"State intervention in semiconductor industry through the EU Chips Act being criticized as another instance of poor planning and execution"
The European Chips Act, passed in 2023 with the aim of boosting semiconductor manufacturing capacity and technological sovereignty, has faced a series of challenges and underperformance, raising concerns about its effectiveness.
The Act, designed to reduce Europe's dependence on external suppliers and enhance competitiveness in the chip industry, has been hampered by several factors.
- Complex Supply Chains and Technological Challenges: The global semiconductor supply chain is intricate, requiring substantial investments and time to overcome technical barriers, develop advanced manufacturing capabilities, and secure supply chain components.
- Regulatory and Enforcement Issues: Related regulatory actions in industries tied to semiconductor technology, such as consumer protection for digital products, show poor compliance and enforcement mechanisms are a broad concern in Europe. Strict rules on in-app purchases compliance and consumer protection in the Netherlands, for example, faced near-complete disregard, hinting at enforcement challenges the Chips Act might also encounter.
- Geopolitical and Economic Pressures: The Act aims at technological leadership but must contend with geopolitical risks and competition, especially from established chip manufacturers in Asia and the US. Concerns in parallel sectors, including US government reports on regulations impacting trade fairness and security risks related to foreign technological influence, illustrate the broader global competitive environment the EU must navigate.
- Performance-Based Policy Adjustment Delays: Broader EU policy frameworks like the Common Agricultural Policy (CAP) have shifted toward performance-based approaches but only after initial periods of adjustment and strategic plan adoption. The Chips Act also likely requires ongoing monitoring, adaptation, and resource alignment to achieve measurable success, which means early failures or slow progress can be part of the longer adjustment process.
Despite these challenges, the European Commission has announced plans for a Chips Act 2.0, despite the first one achieving little success. However, the global chip market is becoming increasingly competitive, with countries such as the US and Japan increasing their investments in chip manufacturing.
Notably, Intel, a major chipmaker, has announced it is giving up on Europe and scrapping planned investments in Germany and Poland. Instead, Intel is moving production to Vietnam and Costa Rica. Similarly, Nvidia, which relied on Taiwan's TSMC for its supplies, has started working on an American factory, but there is no sign of one in Europe.
The initial goal of the Chips Act was to make Europe a world leader in technology, but falling chip sales and profits were already being reported by giants in the industry as new factories came online, indicating a potential glut in the market.
For more detailed and updated specifics, including quantified progress and targeted corrective measures, official EU Commission reports and semiconductor industry analyses published after mid-2025 should be consulted.
- In light of the European Chips Act's underperformance, concerns have arisen about the impact of tariffs and international trade policies on semiconductor manufacturing, as other nations are increasing their investing in this sector.
- The European Chips Act's goal of making Europe a technology leader is being questioned by the shift of key players like Intel and Nvidia towards new factories in countries like Vietnam and Costa Rica, rather than Europe.
- The effectiveness of the European Chips Act in achieving its objectives may be impacted by the general-news developments in politics and technology, such as geopolitical risks, regulatory compliance challenges, and global competitive pressures.
