The European Chips Act

In her 2021 State of the Union address, European Commission President Ursula von der Leyen announced the intention to build a state-of-the-art European semiconductor ecosystem. The European Chips Act package followed the global semiconductor shortage which emerged during the COVID-19 period and disrupted production in key industrial sectors including automotive, energy, healthcare and consumer electronics.¹ Supply chain disruptions in semiconductors highlighted their central role to the modern economy as well as the EU's structural vulnerabilities and dependencies on external suppliers. ²

The European Chips Act package was presented in February 2022, combining a communication, a proposal for the core Chips Act regulation, a proposal amending the Joint Undertaking framework introducing the Chips JU and a recommendation on a common Union toolbox to address semiconductor shortages and an EU mechanism for monitoring the semiconductor ecosystem. The legislative procedure on the core regulation concluded with the adoption of Regulation (EU) 2023/1781 on 13 September 2023, which entered into force on 21 September 2023.

At the time the proposal was being prepared, the Chips Act was not accompanied by a comprehensive impact assessment.³ However, the Commission identified a series of failures in its staff working document affecting the Union's technological sovereignty, economic resilience and capacity to support the green and digital transitions. The limited innovation capacity in the ecosystem, the difficult access to risk capital and financing and the persistent shortage of talent, which hindered the capacity of the sector to innovate, were among the failures to address. The semiconductor shortage also exposed vulnerabilities across the entire value chain, highlighting failures related to low investment in manufacturing capacity and supply dependencies. In this regard, the Commission emphasised an insufficient level of investment, which at the time of the proposal represented less than 4 % of global semiconductor capital expenditure (CAPEX) originating from EU-headquartered companies. The high costs, technological complexity and long investment cycles associated with semiconductor fabrication were considered barriers to private investment without public support mechanisms. Finally, the Commission identified coordination failures between national and Union action, which limited the EU's capacity to coordinate investment and crisis-management response.

The Chips Act aimed to reinforce the semiconductor ecosystem, ensuring the resilience of the supply chain and reducing external dependencies. The regulation outlined five strategic objectives:

The European Chips Act is structured around three pillars:

In September 2024, the Draghi report on EU competitiveness confirmed the diagnosis underlying the Chips Act, but noted that, despite efforts, investment and public support for semiconductor production in the EU remained below that in the US. The report pointed to the lack of coordinated action by Member States, and to the need to fast-track important projects of common European interest (IPCEI). It also noted the need for shorter approval times for funded projects and the definition of chips procurement preferences for EU products as preconditions to develop a long-term EU strategy. It also recommended a permitting regime for chips across the EU through a simplified EU wide procedure.

The 2026 Commission work programme announced a Chips Act 2.0 for the first quarter of 2026. In March 2026, the Executive Vice-President for Technological Sovereignty, Security and Democracy, Henna Virkkunen, chaired the implementation dialogue on the Chips Act with industry representatives. The proposal was presented on 3 June 2026 as part of the 'sovereignty package'.

EU regulatory framework

The Chips Act is directly embedded in the 2020 Industrial strategy for Europe and its 2021 update, as well as the digital compass, which introduced the objective of reaching 20 % of world production in value for cutting-edge semiconductors by 2030. The Chips Act also operates alongside the IPCEI framework. In particular, two IPCEI were approved in 2018 and 2023 in the field of microelectronics and on microelectronics and communication technologies. The two IPCEI encompass 98 projects in 14 Member States, including €10 billion of State aid, and they aim to leverage €20.2 billion of additional private investment. The design support hub also identifies potential IPCEI candidates for advanced semiconductor technologies.

The competitiveness compass presented in January 2025 linked semiconductors to the Union's agenda on reducing excessive dependencies and refers to the broader economic-security toolkit. The Critical Raw Materials Act, which entered into force in 2024, complements the Chips Act by addressing upstream vulnerabilities in materials needed for digital, clean and defence technologies. In December 2025, the joint communication on strengthening EU economic security highlighted the role of the Chips Act in strengthening supply-chain resilience and counteracting high-risk dependencies in mainstream semiconductors. The communication sets out a non-exhaustive list of tools for economic security, in line with the 2023 European economic security strategy.

Commission proposal to revise the Chips Act

On 3 June 2026, the Commission submitted a proposal for a regulation on a framework of measures for strengthening Europe's semiconductor ecosystem repealing Regulation (EU)2023/1781 on the Chips Act. The initiative is accompanied by an evaluation and an impact assessment.

The proposal's explanatory memorandum states that the Chips Act delivered significant outputs, including the establishment of competence centres and five pilot lines, the foundation of a design platform, substantial public and private investment commitments in production facilities, and a coordination and crisis-response mechanism through the ESB. It also notes that clear capability gaps remain, including the EU's overdependence on third countries for semiconductor design and manufacturing and insufficient crisis-preparedness capabilities.

