European chips squeezed in a vise between Chinese and American pressure

Introduction: the ambition of technological sovereignty under threat

A report that shatters the official optimism

For years, Brussels sold the idea of a European technological sovereignty in semiconductors, carried by the Chips Act and billions of euros in public investment. A new report funded by the European Union, jointly written by the Institute for Security Studies and the Institut Montaigne, seriously darkens that narrative: Europe's chip industry faces a bleak future, caught between Chinese restrictions and growing dependence on the United States, according to Reuters coverage published on July 2, 2026.

This diagnosis breaks sharply with the enthusiastic official discourse of recent years. It's a reminder of a harder reality: technological sovereignty cannot be decreed through subsidies alone, it has to be built against rivals who don't play by the same rules.

Why this report should alarm far beyond industry circles

Semiconductors are not just another economic sector: they are the foundation of the entire modern digital economy, from smartphones to defense systems to artificial intelligence. A dependent Europe in this field is a vulnerable Europe, both economically and strategically, facing rivals ready to weaponize that dependence.

The Chinese threat, a vise that keeps tightening

Critical minerals, Beijing's silent weapon

China controls an overwhelming share of the world's production of critical minerals and magnets essential to the manufacturing of semiconductors and advanced electronic components. Its export restrictions, already used as a lever of geopolitical pressure, represent a direct threat to European supply chains, according to the Institut Montaigne report.

This dependence on Chinese raw materials isn't new, but it takes on a more critical dimension as Beijing demonstrates, in other trade disputes, its willingness to use these levers to extract political and economic concessions from its partners.

Taiwan, the systemic risk nobody wants to name

The report also highlights the risk of a conflict in the Taiwan Strait, where the overwhelming majority of the world's most advanced chip production is concentrated, notably at Taiwanese giant TSMC. A military crisis in that region would instantly paralyze the global semiconductor supply, with devastating consequences for the European industry, which is entirely dependent on that Asian supply chain.

This scenario, long considered hypothetical by European industrial planners, is now treated as a serious possibility that must be built into any medium-term industrial resilience strategy.

American dependence, a revealing blind spot

A striking admission from a specialized analyst

What stands out most in this report is the finding that dependence on the United States now worries nearly as much as the Chinese threat. Joris Teer, an analyst at the Institute for Security Studies quoted by Reuters, sums up the situation bluntly: while Beijing remains the biggest perceived threat, dependence on Washington has become a markedly more serious concern since the Trump administration's return.

This statement is significant coming from a circle of experts usually cautious about criticizing Europe's traditional transatlantic allies.

ASML at the heart of a possible transatlantic showdown

The report points to the risk that Washington could impose unilateral restrictions on exports to China of technology produced by European companies, foremost among them ASML, the Dutch maker of lithography machines, considered Europe's most valuable company in the tech sector.

A proposed American bill under study could allow Washington to impose such export controls even on European allies, a prospect that deeply worries industry players, caught between their lucrative Chinese market and their technological dependence on American design software.

ASML, a symbol of European vulnerability and excellence

An irreplaceable company in the global chain

ASML occupies a unique position in the global semiconductor industry: it's the only company in the world capable of producing the extreme ultraviolet lithography machines needed to manufacture the most advanced chips. This near-monopoly position makes it both a major strategic asset for Europe and an obvious target for geopolitical pressure, whether from Beijing or Washington.

Any restriction, whether imposed by the United States to limit exports to China, or by China itself in retaliation, would have immediate repercussions on the revenues and competitive position of this Dutch and European industrial flagship.

The impossible choice between markets

For ASML and other European companies in the sector, the current situation imposes a near-impossible dilemma: complying with American demands to restrict China risks closing off an immense and lucrative Chinese market, while ignoring those demands risks American retaliation on access to design technologies and Western markets.

This dilemma shows just how impossible industrial neutrality has become in a sector so fiercely contested between the world's two technological superpowers.

The structural weaknesses Europe has dragged for years

Energy costs that crush competitiveness

Beyond external geopolitical pressures, the report identifies well-known but still unresolved structural weaknesses: energy prices in Europe remain markedly higher than in the United States or Asia, a major competitive disadvantage for an industry as energy-intensive as semiconductor manufacturing.

This structural energy weakness, worsened since the energy crisis tied to the war in Ukraine, continues to weigh heavily on Europe's ability to attract new investment in chip-making plants, despite the public subsidies available.

A chronic lack of private capital

The report also points to the persistent lack of private venture capital available in Europe to finance innovation in the semiconductor sector, unlike the United States, where far more developed financial ecosystems support large-scale technological risk-taking.

This weakness in private financing forces Europe to rely almost exclusively on public subsidies, a slower and more bureaucratic approach than the American model, driven by agile and abundantly capitalized private investors.

The decline of customer industries, an underestimated problem

Europe's automotive sector, once a pillar, now weakened

Europe's automotive industry, long one of the main buyers of chips manufactured on the continent, is itself going through a period of deep turbulence, caught between a costly electric transition and aggressive Chinese competition on cheap electric vehicles.

This decline of traditional customer industries creates a vicious cycle: less local demand for European chips further undermines the economic viability of investments in new production capacity on the continent.

