Chips Act 2: Europe's expensive bid for semiconductor independence
Brussels has proposed a sequel to its chips strategy, betting that industrial policy can rebuild capacity and cut reliance on foreign suppliers.
Oneonomy Admin
The European Commission's proposed Chips Act 2, unveiled as part of a broader push for technological sovereignty, is a substantial wager that a continent can spend and legislate its way back to relevance in semiconductors — one of the most strategically fraught and technically demanding industries on earth. It is industrial policy on a grand scale, aimed at a problem that money alone has never fully solved.
The motivation is straightforward exposure. Europe consumes far more advanced chips than it manufactures, leaving its economy and security dependent on a handful of foreign producers concentrated in regions of acute geopolitical risk. The pandemic-era shortages and the subsequent scramble for supply made that vulnerability impossible to ignore and politically impossible to leave unaddressed.
Subsidy can buy buildings, but it cannot quickly buy expertise.
What the plan attempts
The proposal aims to expand domestic manufacturing capacity and reduce reliance on suppliers outside the bloc, sitting deliberately alongside new cloud and AI legislation in a coordinated sovereignty package. The ambition is not merely to build a few more factories but to construct a more self-sufficient and resilient technology base that can withstand disruption to global supply chains.
Industrial policy of this kind is expensive, slow and uncertain in its returns. Advanced fabrication plants cost tens of billions of dollars and take years to build and bring to yield; the skilled workforce required to run them is scarce and slow to train; and the most advanced manufacturing processes are guarded jealously by the very few firms that have mastered them. Subsidy can buy buildings, but it cannot quickly buy expertise.
The hard economics
Even with generous subsidy, the underlying economics are punishing for a latecomer. Leading-edge manufacturing is dominated by enormous incumbents whose accumulated scale, learning and process knowledge are extraordinarily difficult to replicate at any price. A new entrant must spend vast sums merely to approach parity with companies that have been refining their craft for decades, with no guarantee of getting there.
Critics question, reasonably, whether Europe can build a genuinely competitive position at the frontier or will end up heavily subsidising capacity that perpetually lags it. Supporters counter that resilience, not outright leadership, is the actual point — that some secure domestic supply is worth paying a premium for, even if it never quite catches the cutting edge, because the alternative is continued dependence.
Sovereignty at a price
The deeper and unresolved debate is about whether industrial policy can deliver genuine strategic autonomy in an industry defined, perhaps more than any other, by global interdependence. The chip supply chain is a planet-spanning web of specialised contributions, and no single bloc has ever fully controlled it. The answer to whether Europe can change that will shape its technological standing for a generation.
Chips Act 2 is, at bottom, a bet that the mounting cost of dependence has finally come to exceed the enormous cost of building at home. Whether that arithmetic actually holds — whether the subsidies buy real security rather than expensive disappointment — is the central question the next decade will be left to answer.