The memorandum highlights a series of proposed improvements stemming from the findings of the Chips Act's evaluation and the lessons learnt from its early implementation, particularly lab-to-fab industrialisation, demand-side measures, broader value-chain coverage and crisis preparedness:

Call for evidence and public consultation

The Commission published a call for evidence in the context of the evaluation and impact assessment of the European Chips Act in September 2025, with the initial intention of publishing the results of the consultation in the first quarter of 2026 together with the proposal for the revised Chips Act 2.0. The call for evidence covers the parallel, or 'back-to-back' exercise of the evaluation of the Chips Act regulation and the impact assessment⁴ for its revision.

The evaluation aims to take stock of all actions stemming from the Chips Act from June 2023 onwards. The call for evidence identifies several hindering factors, including the lack of manufacturing capacity in the EU of advanced semiconductor nodes (below 10nm) and the limited demand from strategic sectors for such chips, which often does not justify potential large-scale investments for rather low volumes. It highlights growing pressure on the market, where the EU presents a competitive edge on mainstream/essential semiconductors (power electronics, microcontrollers, photonics, sensors), marked by non-market policies and practices in third countries. In terms of implementation, the call for evidence mentions the potential for burden reduction and simplification in the application process for State aid measures related to FOAK under pillar 2 of the Chips Act, as well as shortcomings related to insufficient insights into the current supply chain and EU ecosystem (including monitoring across materials, equipment, design tools and downstream users).

The call for evidence  was open for12 weeks, from September to November 2025, and received 209 responses, with the most coming from companies and business organisations (32 %), followed by research institutions (27 %), business associations (15 %) and EU citizens (12 %). The geographical spread of respondents corresponds to major semiconductor hubs in Europe, in Germany (20 %), France (15 %), Belgium (10 %), Spain (10 %), Italy (8 %) and the Netherlands (5 %). The public consultation was carried out in parallel and received 103 survey responses and 39 position papers. The questionnaire had both a backward-looking perspective, on the implementation of the Chips Act, and a forward-looking one, on possible future steps under a potential Chips Act 2.0.

Implementation dialogue on the Chips Act

The implementation dialogue on the Chips Act, chaired by Executive Vice-President Henna Virkkunen in March 2026, brought together stakeholders and industry representatives from across the semiconductor value chain. It aimed to discuss its implementation and identify potential improvements, additions and simplification measures. The dialogue built upon a report developed by the Industry Advisory Group, a working group of the Industrial Alliance on Processors and Semiconductors. The assessment of the implementation of the Chips Act highlights the meaningful results and impact delivered across the chips value chain as well as several structural shortcomings. Across pillars 1 and 2, the analysis notes complex and resource-intensive application and approval procedures, which hamper Europe's positioning in a competitive and agile international environment. Permitting and State aid approval procedures are perceived as lengthy and fragmented between European Commission departments and between different national frameworks. It also identified structural weaknesses under pillar 3 related to governance and a lack of industry involvement in strategic ESB discussions.

Evaluation of the Chips Act

The Chips Act regulation obliges the Commission to submit a report on the evaluation and review of this regulation under Article 40 by 20 September 2026. In the absence of an impact assessment presented for the original 2022 proposal of the Chips Act, and given the lack of evaluation of the 2013 EU strategy for microchips, the evaluation of the regulation is all the more important to assess whether it is achieving its objectives, as was also noted by the European Court of Auditors (ECA).⁵ The evaluation report on the Chips Act covers the period from its entry into force on 21 September 2023 until the end of November 2025. It is based on an external study which complemented the open public consultation.⁶ It covers all three pillars of intervention and cross-pillar elements and the five better regulation criteria of effectiveness, efficiency, relevance, coherence and EU added value. The evaluation uses a credible mixed-method, theory-based approach, drawing on desk research, public consultation and targeted stakeholder consultations, case studies, cost-benefit analysis and targeted consultations. The evaluation reconstructs a strong intervention logic for the Chips Act, including socio-economic impacts and impacts on the governance framework. The evaluation is presented as an ex-post evaluation, while, in methodological terms, it is primarily a mid-term evaluation.

In this regard, the observation period of two years is too short to assess several of the evaluation questions. While the report acknowledges this limitation and is transparent in stating that most observable achievements are outputs rather than outcomes and impacts,⁷ it characterises the limitation as 'rather marginal'. However, it is a central methodological constraint, as it prevents robust assessment of industrial technology transfer, manufacturing output, reduced dependencies, crisis mitigation and long-term competitiveness. The evaluation states that the limitation was mitigated partly by combining stakeholder expectations with their prospective assessment of the Chips Act 2.0 policy options. This approach risks mixing retrospective evidence of the first Chips Act with stakeholder expectations about future impacts and ex-ante modelling supporting the new proposal.

The evaluation finds that Pillar 1, the Chips for Europe initiative, has significantly reinforced the Union's semiconductor research and innovation base. In the open public consultation, 89 % of respondents considered that Pillar I was partially or fully meeting its research and innovation objectives. It should be noted that the assessment is preliminary for some instruments. The design platform had not started onboarding users during the evaluation period and was expected to become operational only in the second half of 2026. The evaluation identifies the lab-to-fab gap as one of the central challenges facing the European semiconductor ecosystem. Some early technology transfer is reported and the pilot lines have encouraged cooperation between research organisations and industrial companies. Stakeholder evidence is rather positive, with some 59 % of public consultation respondents considering that the pilot lines partially or fully supported the transition from laboratory research to fabrication. This share increases to 77 % among research and technology organisations surveyed. Workshops also emphasised the need to move from establishing pilot lines towards their industrialisation, supported by sustained funding, clearer State aid rules and greater involvement of end users in setting technological priorities.

