Chips Are Down: Europe Bets Big

The European Commission published the European Technological Sovereignty Package on 3 June 2026, proposing measures to address the “wicked problems” facing chips, AI, and cloud computing. In the first of two articles on the Package, we examine the Chips Act 2.0 and its relevance for Ireland; our second will cover the AI and cloud computing proposals.

Why Europe Needs More Chips

Chips are everywhere and in everything from smartphones to electricity grids to credit and debit cards to satellites. They are the world’s third most traded commodity after oil and vehicles. Chips are critical enablers of the clean and digital transition. However, most are imported, making supply chains vulnerable to interruption. The complexity of these supply chains makes securing them a genuinely complex or “wicked” problem.

Within this landscape, Ireland stands out as having one of Europe’s most complete semiconductor ecosystems. Spanning design, manufacturing, research, and commercialisation, the sector generates more than €13 billion in annual exports and supports tens of thousands of highly skilled jobs. Last year, Minister Burke published Silicon Island: Ireland’s National Semiconductor Strategy[iv] setting an ambition to build a stronger Irish leadership position in Europe and become a pivotal player in global chip manufacturing, research, and innovation; competing for investment across the entire semiconductor value chain.

Against this backdrop, the Chips Act 2.0 is a welcome and timely development. Once its terms are settled and formally adopted, it will set the conditions that determine whether Ireland’s ambitions can be realised or are likely to remain aspirational.

What does the Proposed Chips Act 2.0 actually say?

At 102 pages (not including supplementary annexes) the Chips Act 2.0 is voluminous. It contains six key parts, analysed below.

1. Chapter I – General Provisions

Chapter I (in conjunction with Annex V) identifies thirteen critical sectors now in focus. These include energy, transport, banking, financial market infrastructure, health, drinking water, waste water, digital infrastructure, public administration, space, food, defence and security.

Chapter I also sets the key objectives for the Chips Act 2.0 to:

• Strengthen the semiconductor ecosystem and prevent supply chain dependencies.
• Continue the Chips for Europe Initiative as Chips for Europe 2.0.
• Set criteria to recognise first-of-a-kind initiatives and strategic projects.
• Enhance coordination between Member States.

2. Chapter II – Chips for Europe, Grand Challenges and Investment

Chips for Europe 2.0 and Investment

Chapter II states that the Chips for Europe 2.0 Initiative will be supported by the EU’s long-term budget, the Multi-Annual Financial Framework (MFF) until its expiry in 2027. It will obtain further support from Horizon Europe and the Digital Europe Programme (which sit within the MFF) along with national and private funding. The proposed post-2028 MFF (2028–2034) currently does not have a dedicated semiconductor budget line. This brings the first unanswered question: what will happen after 2027?

The 2027 stop-date is an obvious initial gap. Further, neither Horizon Europe nor the Digital Europe Programme fund projects in full. Horizon Europe typically covers between 70% and 100% of eligible costs depending on the type of project, with beneficiaries (e.g. universities, research institutes, companies) expected to contribute the remainder from their own resources or national funding.

Grand Challenges

While funding uncertainties remain, the key parameters of the Chips for Europe 2.0 Initiative are set, with five operational objectives. A support system is also to be established for the European network of competence centres in semiconductors. Article 7 on “Grand Challenges” is interesting. The term ‘grand challenges’ is undefined but echoes Mariana Mazzucato’s influential 2018 report for the Commission, which argued for organising EU investment around specific, ambitious societal missions rather than diffuse, bottom-up research funding. Article 7 describes how the Chips for Europe 2.0 will support the EU tackling grand challenges. Article 8 specifically calls out how the European Commission and Member States will stimulate increased demand for chips designed and made in the EU, with a particular focus on cars and vehicles, cloud, aircraft and aviation, telecom and defence.

3. Chapter III – First of a Kind Strategic Projects, European Semiconductor Regions of Excellence, Enhanced Chip Supply Chain Regulation

First of a Kind Initiatives in the Public Interest

European semiconductor initiatives and strategic projects are designated “in the public interest” allowing them to benefit from fast-tracked planning and permitting and potentially favourable state aid treatment. Article 14 sets six requirements for such initiatives, including that they be ‘first of a kind’ and carried out by domestic undertakings. Articles 15–18 set the application process, procedural timelines, and designation criteria for Strategic Projects, with priority areas including European advanced semiconductor manufacturing, AI chips, autonomous driving processors, memory fabrication, and leading-edge chip design.

European Semiconductor Regions of Excellence

Chapter III of Chips Act 2.0 gives the European Commission the power to label a region “European Semiconductor Region of Excellence” label, bringing with it further investment opportunities, and a strengthened status for funding applications. Articles 27 and 28 set the application and framework requirements. This could provide Ireland with the appropriate platform to achieve the ambitions set by Silicon Island: Ireland’s National Semiconductor Strategy.

Enhanced Chip Supply Chain Regulation

Chapter III (in conjunction with chapter IV) enhance the regulation applicable to chip supply chains by introducing security considerations into public procurement for the first time. Article 30 allows (but does not yet require) public authorities buying equipment or

systems for critical sectors such as energy, transport, health, and defence to ask suppliers to declare where their semiconductors come from, whether they have a dual sourcing strategy, and what proportion of their supply chain involves European companies. Article 31 gives the Commission power to escalate this from optional to mandatory if it identifies a persistent supply chain risk. Article 32 allows the Commission to formally designate certain sectors as “risk-prone” and require them to take specific mitigation measures such as stockpiling, dual sourcing, or supply chain mapping.

4. Chapter IV – Enhanced Chip Supply Chain Regulation

Chapter IV is primarily concerned with monitoring and crisis response. It supports the European Commission conducting a strategic mapping exercise of the semiconductor sector in cooperation with the continuing European Semiconductor Board. This is populated by representatives from Member States and chaired by the European Commission. Chapter IV establishes a monitoring, information gathering and a shortage response mechanism. Processes are also established for priority rated orders and common orders. Fines may be levied for supplying incorrect, incomplete or misleading information to the European Commission.

5. Chapter V – The European Semiconductor Board, National Competent Authorities and the National Industrial Alliance

Chapter V sets the objectives for the continuing European Semiconductor Board, its purpose, tasks and structure and operating procedures. It is to advise the European Commission on all matters relating to the implementation of the Chips Act 2.0, including strategic technology priorities, project designations, and international cooperation on semiconductors. It is to be chaired by the European Commission with representatives from all Member States. National Competent Authorities must be designated to implement the Act, and an Industrial Alliance of relevant stakeholders from academia, industry, and technology companies is to be appointed to advise on accelerating the industrialisation of innovation.

6. Chapter VI, VII and VIII – Confidentiality, Penalties and Commission Delegation of Powers

The remaining chapters address confidentiality obligations, penalties for providing incorrect or misleading information, delegation of law-making powers to the Commission, an evaluation and review mechanism, and the repeal of the original Chips Act.

What Happens Next?

The Chips Act 2.0 has been identified as one of the EU’s highest legislative priorities, with a target for final adoption in the second quarter of 2027. The intervening period will be shaped by two negotiations running in parallel: the legislative process in the European Parliament and Council, where Member States will likely press hard on funding ambition and governance; and the broader MFF discussions, where the presence or absence of a dedicated semiconductor budget line will determine whether the Act’s strategic ambitions are backed by commensurate resources.

For Ireland, the stakes are clear. The Silicon Island Strategy created a compelling vision, but vision requires architecture to become reality. The Chips Act 2.0 provides that architecture: the strategic project framework, the Semiconductor Regions of Excellence designation, the demand-side measures, and the supply chain intelligence tools that Irish companies, research institutions, and policymakers will need to navigate an increasingly competitive global landscape. Whether Ireland makes the most of what this framework offers will depend on the quality of engagement with Brussels in the months ahead, and on ensuring that when the final text is agreed, