CEIAS Considers: Chips Act 2.0 and Europe’s semiconductor objectives

On June 3, 2026, the European Commission unveiled its long-awaited Chips Act 2.0, a significant update to its 2023 semiconductor policy framework. Introduced as part of the broader European Technological Sovereignty Package, which also covers cloud infrastructure and data centers, the digitalization of energy, and open-source strategy plans, the new legislative proposal seeks both to expand upon and address shortcomings in the original framework.

To assess the potential impact of the new legislation, we approached several experts to reflect on two key questions: 

1. To what extent, and in what ways, can Chips Act 2.0 help the EU and its individual member states achieve their semiconductor ambitions?

2. How can cooperation with Indo-Pacific partners help advance the Act’s objectives?

Europe’s semiconductor aggiornamento 

Pierre Sel, Associate Researcher at Institut Montaigne

As geopolitical and geoeconomic uncertainties cloud Europe’s horizon, the Chips Act 2.0 marks a decisive shift in the EU’s semiconductor policy by recognizing that industrial weakness in critical segments of the supply chain constitutes a strategic vulnerability. Europe’s overreliance on foreign suppliers for technologies such as advanced semiconductor fabrication and AI chip design is framed as a sovereignty risk, particularly as geopolitical tensions escalate and dependencies are increasingly weaponized by both China and the United States.

The Chips Act 2.0 therefore prioritizes demand-side measures. As part of the Technological Sovereignty Package, it aligns with the Cloud and AI Development Act (CADA) to leverage European data center construction plans in order to create demand for AI chips. The Act introduces “grand challenges”—large-scale, cross-sectoral initiatives—to structure demand for emerging technologies in Europe, while public procurement may integrate security-of-supply criteria for critical sectors. Strategic projects further target capacity gaps in areas such as memory, advanced manufacturing, and AI processors.

The new Chips Act does not, however, herald the return of the “fortress Europe” myth. Instead, it explicitly encourages the Commission to conclude strategic semiconductor partnerships with “established or emerging international partners,” provided that such partnerships contribute to the EU’s security of supply. The “strategic projects” framework also aims to incentivize foreign firms to localize production in Europe. 

The Chips Act 2.0 lays out a clear, articulated vision of sovereignty and resilience, though the challenges remain. The budget question remains unresolved and subject to future negotiations, compounded by Europe’s modest growth rates and investment levels. Execution will be paramount, as strategic projects could face external pressures: both China and the United States have signaled discontent and possible retaliatory measures against Europe’s industrial policies. Finally, the competitiveness of the semiconductor ecosystem will also depend on addressing long-standing weaknesses in the EU economy, from high energy prices to the weakening of its industrial base.

Antonio Calcara, Head of the Technology and Economic Statecraft program at the Centre for Security, Diplomacy and Strategy (CSDS) Office

On the first question, I see several positive elements in Chips Act 2.0. The most important is its stronger focus on advanced chips and demand. The original Chips Act was largely supply-side oriented; this new approach appears to take the ecosystem more seriously, linking semiconductors to AI factories, cloud infrastructure, data centers, and broader industrial demand. This is also why it matters that Chips Act 2.0 was presented alongside the Cloud and AI Development Act. The logic is clear: Europe cannot build a semiconductor industry solely by subsidizing production; it also needs credible downstream demand.

That said, two caveats are important. First, it remains to be seen how much of this ambition will survive negotiations with the member states and the European Parliament. Second, the focus on advanced chips is promising, but Europe still lacks large domestic buyers comparable to the US big tech firms. AI factories can help create demand, but it remains unclear whether they will be sufficient to anchor a competitive European advanced-chip ecosystem.

On the second question, Indo-Pacific partners are absolutely critical. South Korea plays a central role in memory chips; Japan remains highly relevant in materials, equipment and advanced manufacturing; Taiwan is indispensable in advanced foundry capacity; and important interconnections are already emerging, for example through IMEC’s cooperation with Japan’s Rapidus. These partnerships can help Europe access capabilities it cannot develop on its own.

The key question, however, is whether this creates enough critical mass. My view is that it is a good starting point, but not yet a complete strategy. Much will depend on the political and economic relations that Europe and its Indo-Pacific partners establish with the United States in the coming months. US export controls, industrial policy, and alliance politics will strongly shape the extent to which European countries (and their Indo-Pacific partners) can build these partnerships independently.

A small-state test for the Act

Martin Weis, Professor at the Institute of Electronics and Photonics at the Slovak University of Technology (STU) in Bratislava

Chips Act 2.0 quietly drops the headline that defined its predecessor: the 20% target for the EU’s share of global chip production, which now survives only in the Digital Decade program. The Commission’s own impact assessment draws on the European Court of Auditors’ verdict that the original Act was “very unlikely” to achieve that “overly ambitious” goal. This is the right correction. For a small member state, the 20% figure was always a distraction: the question was never whether Europe could win the fab race, but whether the act strengthens the value-chain segments where the EU has something to scale.

The impact assessment is blunt about where Europe is the weakest. Not one of the world’s top 20 assembly, test, and packaging (OSAT) companies is headquartered in the EU, and the Union’s projected revenue share in that segment is essentially zero through 2030. Europe’s leading-edge front-end capacity is concentrated almost entirely in a single Intel facility in Ireland. The act’s decisive contribution therefore lies in advanced packaging, chiplet integration, and power and compound semiconductors, not in chasing sub-2nm logic.

Seen from Slovakia, this turns a story of absence into one of niche assets. A small economy with no silicon fab still hosts an established power-module packaging base, a domestic gallium-arsenide wafer producer, back-end equipment makers, and a small but real fabless design segment—precisely the areas the assessment flags as European opportunities. The real test for such a country is whether the act’s instruments reach this distributed capacity or whether—by relying on state aid and a still-hypothetical European Competitiveness Fund (“should it materialize,” as the Commission puts it)—it once again rewards the few states able to co-finance multi-billion-euro fabs, hard-wiring a two-speed Europe.

This is where Indo-Pacific partnerships become more than a slogan. The capabilities Europe lacks, such as advanced packaging, back-end, equipment, and skilled labor, are precisely those that Taiwan, South Korea, and Japan have built over decades. For a small member state, the realistic path is not a flagship fab but targeted cooperation: joint back-end and power-module pilot lines, equipment partnerships, and talent exchange. Slovakia’s own power-module laboratory with Taiwan shows how such links can transfer the capabilities the EU needs.

Yet the recent US-China summit in Beijing suggests that this corridor is narrowing. Washington is extending export controls across the equipment supply chain, including over Dutch and Japanese toolmakers, while AI chips remain a bargaining chip in US-China relations. Small EU states have the least leverage in this environment and the most to lose from choosing sides. For them, both the Act and cooperation with Indo-Pacific partners will be judged less by the EU’s aggregate market share than by whether Europe builds enough of its own back-end base to make those partnerships a choice rather than a dependence.

Dominika Remžová, Research Fellow at CEIAS

The new iteration of the EU’s Chips Act has been praised on several fronts, most notably for acknowledging the importance of demand-side measures and mature-node chips as complements to its previously supply-heavy and advanced-node-focused approach. The Act’s (supra-)state aid conditionality has also been expanded to include ownership and control requirements—though it does not prevent foreign companies from qualifying as “domestic undertakings” and thereby accessing the corresponding support through localization strategies and other restructuring measures. Moreover, the broader package at times blurs the distinction between ownership and control, especially regarding advanced-node chips and the AI stack.

On the one hand, the act repeatedly acknowledges the indispensability of mature- and specialized-node semiconductor production to the EU’s industrial ecosystem, with the addition of photonic ICs to the Chips for Europe Initiative (the original act’s major R&I component) being a positive development in this area. On the other hand, “strategic autonomy,” with its emphasis on the design and manufacturing of leading-edge chips, remains the overarching paradigm. 

