EU plans reset for Chips Act to boost local chip demand and production

The European Union’s original plan to become a semiconductor powerhouse is getting a do-over. The upcoming Chips Act 2.0, expected around June 3, 2026, will shift the bloc’s strategy from luring advanced chip fabrication plants to a more fundamental problem: making sure someone in Europe actually buys the chips Europe wants to produce.

From €43 billion to €120 billion, and a reality check

The original European Chips Act, introduced in 2023, set an ambitious target of €43 billion in combined public and private investment. The goal was to double the EU’s share of global semiconductor production to 20% by 2030.

That’s not happening. The European Court of Auditors has assessed that the original objective is “very unlikely” to be met. Slow progress and fragmented funding across member states turned a bold industrial policy into a cautionary tale about setting targets without clear mechanisms to hit them.

The revised plan swings big in the other direction. Chips Act 2.0 aims to mobilize €120 billion ($140 billion) in investments by 2035. That’s nearly three times the original figure and represents one of the largest coordinated industrial subsidies the EU has ever attempted in technology.

Demand first, fabs second

The new draft addresses this by creating mechanisms for what policymakers call “demand aggregation.” Think of it as the EU trying to play matchmaker between chip manufacturers and the European industries that should be buying from them, particularly automotive and cloud computing.

A notable project under discussion illustrates the scale of ambition: a proposed €30 billion foundry dedicated to advanced AI semiconductors, reportedly targeting chips at the 3 nm node. The investment model being explored would split funding among the European Commission, member states, and private enterprises.

The competitive landscape has shifted

The Semicon Coalition, a group of European semiconductor stakeholders, issued a declaration in September 2025 calling for a revised strategy to seize technological opportunities. Their argument was straightforward: the 2023 framework was designed for a world that no longer exists.

Europe’s position in the semiconductor value chain isn’t zero. ASML, the Dutch lithography giant, remains the single most critical company in the entire global chip supply chain. Companies like Infineon and STMicroelectronics hold strong positions in automotive and industrial chips.

What this means for investors

Companies in the automotive semiconductor space stand to benefit most directly. If the EU successfully creates procurement mechanisms that incentivize European carmakers to source chips domestically, firms like Infineon, NXP Semiconductors, and STMicroelectronics could see meaningful tailwinds.

The simplification of subsidies, another stated goal of the reset, could matter as much as the headline investment number. The original Chips Act was criticized for bureaucratic complexity that made it difficult for companies to access funds quickly.

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