In Need of a Hardware Update: An Analysis of the EU’s Chips Act

In August of 2025, Intel officially canceled the construction of its new €30 billion semiconductor factory in Magdeburg, Germany, symbolizing Europe’s faltering plans to become a key player in the semiconductor industry (it-daily, 2025). The cancellation symbolizes the insufficiency of Europe’s semiconductor industrial ambitions, especially under the EU’s 2023 Chips Act. This legislation sought to increase Europe’s semiconductor market share from 10% to 20% by 2030 (European Council, 2023). Instead, two years later, Europe’s share remains stuck at 10% while competitors are flourishing (Dauvé, 2025). Despite €86 billion in funding, projects have been uncoordinated, leading to total deadlock (European Court of Auditors, 2025). Two years later, Europe’s strategy remains commendable, but its results are minuscule.

This article examines why Europe’s semiconductor strategy has failed. It then outlines a revised “Chips Act 2.0.” These revisions focus on correcting Europe’s strategic course in its semiconductor strategy, allocating strong and measurable public investment, maintaining Europe’s strength in semiconductor lithography, and leveraging partnerships with allies to remain stronger geopolitically.

Fragmented Ambition
Most Chips Act projects remain unlikely to reach the Digital Decade target, highlighting that current funding lacks coordination among member states (European Court of Auditors 2025; ESIA, 2025). Although they ended up being canceled, Intel planned projects in both Germany and Poland (Notes from Poland, 2025). France continues to back STIMicroelectronics, while the Netherlands guards its industry titan, ASML (ESIA, 2025). These efforts make sense domestically but undermine Europe’s collective industrial cohesion and competitiveness.

This lack of coordination illustrates the structural issue that Europe’s subsidy approach benefits national interests instead of continental growth. These shortcomings become even more alarming when compared to the actions taken by competitors. The U.S. CHIPS and Science Act mobilized $52 billion in direct funding and private investment through key performance benchmarks (NIST, 2023). These targeted goals, including provisions like manufacturing subsidies, have led the US to significantly grow in all facets of the semiconductor industry. South Korea’s “K-Semiconductor Belt” offers tax breaks and infrastructure integration to support a unified national supply chain (Kim and Jin, 2023). The difference is not just funding but rather how it is used. The U.S. and South Korea have clear performance metrics to ensure efficiency and accountability, while Europe has aimless projects. Their ambition is collective, but execution remains national.

Europe’s Crown Jewel: ASML
Despite all these headwinds, Europe leads in lithography, the process of using light to print circuit patterns onto a microchip. Specifically, ASML is the sole producer of extreme ultraviolet (EUV) lithography, the most advanced chip manufacturing technology, and an indispensable tool for AI development. Each machine is costly and depends on a continent-wide network of collaborations (ASML, 2025).

ASML’s monopoly on EUV technology gives Europe strong leverage in the semiconductor industry, yet it is not leveraged as a strategic influence. For instance, the Dutch government recently acquiesced to the Trump administration’s demands to restrict exports of EUV and DUV machines to China, hurting its earnings and proving Europe’s dependence on U.S. policy (Tech in Asia, 2025). What should be Europe’s strongest card is just another constrained asset.

If the EU wants technological sovereignty, it must wield ASML’s dominance as a foundation for a strong industrial ecosystem, not an isolated success story.

Chips Act 2.0
A new Chips Act should refine the 2023 framework through three practical reforms.

1. Performance-based subsidies
Europe should reorient its approach to subsidies based on tangible public outcomes like job creation, regional growth, or R&D intensity instead of open-ended incentives (ESIA, 2025). These measurable outcomes would transform Europe’s scattered approach into meaningful investments with strong returns. By tying government investment to measurable outcomes, the EU can replicate accountability mechanisms that have driven success under the U.S. CHIPS Act (NIST, 2023). Accountability prevents redundant projects and guarantees that subsidies result in long-term benefits such as workforce expansion and innovation hubs. As a result, these reforms would directly address the inefficiencies in the current Act. 

2. Lithography dominance
Europe should direct its investment into ASML’s lithography technology, linking them with suppliers and research centers across the Netherlands, Germany, Belgium, and France. Solidifying Europe’s dominance in lithography would unite the continent around an integrated and globally competitive value chain (ESIA, 2025). This consolidated approach would double down on Europe’s strengths instead of trying to catch up on areas where it lags far behind. The CEO of ASML warns that export controls are undermining collaboration, emphasizing the importance of internal integration in Europe (Tech in Asia, 2025).

3. Grow strategic partnerships
Through multilateral forums like the EU-U.S. Trade and Technology Council, Europe should invest with the U.S. in next-generation chip materials and design. This collaboration could lead to microchips that perform better and require less energy (Hamilton 2022). This shared research would extend Europe’s influence while not having to replicate fabrication techniques.

This set of reforms would transform the Chips Act into a coherent industrial strategy rather than a patchwork of aimless investments.

Looking forward
Semiconductors underpin many facets of the modern economy and could be the key to Europe’s digital transition. The closure of the Magdeburg plant highlights the urgency of a combined strategic approach. Europe cannot outspend Washington or Seoul, but it can dominate key markets and out-specialize them.

Focusing on deliverable outcomes like performance-based subsidies, lithography focus, and strategic partnerships, the EU can transform ambition into strong action. In simpler words, the Chips Act does not need to be rewritten; it just needs a hardware update.

Bibliography
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ASML. (2025b). Technology overview. https://www.asml.com/en/technology

European Commission. (2023). European Chips Act. https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/europe-fit-digital-age/european-chips-act_en

European Council on Foreign Relations (ECFR). (2025). Chips on the menu: How the EU can get its act together on semiconductors. https://ecfr.eu/article/chips-on-the-menu-how-the-eu-can-get-its-act-together-on-semiconductors

European Court of Auditors. (2025). Special report No. 12/2025: Implementation of the European Chips Act. https://www.eca.europa.eu/en/publications?ref=SR-2025-12

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Kim, Kyu Dong; Jin, Ellie. (2023, June). The South Korean K-Chips Act. https://1npdf11.onenorth.com/pdfrenderer.svc/v1/abcpdf11/GetRenderedPdfByUrl/alerts-privateequity-the-south-korean-k-chips-act.pdf/?url=https://www.goodwinlaw.com/pdf%2Fen%2Finsights%2Fpublications%2F2023%2F06%2Falerts-privateequity-the-south-korean-k-chips-act

Hamilton, D. S. (2022, March 6). Making the U.S.–EU Trade and Technology Council effective. Transatlantic Policy Center. https://www.transatlantic.org/wp-content/uploads/2022/03/TTC-summary-brief-final-March-6-2022.pdf

it-daily.net. (2025, August 22). Intel officially cancels construction of chip factory in Magdeburg, Germany. https://www.it-daily.net/en/shortnews-en/intel-officially-cancels-construction-of-chip-factory-in-magdeburg-germany

National Institute of Standards and Technology (NIST). (2025). CHIPS for America: Funding updates. https://www.nist.gov/chips/funding-updates

Notes from Poland. (2025, July 25). Intel to “no longer move forward” with planned new plant in Poland. https://notesfrompoland.com/2025/07/25/intel-to-no-longer-move-forward-with-planned-new-plant-in-poland/

Dauvé, Sébastien. (2025). Semiconductors: Can Europe regain ground? https://www.polytechnique-insights.com/en/columns/industry/semiconductors-can-europe-regain-ground

Tech in Asia. (2023). ASML CEO warns geopolitics may hurt innovation under U.S. tariffs.https://www.techinasia.com/news/asml-ceo-warns-geopolitics-may-hurt-innovation-under-us-tariffs