Under Pillar 2, the evaluation finds that the Chips Act contributed to a substantial increase in announced semiconductor manufacturing investment. Before the Act, EU semiconductor capital expenditure represented approximately 4 % of the global total and had remained broadly stagnant for more than a decade. Under the first-of-a-kind framework, the Commission had approved State aid for 11 projects representing more than €32 billion in combined public and private investment. According to the evaluation, annual semiconductor investment was approximately five times higher than in the pre-Chips Act period. The evaluation nonetheless concludes that progress towards greater strategic autonomy remains limited. The facilities have long construction and ramp-up periods, meaning that most had not entered production during the evaluation period. Although modelling cited in the report projects a 38 % increase in EU manufacturing capacity by 2030, global capacity is expected to expand at a similar rate, leaving the European share at approximately 8 %.

The evaluation finds that the Chips Fund improved access to finance for semiconductor and quantum start-ups. The €300 million thematic EIC Accelerator allocation was fully used within two years, while the InvestEU component had supported 31 companies with €116 million in equity investment. The exhaustion of the Chips Fund budget indicates demand and programme uptake. The evaluation does not examine whether beneficiaries raised more private capital, scaled more rapidly, remained in Europe or achieved better commercial results than comparable unsuccessful applicants. Nor does it provide a quantified estimate of the overall financing gap.

The evaluation concludes that the first Chips Act was predominantly focused on the supply side and did not sufficiently address the market conditions required to sustain European production. Workshops and interviews supported measures such as demand aggregation, coordinated procurement and stronger engagement between chip producers and industrial users. The industrial-user survey received only seven responses, and the evaluation does not provide a systematic assessment of expected European demand by application, technology node or sector.

Finally, the evaluation concludes that the European Semiconductor Board has improved coordination between the Commission and Member States. It provides a permanent forum for exchanges on semiconductor strategies, major investments, IPCEI, economic-security risks and cross-border supply-chain developments. The Board also supported the development of strategic mapping, early-warning indicators and the SCAN monitoring system. In the consultation, 88 % of respondents considered that dispersed national strategies required EU-level coordination. The evaluation finds that Pillar III has provided only partial system-level visibility. Monitoring remains focused mainly on manufacturers and customs-based product dependencies, while important information on materials, equipment, design tools, distributors and downstream users remains fragmented.

Parliamentary resolutions under the 10th legislative term

In March 2025, 54 MEPs co-signed a letter sent to Executive Vice-President Henna Virkkunen urging the European Commission to launch an ambitious Chips Act 2.0, and calling for a long-term chip strategy. The letter calls for greater European investment in AI chips and other semiconductors that were 'not adequately covered under the initial proposal'.

In its resolution of January 2026 on European technology sovereignty and digital infrastructure, Parliament called for a 'comprehensive European industrial policy for the digital ecosystem' to reduce harmful dependencies, strengthen domestic value chains and ensure a secure, trustworthy and innovation-driven digital ecosystem. According to Parliament, the EU's industrial technology ambitions should focus on key strategic technologies for the future, such as semiconductors, and integrate all relevant policy domains, including market access, standardisation, research and development (R&D), investment, trade and international cooperation. Parliament stressed the urgency for action to boost EU domestic semiconductor manufacturing to improve supply chain resilience. This includes an effort to support manufacturing within the EU of both legacy semiconductors widely used in important economic sectors (e.g. automotive) and advanced chips. In this regard, Parliament called on the Commission to place advanced AI chips at the forefront of the revision of the European Chips Act, including their design and production.

Selection of parliamentary questions

Several parliamentary questions from the current term related to the progress made by the Chips Act in support of production capacity, including the results of the review carried out by the ECA. In its answer, the Commission emphasised the achievements under pillar 1 and 2 of the Chips Act, breaking down the €43 billion of investment that had been announced. While recognising that it remains challenging to achieve the digital decade target of 20 % of global semiconductor production by 2030, it highlighted that the EU's production is projected to more than double by 2030 following current market trends.

Regarding export control measures, several parliamentary questions enquired about US restrictions on AI chip exports to EU Member States, as well as the recent case to impose restrictions on Nexperia by the Dutch government and the impact of China's export rules on rare earth elements. In its answer, the Commission reaffirmed its commitment 'to the integrity of the Single Market and ensuring that trade restrictions do not undermine its functioning or the EU's legitimate technological ambitions in the field of AI'. It also suggested recommendations to enhance 'the coordination of national control lists and has also proposed to make the update of the EU list of dual-use controls more flexible and reactive to technological and geopolitical developments'. The Commission also recognised the need to remain vigilant regarding China's export licensing requirements on the rare earth elements (REE) export rules and its impact on specific industries (e.g. defence). It reaffirmed its commitment to reduce dependencies related to critical raw materials (CRMs) by adopting the RESourceEU action plan in December 2025.