The European Union is revamping its semiconductor strategy with the upcoming Chips Act 2.0, which is expected to debut around June 3, 2026. This new approach will focus on ensuring that there is a domestic market for the chips produced in Europe rather than just attracting chip manufacturing plants.
#Why is the investment goal changing from €43 billion to €120 billion?
The initial objective of €43 billion in public and private investments, set by the first European Chips Act in 2023, aimed to double Europe's share of global semiconductor production to 20% by 2030. However, the European Court of Auditors has indicated that meeting this target is highly unlikely due to slow progress and uneven funding across member states. Consequently, the revised strategy targets an impressive €120 billion ($140 billion) in investments by 2035, marking one of the largest coordinated efforts by the EU in technology subsidization.
#What will the new strategy entail?
The Chips Act 2.0 will implement mechanisms for demand aggregation. This initiative aims to connect chip manufacturers more effectively with European industries, particularly in automotive and cloud computing sectors. Notably, discussions are underway for a €30 billion advanced AI semiconductor foundry, which would focus on producing chips at the cutting-edge 3 nm node, with funding split between the European Commission, member states, and private enterprises.
#How has the competitive environment evolved?
The Semicon Coalition, a collective of European semiconductor stakeholders, has called for a strategy revision, arguing that the previous framework was outdated. While Europe's semiconductor value chain is not without merit, with firms like ASML leading lithography and companies such as Infineon and STMicroelectronics making significant strides in automotive chips, there is a need to adapt to the current technological landscape.
#What implications does this have for investors?
Investors in the automotive semiconductor space may gain substantial advantages if the EU manages to enhance procurement methods that encourage European car manufacturers to buy locally produced chips. Companies such as Infineon, NXP Semiconductors, and STMicroelectronics could see increased support and growth.
Streamlining subsidies may also become vital, as the original Chips Act faced criticism for bureaucratic hurdles that delayed access to funds. By simplifying these processes, European semiconductor companies could experience a significant boost, aligning with the broader goals of enhancing the continent's semiconductor capability.