, but for the region’s broader economic future. With microchips playing a critical role in sectors ranging from automotive and healthcare to energy and telecommunications, the EU’s reliance on foreign suppliers leaves it vulnerable to external disruptions. These disruptions could come in the form of trade tensions, supply chain bottlenecks, or geopolitical conflicts, all of which could have serious consequences for Europe’s economic stability.
At the heart of the issue is a need for more investment in semiconductor manufacturing within the EU. While the European Commission has made strides toward attracting private investment and building local infrastructure, the road to reducing dependence on China and other foreign suppliers will be a long one.
The EU’s current reliance on low-tech chips is a short-term problem that could have long-term implications if not addressed. By meeting its microchip production goals, Europe can ensure its technological sovereignty and reduce the risks posed by global supply chain vulnerabilities.
