Europe’s Semiconductor Ambitions: Assessing the Chips Act 2 and India-EU Collaboration Prospects

The European Chips Act 2 sets out an ambitious vision to bolster the EU’s semiconductor ecosystem, targeting a 20 percent share of the global market by 2030. While these objective underscores Europe’s determination to secure technological sovereignty, current projections and comparative investments raise questions about its feasibility. At the same time, emerging opportunities for India-EU cooperation promise to enhance supply chain resilience, accelerate technological innovation, and address critical workforce and sustainability challenges.

Economic Impact and Competitive Positioning

The economic implications of the EU Chips Act reveal a complex landscape of ambitious targets and practical constraints that require careful evaluation. The EU semiconductor market, valued at EUR 50 billion in 2023, demonstrates significant growth potential, yet current projections indicate substantial challenges in achieving the stated objective of 20% global market share by 2030. Independent analyses suggest the EU will likely reach only 11.7% by 2030, falling significantly short of this ambitious target. This gap between aspiration and realistic achievement underscores the need for more pragmatic goal-setting and strategic focus on areas where Europe maintains competitive advantages.

The investment scale mobilized through the Chips Act, while substantial at 43 billion EUR in policy-driven investments, pales in comparison to global competitors who have demonstrated significantly larger financial commitments. China has invested approximately 138 billion EUR since 2014, South Korea aims for 400 billion EUR by 2030, and the United States commits 182 billion EUR through its CHIPS and Science Act. This funding disparity creates competitive disadvantages that may limit the EU's ability to achieve semiconductor sovereignty, particularly in advanced node manufacturing where capital requirements are exponentially higher.

The automotive semiconductor segment presents both opportunities and vulnerabilities for EU competitiveness. European automotive semiconductor sales have shown robust growth since 2020, with the market valued at EUR 13.05 billion in 2023 and projected to reach EUR 17.38 billion by 2026 at a compound annual growth rate of 8.19%. However, the automotive sector's reliance on semiconductors, accounting for 37% of semiconductor shipments to Europe, creates systemic vulnerabilities to supply chain disruptions that the Chips Act must address more comprehensively.

Critical import dependencies continue to challenge EU economic sovereignty, particularly for logic chips and memory chips primarily sourced from Taiwan. Substitutability indicators suggest limited EU capability to replace imports with domestic production across several semiconductor categories, creating economic vulnerabilities to geopolitical tensions and supply chain disruptions. The Chips Act's emphasis on manufacturing capacity building must therefore be complemented by strategic partnerships that enhance supply chain resilience without creating new dependencies.

India-EU Economic Partnership Opportunities

India's semiconductor ecosystem presents compelling opportunities for mutually beneficial economic cooperation that can strengthen both regions' competitive positions. India's semiconductor market, valued at $54.3 billion in 2025, is projected to double to $103.5 billion by 2030 with a robust compound annual growth rate of 13.8%. The India Semiconductor Mission has approved investments worth $10 billion, creating substantial opportunities for technology transfer, joint ventures, and supply chain integration.

The complementary nature of India's semiconductor capabilities and EU strengths creates synergistic partnership potential. India's established expertise in semiconductor design, combined with its growing manufacturing capabilities, aligns well with EU strengths in equipment manufacturing and process technology. The Morigaon facility in Assam, representing an investment of Rs. 27,000 crore and capable of producing 48 million chips daily while generating 15,000 direct and 11,000-13,000 indirect jobs, exemplifies the scale of India's manufacturing ambitions. These developments create opportunities for EU companies to participate in India's semiconductor growth while enhancing supply chain diversification.

Strategic alignment between India's semiconductor policies and EU objectives offers pathways for collaborative development. India's focus on advanced nodes (5-7 nm) and silicon carbide wafer manufacturing for electric vehicles and renewable energy creates natural synergies with EU green transition goals. The successful US-India Initiative on Critical and Emerging Technology (iCET) demonstrates the template for similar EU-India semiconductor cooperation frameworks that could benefit both regions' strategic objectives.

Social Impact and Workforce Development Challenges

The social implications of the EU Chips Act reveal significant challenges in workforce development that require urgent attention and substantially increased investment. The EU semiconductor sector currently supports over 13 million jobs, representing approximately 6% of total EU employment with turnover contributing over 7% to EU GDP. However, the industry faces acute skilled labor shortages that threaten the successful implementation of the Chips Act's ambitious manufacturing expansion plans.

Current workforce development initiatives appear woefully inadequate relative to industry needs. Europe faces a critical shortage of 350,000 semiconductor professionals by 2030 to achieve the EU's ambitious goal of doubling its global market share from 10% to 20%. Current estimates suggest the total demand will reach 600,000 professionals by 2030, but Europe currently employs only around 250,000-380,000 people in the semiconductor industry. The EU semiconductor industry already experiences 3,830 unfilled positions annually, with projections indicating 75,390 additional positions will need to be filled by 2030.

