As the “Trumpian tornado” sweeps through everything in its path, Europeans are gaining a sharper understanding of the need to defend their sovereignty. Semiconductors are at the centre of this awareness, as this sector is critical for securing Europe’s sovereign future. While the philosophy behind the European Chips Act was sound, its practical implementation has faced real difficulties. With a European Chips Act 2 under consideration, it is crucial that Europe gets it right this time.

Chips Act 1: a luxury of intent, a deficit of delivery

When Brussels unveiled its €43 billion Chips Act, it was heralded as a watershed moment. Its aim was to create a tightly integrated ecosystem encompassing fabless design, manufacturing, packaging, and testing, decoupling Europe from its reliance on Asia for semiconductor production. In practice, however, the act has stumbled. Approval processes slowed to a crawl just as global competitors accelerated, and many projects were caught up in cumbersome red tape. Member states injected the bulk of the funding—with the Commission’s own share at a modest €4.5 billion up to 2030—and prompting concerns over whether priorities were being blurred, and whether real sovereignty was being achieved.

The Chips Act, originally introduced to tackle the global shortage of semiconductors following the Covid-19 pandemic, has failed to get European chip production up and running. Projects such as plans to build a $3 billion plant in Germany headed by North Carolina firm Wolfspeed have been delayed, with the firm cutting capital spending following weakness in the European and U.S. EV markets. Other projects have failed to get up and running, often due to the need for EU approval for state-funded projects, a process that has proved to be too slow.

In response, a coalition of semiconductor firms, including Infineon, NXP, STMicroelectronics, Bosch, and ASML, urged the Commission to consider a follow-up initiative that wouldn’t just bankroll fabs, but also invest in chip design, R&D, materials, and equipment. Industry groups like ESIA, representing chipmakers, and SEMI Europe, representing the broader industry, have been leading the charge, and have stated that they would send their plea for a ‘Chips Act 2.0’ to Commission digital chief Henna Virkkunen. This idea is for the European Commission to “decisively support semiconductor design and manufacturing, R&D, materials and equipment,” SEMI said in a statement. In parallel, 54 members of the European Parliament wrote to the Commission, warning that Europe risked losing critical momentum unless a second Chips Act was deployed quickly.

Virkkunen, the Commission’s executive Vice president for digital policy, has confirmed that a second iteration is already in the works and has outlined its importance as Europe seeks to gain a foothold in the AI market. “It’s a very important part of our technological sovereignty that we are able to design and manufacture AI chips in the future,” Virkkunen said. Yet the shadow of bureaucratic lag and misplaced investments still looms, and without strategic refinement, a Chips Act 2 risks becoming a repeat performance.

On-shoring production, trusting European innovation

If Europe hopes to escape this cycle of subsidies with diminishing returns, it must look beyond bricks-and-mortar fabs to the success of fabless pioneers. Beyond the gleaming fabs and capital-intensive foundries, these innovators are companies that design cutting-edge chips without owning the production lines. Their strength lies in agility, niche specialisation, and the speed of bringing novel architectures to market.

A leading case is SiPearl, the French startup behind the Rhea1 processor powering JUPITER, Europe’s first exascale supercomputer. Firms like SiPearl are aware of the critical role they have to play if Europe is to succeed in its quest for full technological sovereignty. As Philippe Notton, CEO and former leader of the European Processor Initiative, remarked: “Our aim is to give Europe and all our users greater sovereignty, particularly in relation to the United States while building a leading position in the global application markets of artificial intelligence and supercomputers. This European sovereignty can be embraced by other countries outside Europe because we share the same values of independence.” A vision shared by many investors, since SiPearl has just closed a new round of financing of over 30 million euros. And there’s more good news too, as the company has just entered the production phase.

In the Netherlands, Axelera AI is racing ahead in the AI chip space. Having secured Series B in fabless semiconductors (raising $68 million in mid‑2024, bringing total funding to $120 million), Axelera is now developing its Titania chip for generative AI under the EU‑supported EuroHPC “DARE” project, backed by a €61.6 million grant. Its Metis AI Platform, designed for energy‑efficient inferencing on edge devices, addresses a critical gap in Europe’s AI infrastructure.

Another rising company is Codasip, based in Germany, which has become a powerhouse in RISC‑V cores and processor IP. With over two billion cores deployed globally and recent investments—including EU Horizon 2020 funding and a CHERI‑enabled X730 RISC‑V CPU release in 2024. Codasip underscores Europe’s capability to craft flexible, secure processors tailored to automotive, IoT, and embedded AI applications. Surprisingly, the company may be sold in whole or in part this summer.

Supporting all these startups, the EU Chips Design Platform, under the guidance of DG Connect and coordinated by imec,  offers fast-track access to EDA tools, IP libraries, pilot lines, and mentoring, aiming to onboard its first cohort by early 2026. A parallel initiative is a Coordination and Support Action under Horizon Europe designed to enhance cohesion across fabless SMEs and lobby for their interests at policymaking tables.

These companies and platforms illustrate a rich tapestry of European chip design talent, ranging from exascale supercomputing to edge-AI and processor IP. Fully capitalising on their momentum will hinge on Chips Act 2 delivering not just funds, but also speed, integration, and tailored support for design-first strategies.

Moving forward: sovereignty 2.0

With Chips Act 2 now on the horizon, policymakers have a chance to recalibrate. The initial legislation succeeded in raising awareness but was too slow to mobilise real-scale change and get the industry moving on European soil. Now, it’s crunch time. Europe needs a new approach that balances manufacturing with in-house design, integrates legacy chips with cutting-edge AI needs, and backs nimble startups as much as industrial giants. Industry groups and lawmakers alike are demanding more selectivity and speed. Dutch Minister Dirk Beljaarts was explicit: “We need to allocate funds,” he told Reuters. “Both private and public funds to push the sector, also to make sure that the trickle-down effect takes place and that (small and medium size) companies also benefit.”

Virkkunen has said a follow-up programme will roll out before summer and will include an “AI Continent Action Plan” to support chips specific to artificial intelligence. This offers an ideal moment to embed support for enterprises like SiPearl, which sit at the crossroads of EU ambition and industrial innovation. Indeed, Europe needs reliable new options as it has placed itself in a situation of dependence on Nvidia. The American company is now in the crosshairs of the French anti-trust authority. “Concerns have also been raised about the sector’s reliance on Nvidia’s CUDA chip programming software (the only one that is 100% compatible with the GPUs essential for accelerated computing). Recent announcements of Nvidia’s investments in AI-focused cloud service providers such as CoreWeave are also a cause for concern” states the authority.

The challenge for Europe is steep: strategic funding must flow faster, evaluation processes must be streamlined, and support must extend across the value chain—from design labs through pilot runs, validation and commercialization. If properly executed, European firms will not just power projects like JUPITER; they will help power the next era of European sovereignty. Now is the critical juncture.