EU proposes Chips Act 2.0 to strengthen semiconductor ecosystem

The European Commission has proposed Chips Act 2.0, a new framework intended to strengthen Europe’s semiconductor ecosystem and build on the original European Chips Act.

The proposal aims to boost the EU’s competitiveness, technological sovereignty, and resilience while improving crisis preparedness in semiconductor supply chains. It forms part of the Commission’s wider European Technological Sovereignty Package, alongside the Cloud and AI Development Act, an Open Source Strategy, and a roadmap for digitalisation and AI in the energy sector.

The Commission says the EU remains structurally dependent on third countries for semiconductor design and manufacturing, including advanced and leading-edge chips needed for AI. It also points to gaps in crisis preparedness, noting that existing mechanisms rely heavily on voluntary information sharing outside crises and do not provide sufficient, timely supply-chain intelligence.

Chips Act 2.0 would support both mainstream and advanced semiconductors, including AI chips. Measures are expected to include stronger research and innovation support, faster permitting, supply-chain information tools, Semiconductor Regions of Excellence, skills investment, strategic projects, and innovation procurement.

The proposal also places greater emphasis on demand-side measures, including support for public procurement and industrial uptake of European semiconductor technologies. The Commission argues that stronger local demand can reinforce local supply, shorten supply chains, and better align European production capacity with the needs of strategic sectors.

The initiative complements the EU’s broader technological sovereignty agenda. The Commission says Chips Act 2.0 should help reduce strategic dependencies, improve security of supply, support industrial scale-up, and strengthen Europe’s role in semiconductor technologies needed for AI, cloud, defence, automotive, energy, and other critical sectors.

Why does it matter?

The Chips Act 2.0 shows how the EU is shifting from an emergency response to the global chip shortage to a broader semiconductor industrial strategy. The proposal links chip policy directly to AI competitiveness, cloud infrastructure, defence, energy, automotive supply chains, and technological sovereignty. Its emphasis on demand-side measures also matters: Europe is not only trying to attract semiconductor production, but also to create stronger domestic markets for European chip technologies.

Would you like to learn more about AI, tech, and digital diplomacy? If so, ask our Diplo chatbot!