The scale of skills development programs under the Chips Act appears insufficient to address these challenges. The European Chips Skills Academy aims to train 85,000 engineers through its Chips to Startup Programme over five years, falling dramatically short of the 350,000 professionals needed by 2030. Furthermore, the educational pipeline demonstrates structural inadequacies, with only 6% of semiconductor-related graduates expected to join the EU semiconductor industry. The supply of graduates entering the semiconductor industry will grow modestly by 2030 at only 1% compound annual growth rate compared to 5% compound annual growth rate employment growth.

Specific technical skill shortages compound these challenges, with the EU semiconductor industry facing significant deficits in critical areas including 3,800 system designers, 2,400 analog designers, and 3,000 cybersecurity experts. By 2030, the EU will need 54,000 professionals with electrical engineering degrees to fill positions in manufacturing, design, and testing. These figures demonstrate that while the EU Chips Act includes skills development components, the scale of funding and programs represents a small fraction of total investment and cannot realistically address the magnitude of the talent shortage.

Regional development implications of semiconductor investments require careful consideration to prevent exacerbation of existing inequalities. The concentration of investments in specific regions, particularly Germany, Netherlands, and France, may create significant regional disparities unless deliberately addressed through inclusive planning and distribution mechanisms. The substantial regional economic multiplier effects of semiconductor investments necessitate strategic geographic distribution to ensure equitable development across the EU.

Environmental Impact and Sustainability Considerations

The environmental implications of semiconductor manufacturing present both challenges and opportunities that require comprehensive integration into the Chips Act framework. Semiconductor manufacturing poses significant environmental challenges, with the industry projected to consume 237 TWh of electricity globally by 2030, approximately matching Australia's total electricity consumption. Water consumption presents equally concerning challenges, with approximately one trillion liters used in 2019 for semiconductor manufacturing globally.

Manufacturing processes release perfluorocarbons and sulfur hexafluoride, both gases with exceptionally high global warming potential, necessitating robust environmental mitigation strategies. Research indicates that 75% of CO2 emissions for battery-powered devices occur during manufacturing phases, emphasizing the critical importance of sustainable production methods in semiconductor facilities. These environmental challenges require the EU to establish binding sustainability standards for all Chips Act funded projects and mandate comprehensive environmental impact assessments.

Despite manufacturing challenges, semiconductors serve as essential enablers of climate transition technologies. In 2020, 62% of renewable power generation capacity achieved lower costs than fossil fuel sources, largely enabled by semiconductor-based efficiency improvements. The EU's strategic focus on power electronics, demonstrating compound annual growth rate of 11.1%, directly supports green transition objectives and climate policy implementation. This dual role of semiconductors as both environmental challengers and climate solution enablers requires nuanced policy approaches that maximize environmental benefits while minimizing negative impacts.

Leading industry practices demonstrate feasible pathways for sustainable semiconductor manufacturing. Companies like Intel have adopted comprehensive water management practices, aiming for net-positive global water contribution through innovative recycling and conservation technologies. Taiwan's semiconductor industry achieved over 85% water recycling rates from 2016-2020, establishing realistic benchmarks for sustainable manufacturing practices. These examples provide templates for EU environmental standards and best practices that can be integrated into Chips Act implementation.

India-EU Environmental Cooperation Potential

India's emphasis on sustainability in semiconductor manufacturing creates substantial opportunities for joint EU-India green technology partnerships. India's focus on silicon carbide wafers for electric vehicles and renewable energy applications aligns directly with EU environmental objectives and green transition priorities. Collaborative development of sustainable manufacturing technologies, circular economy approaches for semiconductor materials, and joint research into environmentally friendly production processes could benefit both regions while advancing global sustainability goals.

Recommendations for Enhanced Implementation

The comprehensive analysis reveals several critical areas requiring attention in the Chips Act 2 implementation. Economic strategy refinement should include realistic reassessment of the 20% market share target based on competitive landscape analysis and available resources. Focus should shift toward strategic niches where the EU maintains competitive advantages rather than broad-based capacity building across all semiconductor segments. Enhanced state aid coordination mechanisms are essential to prevent counterproductive member state competition and maximize EU-wide benefits.

India-EU cooperation frameworks represent significant opportunities for mutual benefit that should be formally integrated into Chips Act implementation. Establishing structured semiconductor partnership mechanisms that leverage India's design capabilities and the EU's equipment excellence can enhance both regions' competitive positions. Joint research and development programs focusing on sustainable manufacturing technologies, regulatory alignment frameworks to facilitate trade and technology transfer, and formal consultation mechanisms for Indian industry input into EU semiconductor policy development would strengthen bilateral cooperation.

Environmental integration requires mandatory environmental impact assessments for all Chips Act funded projects, establishment of binding sustainability standards for semiconductor manufacturing in the EU, and substantial investment in circular economy approaches for semiconductor materials and waste management. Social impact enhancement necessitates dramatic scaling up of skills development programs proportionate to industry growth projections, ensuring geographic distribution of investments to prevent regional concentration, and creating pathways for international talent mobility, including Indian professionals, to address EU skill shortages while building domestic capabilities.

