Chips Act 2: competing on Europe’s semiconductor strengths

Most Europeans will never see a semiconductor. Yet these tiny components determine whether cars leave production lines, hospitals can operate advanced equipment, energy systems remain reliable and artificial intelligence can develop. Chips are the industry behind modern industry.

The European Commission’s proposal for a Chips Act 2 therefore comes at a decisive moment. The first Chips Act helped to activate more than EUR 52 billion in public and private investment. But the global race has accelerated, geopolitical tensions have deepened and our dependencies remain significant. Europe must move from an emergency response to a coherent, long-term industrial strategy.

Europe will not succeed by replicating Asia or the United States. Nor should technological sovereignty be confused with isolation or self-sufficiency. Our objective must be strategic resilience: strengthening European capacity where dependencies create genuine risks, while preserving open, rules-based trade and cooperation with reliable partners.

Europe already has formidable assets in research, lithography, equipment, pilot lines, and advanced manufacturing. The challenge is to connect these strengths and address the weaker links. A credible strategy must cover the entire value chain: design and design tools, materials, equipment, wafer fabrication, advanced packaging, assembly, testing, and industrial deployment. It must support leading-edge technologies, including AI chips and photonics, without overlooking mature-node semiconductors, which remain essential to automotive, energy, medical devices, and industrial automation.

This demands more than subsidies. Public support must leverage private capital, and European coordination must prevent competition between national treasuries from fragmenting the Single Market. Investors also need affordable and reliable energy, skilled people, modern infrastructure, faster permitting, genuine one-stop shops and predictable rules. Europe cannot aspire to technological leadership while making investment unnecessarily slow or complex.

Industrial policy must also look beyond supply. Public procurement, co-design with user industries and demand aggregation can create lead markets for technologies developed and manufactured in Europe. SMEs, start-ups, scale-ups and fabless companies need effective access to finance, pilot lines and design tools, enabling them to enter value chains rather than remain spectators of Europe’s transformation.

People are central to this strategy. Europe needs engineers and researchers, but also technicians, operators, maintenance specialists, electricians, mechanics, and software developers. Workers and their representatives should help anticipate skills needs and design training strategies. Social dialogue can help companies and regions manage technological change and retain industrial knowledge.

At the same time, support for quality employment must not become a pretext for imposing uniform industrial-relations models across Europe. Conditions attached to public funding should be transparent, proportionate and directly related to the supported project. They should respect the autonomy of the social partners and the diversity of national systems, rather than create automatic requirements concerning collective agreements. Claw-back mechanisms may be justified where public commitments are not honored, but they too must be clear and proportionate. The goal is to generate lasting economic and social value, not new administrative burdens. 

Finally, success must be measurable. Monitoring cannot stop at the funding announced or capacity promised. It should assess private investment mobilization, innovation brought to market, productivity, global competitiveness, quality employment, skills development, and regional impact. Stronger crisis instruments are necessary, but they must remain temporary, proportionate and respect commercially sensitive information.

The Chips Act 2 is about much more than chips. It is a test of whether Europe can turn strategic ambition into industrial capability. We know many of the measures required. The question is whether we can prioritize, coordinate and deliver them at the speed demanded by global competition. If we do, Europe can build a semiconductor ecosystem that is innovative, resilient, open to the world and unmistakably European. The time to deliver is now. 

By Gonçalo Lobo Xavier, EESC Employers' Group member and Rapporteur of Opinion INT/1127 Chips Act 2.