The act’s major objective of reducing the EU’s long-standing dependence on foreign tech and materials providers may also appear to sit uneasily alongside the ongoing negotiations on joining the US-led Pax Silica initiative. This can, however, also be seen as reflecting the Union’s distinction between its own geo-economic interests, which still allow for both cooperation and competition rather than purely rivalry-based dynamics, and the United States’ largely geopolitical (namely, conflict-prone) imperatives that it now indiscriminately attaches to its alliance system. And despite the repeated emphasis on the “security of supply” in relation to both of the act’s major objectives—increasing the competitiveness of the Union’s semiconductor value chain and enhancing its crisis-response capabilities—the integration of this security dimension as a public procurement criterion remains voluntary.

Definitions of “EU added value” and “common Union interest” also remain vague. Alongside concerns about increasing fragmentation linked to the loosening state aid rules and the European Competitiveness Fund, this raises further questions about the prospects for industrial upgrading in small CEE states, whose FDI-reliant growth models and (semi-)peripheral positions within broader production networks have long been seen as posing considerable constraints on such ambitions. 

That said, the EU’s broader economic security agenda and the ongoing shift toward just-in-case supply chain configurations open new opportunities for countries that have long relied on attracting investment through lower labor and production costs. Indeed, the skills development associated with new semiconductor investments and talent programs, as illustrated by cooperation between the Czech Republic and Taiwan, may prove to be the first stepping stone toward social and industrial upgrading within the region and, by extension, toward realizing its future semiconductor ambitions. Within this context, increasing cooperation with Indo-Pacific partners, especially those with supply chain strengths complementary to the EU’s, is particularly welcome.

The European Commission’s proposed Chips Act 2.0 reflects both what the first Chips Act could and could not achieve. Considerable investment was mobilized, and research capacity strengthened, yet the EU remains dependent on third countries for chip manufacturing, particularly at the advanced nodes that underpin the AI revolution. Chips Act 2.0 attempts to correct course through permitting reform, demand aggregation, and AI-focused “grand challenges.” 

The timing of the Act is not coincidental. The current global economic security order is structured, to a significant degree, around the United States’ export control architecture, a system that has progressively tightened access to technology for China while consolidating a coalition of trusted-partner economies. Media reports suggest that the EU is moving toward formally joining Pax Silica, a US-led initiative aimed at securing supply chains for AI semiconductors, critical materials, and advanced technologies, already comprising Australia, India, Japan, South Korea, and Singapore. 

Read alongside Chips Act 2.0, this development points to a gradual and meaningful shift in Europe’s positioning: from cautious observer to a more active participant in the architecture of supply chain security. From Taiwan’s perspective, that convergence is broadly welcome. The CHIPDIPLO paper’s recommendation that EU–Taiwan cooperation on foundational chips be embedded within a broader plurilateral format finds its institutional expression in Pax Silica, a setting in which Taiwan’s role, though unofficial, is structurally indispensable. 

The internal deliberations surrounding the reported move by Pax Silica do, however, invite reflection. France and several other capitals reportedly sought clarification on governance, the initiative’s relationship with the G7, and safeguards for EU regulatory autonomy, including export controls and investment screening. These concerns are legitimate expressions of institutional prudence, but they also reflect a deeper tension between strategic autonomy and collective action that Taiwanese counterparts have consistently identified as a source of uncertainty in the relationship. The question for Taiwan is less about whether Europe’s intentions are sound and more about whether its policy commitments will prove durable across electoral cycles and shifting member-state priorities.  

Chips Act 2.0’s formal introduction of “strategic partnerships on semiconductors” as a mechanism for international cooperation also offers the legal scaffolding for more structured EU-Taiwan engagement. More concretely, the Act’s investment-facing measures, combined with “demand accelerators,” could provide the kind of market visibility that Taiwanese firms have long required before deepening their European exposure. That signal, if sustained, changes the investment calculus. Europe’s semiconductor ambitions will ultimately be judged not by the legislation it passes, but by whether partners like Taiwan conclude that it is both a market and a partner worth committing to.