Conclusion

The EU Chips Act represents a necessary but insufficient response to European semiconductor challenges that requires substantial refinement and enhancement. Economic projections demonstrate significant shortfalls in achieving stated objectives, while social and environmental impacts demand more comprehensive integration and substantially increased investment. The India-EU partnership presents exceptional opportunities for mutual benefit, particularly in sustainable semiconductor development and supply chain resilience enhancement.

Success in semiconductor sovereignty requires strategic focus on competitive advantages, realistic target-setting based on available resources and competitive dynamics, and enhanced international cooperation frameworks that leverage complementary strengths while addressing shared challenges in sustainability and workforce development. Prioritizing strategic partnerships with India as a fundamental component of revised Chips Act implementation, focusing on sustainable technology development, talent mobility facilitation, and regulatory harmonization to create a more resilient, competitive, and environmentally responsible semiconductor ecosystem that serves the interests of both regions and contributes to global technological advancement.

References

Academic and Research Publications:

Bonnet, P., Ciani, A., Molnar, J., & Nardo, M. (2025). EU's strengths and weaknesses in the global semiconductor sector (Report No. EUR 40253, JRC141323). Publications Office of the European Union. https://doi.org/10.27606/302476

European Commission. (2025). Call for evidence for an evaluation and impact assessment run in parallel: Review of the Chips Act (Document No. 090166e521b8c063-1). European Commission.

European Court of Auditors. (2025). The EU's strategy for microchips: Reasonable progress in its implementation but the Chips Act is very unlikely to be sufficient to reach the overly ambitious Digital Decade target (Special Report 12/2025). European Court of Auditors.

India Electronics & Semiconductor Association. (2024). The challenges and opportunities in Indian semiconductor industry (ICEA Report). ICEA.

Official EU Documents:

European Commission. (2023). European Chips Act - Questions and answers (Press release). European Commission. https://ec.europa.eu/commission/presscorner/api/files/document/print/en/qanda_23_4519/QANDA_23_4519_EN.pdf

European Parliament and Council of the European Union. (2023). Regulation (EU) 2023/1781 of the European Parliament and of the Council of 13 September 2023 establishing a framework of measures for strengthening Europe's semiconductor ecosystem and amending Regulation (EU) 2021/694 (Chips Act). Official Journal of the European Union. https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32023R1781

Government and Official Sources:

Government of India, Press information Bureau. (2024). A game-changer for India's semiconductor ecosystem (Press Release No. PRID=2074074). https://www.pib.gov.in/PressReleseDetailm.aspx?PRID=2074074

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3D InCites. (2025, February 23). Bridging the semiconductor talent gap – The role of the European Chips Act and beyond. https://www.3dincites.com/2025/02/bridging-the-semiconductor-talent-gap-the-role-of-the-european-chips-act-and-beyond/

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Infosys. (2025, April 6). Semiconductor industry outlook 2025. https://www.infosys.com/iki/research/semiconductor-industry-outlook2025.html

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IT Law Co. (2024). European Chips Act: A bold step toward semiconductor sovereignty. https://itlawco.com/european-chips-act-a-bold-step-toward-semiconductor-sovereignty/

McKinsey & Company. (2024, February 1). Filling the talent gap in semiconductors. https://www.mckinsey.com/industries/semiconductors/our-insights/how-semiconductor-companies-can-fill-the-expanding-talent-gap

McKinsey & Company. (2024, August 1). Closing the growing US semiconductor talent gap. https://www.mckinsey.com/industries/semiconductors/our-insights/reimagining-labor-to-close-the-expanding-us-semiconductor-talent-gap

McKinsey & Company. (2025, April 20). Semiconductors have a big opportunity—but barriers to scale remain. https://www.mckinsey.com/industries/semiconductors/our-insights/semiconductors-have-a-big-opportunity-but-barriers-to-scale-remain

SEMI. (2024). Europe's semiconductor strategy: Navigating geopolitics and building resilience. https://www.semi.org/en/blogs/europes-semiconductor-strategy-navigating-geopolitics-building-resilience

TPD. (2025, August 24). 50% engineer shortage: Strategic semiconductor recruitment solutions for 2025. https://tpd.com/blog/semiconductor-engineer-shortage-how-hr-teams-can-navigate-the-2025-talent-crisis/

Uptime Crew. (2025, June 15). Semiconductor workforce 2025: Trends every company should know. https://uptimecrew.com/blog/semiconductor-workforce-challenges-2025/

Wafer World. (2024, August 8). The semiconductor talent gap. https://www.waferworld.com/post/the-semiconductor-talent-gap

Academic Journal Articles:

Moritz, U. E. A. (2024). The paradox of semiconductors: EU governance between sovereignty and interdependence. European Institute for Asian Studies Working Paper, Article V3. https://eias.org/wp-content/uploads/2024/07/MoritzUEA-ArticlePDF-V3.pdf

Understanding global chip shortages. (2024). Journal of Supply Chain Management