A broader deindustrialization that worries Brussels

This phenomenon fits into a wider fear of deindustrialization in Europe, a subject increasingly troubling European decision-makers facing Chinese competition across nearly every manufacturing segment, from solar panels to electric vehicles to consumer electronics.

Without a solid customer industrial base on its own territory, Europe's ambition of semiconductor sovereignty risks staying largely theoretical, for lack of sufficient economic outlets to justify the colossal investments required.

The European Commission's response, between ambition and realism

A Chips Act 2.0 to fix the gaps in the first

Faced with this harsh assessment, the European Commission presented in June 2026 a proposal for a Chips Act 2.0, meant to fix the gaps identified in the first version of that legislation, deemed insufficient by many industry players and experts to truly close the gap with the United States and Asia.

This new initiative aims in particular to simplify the administrative procedures for accessing subsidies and to more precisely target the segments of the value chain where Europe retains a real competitive advantage, rather than trying to compete on every front at once.

The Pax Silica initiative, a name that says a lot about the ambitions

At the same time, Brussels launched an initiative called Pax Silica, a name that explicitly evokes the ambition of a kind of strategic peace built on mastery of silicon, the cornerstone of all modern electronics. The initiative aims to strengthen Europe's international partnerships beyond its sole relationship with the United States and China.

It remains to be seen whether this rhetorical ambition will translate into concrete industrial results, or whether it will join the long list of well-intentioned European initiatives that were never funded enough to truly shift the global balance of power in this sector.

What this means for the global race in artificial intelligence

No advanced chips, no sovereignty in artificial intelligence

The crisis in European semiconductors isn't just an isolated industrial concern: it directly shapes the continent's ability to fully participate in the global race for artificial intelligence, a field where advanced chips have become the single most critical strategic resource, much like oil in the twentieth century.

Without guaranteed access to these cutting-edge components, European ambitions to develop competitive artificial intelligence models against the American and Chinese giants of the field risk remaining structurally hobbled by this unresolved hardware dependence.

A lag that fuels the flight of talent and capital

This structural lag in semiconductors also fuels a worrying flight of talent and capital toward the United States, where the best European researchers and engineers in artificial intelligence and microelectronics find far more favorable financing and infrastructure conditions for their ambitions.

This technological brain drain forms an additional vicious cycle: the less effectively Europe invests in its semiconductor ecosystem, the more it loses the talent needed to one day reverse that trend.

The comparison that stings, American and Chinese investment

Washington bets hundreds of billions on its own capacity

The United States has committed hundreds of billions of dollars, through the American CHIPS Act and massive private investment, to bring part of advanced semiconductor production back onto its own soil, reducing its own dependence on Asia while consolidating its technological lead.

This mobilization of resources, both public and private, far exceeds the scale of comparable European investments, widening the gap between the two Western blocs in this strategic sector.

Beijing accelerates despite Western sanctions

China, for its part, continues to invest massively in developing its own semiconductor industry, seeking to bypass Western restrictions on the export of advanced technology through an accelerated strategy of self-sufficiency, with mixed results but real progress on some less advanced segments of the market.

This three-way race between Washington, Beijing and a Europe struggling to keep pace shows the urgency for the continent to quickly find its place in this new global technological geography, before the positions freeze durably to its disadvantage.

Industry voices calling for a wake-up call

European executives growing increasingly alarmist

Several European technology company executives have multiplied their public statements in recent months to warn about the urgency of the situation, calling for bolder measures than Brussels's current initiatives, seen as too timid given the scale of the competitive challenge posed by Washington and Beijing.

These calls generally converge on the same demand: drastically simplify European regulation, speed up industrial investment approval procedures, and mobilize public funding amounts matching those committed by American and Chinese rivals.

The risk of a gap between rhetoric and political action

This persistent gap between the scale of the political rhetoric about European technological sovereignty and the reality of the resources actually mobilized remains one of the most recurring points of friction between industry and European institutions.

As long as this gap isn't closed through financial commitments and regulations matching the stated ambitions, Europe risks continuing to fall behind rivals who act with markedly greater determination and resources.

Possible scenarios for the next decade

An optimistic scenario, but a demanding one

In the best-case scenario envisioned by the report's authors, Europe manages to consolidate its niche positions, notably around ASML and a few specialized champions, while intelligently diversifying its international partnerships beyond the sole transatlantic axis, thereby reducing its vulnerability to unilateral decisions from Washington or Beijing.

This scenario nonetheless assumes a far more determined political and financial mobilization than what has been observed so far, along with an ability to quickly resolve the structural weaknesses identified, particularly around energy costs and access to private capital.

A pessimistic scenario that cannot be ruled out

Conversely, the most pessimistic scenario envisions a Europe increasingly marginalized in the global semiconductor value chain, reduced to a mere consumer market for chips designed and manufactured elsewhere, with all the geopolitical and economic consequences that would carry for the continent's strategic autonomy.

This scenario, while not irreversible at this stage according to the report's authors, would become markedly more likely if current trends of relative underinvestment and persistent strategic dependence were to continue without major correction in the years ahead.

