Is the EU Losing Its Chip Crown to China?

An In-Depth Assessment of Semiconductor Geopolitics and Market Realities

Microchips have become the new battleground for global influence and economic security. These minuscule components are the backbone of modern technology—driving smartphones, cars, cloud computing, artificial intelligence, and advanced weaponry. Control over semiconductor manufacturing today equates to control over the future. While the European Union once stood tall with its legacy of innovation and precision engineering, the balance is shifting.

China, backed by aggressive state policy and strategic investments, is swiftly climbing the semiconductor value chain. This tectonic shift isn’t just about market shares, technological sovereignty, national security, and the reshaping of global power dynamics. As China accelerates, the EU must confront an urgent question: is it at risk of surrendering its semiconductor edge—and with it, a cornerstone of its digital and economic independence?

Europe’s Semiconductor Standing: Innovation Stronghold or Manufacturing Laggard?

Europe’s semiconductor industry has long been regarded as a hub of precision, innovation, and reliability, particularly in areas such as analog chips, power semiconductors, automotive electronics, and advanced lithography equipment. In 2024, the European semiconductor market was valued at $126.3 billion, with forecasts suggesting growth to $217.1 billion by 2033, at a CAGR of 5.7% (IMARC Group).

However, while Europe’s intellectual and design capabilities remain globally respected, its share in global chip manufacturing has dramatically eroded—from a robust 44% in 1990 to a projected 9% by 2032 (Visual Capitalist). This decline can be attributed to an over-reliance on R&D leadership and niche market strength, without proportional investment in domestic fabrication infrastructure. Unlike Asia or the U.S., Europe failed to build mega fabs or attract major foundries at scale during the critical decades of semiconductor globalization.

The 2023 European Chips Act was introduced as a strategic countermeasure. Backed by €43 billion in EU and private funding, it aims to double Europe’s global chip market share to 20% by 2030 (European Commission). The Act is ambitious in scope—targeting everything from design and prototyping to manufacturing and talent development. Yet, there is growing concern among experts and institutions such as the European Court of Auditors (ECA), which has called the plan “deeply disconnected from reality,” estimating a more realistic market share of 11.7% by 2030 (The Guardian).

Europe’s leading firms, including ASML, Infineon Technologies, STMicroelectronics, and NXP Semiconductors, continue to hold global leadership in their niches. ASML, for example, is the world’s exclusive supplier of extreme ultraviolet (EUV) lithography systems, a critical technology enabling chips with nodes below 7nm. This singular position makes the Netherlands-based company a geopolitical keystone, so much so that the U.S. and EU have heavily lobbied to restrict ASML’s sales of advanced systems to China (Reuters).

But manufacturing is a different story. Unlike Taiwan, South Korea, or increasingly China, Europe has not scaled up semiconductor foundry capacity. A key example is Intel’s delayed €30 billion fabrication plant in Magdeburg, Germany. The project was pitched as the EU’s anchor investment for reshoring advanced chip production but has encountered political wrangling, subsidy negotiations, and escalating costs—further casting doubt on the EU’s capability to implement large-scale industrial policy (Le Monde).

Moreover, Europe is also facing a talent gap. Semiconductor manufacturing requires highly specialized engineering capabilities that have become scarce due to decades of offshoring and academic underinvestment. The Chips Act addresses this partially, but whether it can reverse entrenched trends in time remains uncertain.

China’s Strategic Semiconductor Surge

China’s semiconductor growth is both deliberate and state-engineered. With the semiconductor market valued at $182.8 billion in 2024 and expected to grow to $429.9 billion by 2033 at a CAGR of 8.9%, the country is aggressively scaling both upstream and downstream value chain participation (Statista).

Unlike the EU, China has deployed a coordinated, top-down policy framework under programs like Made in China 2025, aiming for 70% chip self-sufficiency by 2025—though its actual domestic chip production still hovers around 16% of total consumption. The gap is narrowing quickly, however, especially in mature nodes (28nm and above), which power electric vehicles, IoT, industrial systems, and military-grade electronics.

A cornerstone of China’s push is the National Integrated Circuit Industry Investment Fund—widely known as the “Big Fund.” In 2024, it launched its third phase with $47.5 billion in capital to support domestic chip manufacturing, packaging, EDA tools, and materials ecosystems (Caixin Global). This complements local government subsidies, equity financing, and cheap loans to national champions such as SMIC, Huawei, Naura Technology, and Hua Hong Semiconductor.

China is also outspending the EU by a wide margin in capital equipment. In H1 2024 alone, it imported $25 billion worth of chipmaking tools, outpacing Taiwan, South Korea, and the United States combined. This figure is projected to cross $50 billion by year-end (TrendForce).

Despite U.S. sanctions cutting off access to advanced EUV tools, China has made incremental progress in developing its domestic DUV (deep ultraviolet) lithography and memory technologies. For instance, Huawei’s 2023 launch of the 7nm Kirin 9000S chip—fabricated by SMIC—signaled an unexpected breakthrough under export restrictions, raising questions about how far domestic innovation has progressed under pressure.

Yet challenges remain. While China can manufacture chips at mature nodes and is making rapid progress in DRAM, NAND, and analog ICs, it continues to lag behind in high-performance logic chips below 5nm, and in EDA software and precision metrology tools. Also, quality consistency, yield rates, and global customer confidence in Chinese fabs are still building.

Head-to-Head: Comparative Landscape

While both regions are investing aggressively, the nature and scale of their strategies differ markedly. Europe banks on high-value engineering, strategic alliances, and precision tooling; China pursues manufacturing scale, policy alignment, and vertical integration.

Strategic Reflections: Reclaiming Relevance or Accepting Redefinition?

For Europe, the path forward is fraught with urgency. Retaining technological sovereignty in semiconductors will require not only capital and coordination but also cultural change. Historically siloed national policies across member states must now converge with industrial execution and talent development. The Chips Act is a good starting point, but the EU must simplify subsidy access, accelerate permitting for mega fabs, and incentivize local demand for chips through smart procurement policies.

China’s rise, meanwhile, underscores the power of industrial policy and national will. Despite significant technological bottlenecks and geopolitical headwinds, its ability to build capacity at speed has recalibrated global supply chains. If it cracks high-end design and fabrication in the next decade, it may not just catch up to the West—it could leapfrog it in certain domains.

For the EU, this is not a race it can afford to lose.