The European Union announced plans to invest €120 billion ($140 billion) in public-private funding by 2035 to revive its semiconductor industry under an updated Chips Act known as Chips Act 2.0 [1]. The move aims to increase local demand for EU-made chips after the original 2023 legislation failed to grow the bloc’s market share in semiconductors [1].
The European Commission stated in May 2026 that the current trade and investment relationship with China is unsustainable, following a strategic debate on ties with the Chinese government [2]. This has raised concerns within the EU about potential retaliation linked to the reassessment of its economic relationship [2].
The first Chips Act, passed in 2023, sought to strengthen the EU’s presence in the global chip market but did not deliver the expected growth in market share [1]. The new legislation aims to correct this by focusing on boosting demand within the EU for chips made locally and promoting semiconductor manufacturing capacity on European soil [1].
In a statement accompanying the May 2026 announcement, the European Commission framed the investment as vital to ensuring supply chain security and reducing dependency on foreign semiconductor imports amid geopolitical tensions [1, 2]. The decision reflects growing unease about the EU’s reliance on external suppliers, especially given the strained relations with China.
The Chips Act 2.0 investment will come from combined public and private sources, pooling efforts to modernize and expand the EU’s chip production capabilities [1]. Industry insiders view this step as critical to competing with major global players such as the US, Taiwan, and South Korea.
The EU will continue to closely monitor the economic ties with China as it rolls out the investment plan, balancing geopolitical risks with the need for stable supply chains in crucial technologies [2]. The next major milestone for the Chips Act 2.0 is its formal introduction and legislative process later this year, setting detailed spending guidelines and incentives for chipmakers.
The effort to reboot Europe’s semiconductor sector faces significant challenges, including technology gaps and competition. However, the €120 billion funding commitment outlines clear political will to regain ground in the strategic industry by 2035.