The role of the Netherlands, unwitting guardians of a strategic treasure

A national responsibility that has become a continental issue

The Netherlands, as host country to ASML, finds itself in a particularly delicate diplomatic position, constantly having to arbitrate between American pressure to restrict exports to China and its own national economic interests tied to that company's sales in the Chinese market.

This situation effectively turns The Hague into a front-line geopolitical actor in the Sino-American technology tensions, a responsibility disproportionate to the country's size, but one that shows how far the stakes of technological sovereignty now exceed traditional national borders.

Still insufficient European coordination on this file

Despite the obvious strategic importance of this issue for the whole continent, coordination between the Netherlands and other European capitals on the strategy to adopt against American and Chinese pressure remains judged insufficient by several experts cited in the report, with each country tending to defend its own national industrial interests ahead of the collective European interest.

This decision-making fragmentation weakens Europe's overall negotiating position against American and Chinese counterparts who, for their part, generally speak with one coherent national voice on these strategic issues.

What European citizens need to understand about this issue

A technical subject with very concrete consequences

To the general public, semiconductor issues can seem abstract and distant, reserved for industry experts and trade negotiators. Yet the availability and price of electronic chips directly affect the cost of cars, smartphones, household appliances and practically every connected device in the daily lives of European citizens.

A chip shortage, like the one experienced in the early 2020s, already showed how much this dependence could concretely disrupt everyday economic life, from car delivery delays to the prices of consumer electronics.

A question of collective resilience, not just industrial policy

Beyond the purely economic aspect, this issue touches on Europe's collective resilience against external geopolitical shocks, whether a conflict over Taiwan, new Chinese restrictions on raw materials, or unilateral American decisions affecting access to critical technologies.

This resilience cannot be guaranteed without a sufficiently robust and diversified European industrial base in this sector, which places this technical question squarely at the heart of democratic debates about the continent's strategic future.

Training talent, the often-forgotten link

A shortage of engineers specialized in microelectronics

Beyond factories and subsidies, Europe's semiconductor industry suffers from a chronic shortage of specialized engineers in microelectronics and materials physics, a skills gap that directly limits the continent's ability to operate new plants even when funding is available.

Several European universities have begun strengthening their specialized training programs, but these efforts will take years before producing enough graduates to close the gap with the industrial needs projected under the Chips Act 2.0.

Global competition to attract top talent

This skills shortage fits into a fierce competition among Europe, the United States and Asia to attract and retain the best engineers and researchers in this highly specialized field, with salaries and working conditions often more attractive across the Atlantic and in East Asia.

Without a coherent strategy to retain this talent on the continent, even massive investments in new production capacity risk running into a wall of skilled-labor shortages once they come online.

Conclusion: a strategic window that is closing

A harsh diagnosis, but not an irreversible one

This joint report from the Institute for Security Studies and the Institut Montaigne paints a harsh picture, but not necessarily a hopeless one: Europe retains real assets, starting with companies of excellence like ASML, but it must urgently resolve its structural weaknesses, its political fragmentation and its excessive strategic dependence on partners whose interests don't always align with its own.

The time left to correct this trajectory is shrinking fast, as the United States and China continue to invest massively to consolidate their respective positions in this technological race that will define the coming decades.

What this decade will decide for technological Europe

The decade now opening will determine whether Europe manages to turn its stated ambition of technological sovereignty into tangible industrial reality, or whether it resigns itself to the status of a captive market, dependent on strategic decisions made in Washington and Beijing. This choice involves far more than the semiconductor sector alone: it involves the continent's overall strategic autonomy for generations to come.

By Maxime Marquette, columnist

Columnist's transparency note

Who I am and my acknowledged biases

I am a columnist, not a microelectronics engineer or an economist specialized in global technology supply chains. This analysis draws on the joint report from the Institute for Security Studies and the Institut Montaigne, as well as coverage from Reuters and Tekedia, all cited in the sources below. My acknowledged bias is pro-Western: I believe Europe must urgently strengthen its technological sovereignty against China, while staying clear-eyed about the risks also posed by excessive dependence on unilateral American decisions.

On the Trump angle adopted here, I highlight a real risk posed by certain American trade policies toward European technology, a judgment that concerns economic policy and not the American administration's military posture, which I continue to credit elsewhere on the NATO file.

What I don't know

I do not have the full technical text of the Institute for Security Studies and Institut Montaigne report in complete detail, nor the precise timeline for adoption of the Chips Act 2.0 by European institutions. I have not invented any quote or testimony: all information reported comes from the journalistic and institutional sources cited below.

Sources

Primary sources

Institut Montaigne, EU Semiconductor Geopolitical Risk Survey Outlook 2026-2031

Institut Montaigne, full text of the policy paper on European semiconductor geopolitical risks

Secondary sources

Reuters, Chinese, US risks mean EU chip sector faces bleak future, report says — July 2, 2026

Tekedia, EU faces bleak future in global chip race as China curbs supplies and US dependence deepens

Anthropic, news on the global race for artificial intelligence — 2026

The Kyiv Independent, ongoing coverage of Western technological and geopolitical issues — July 2026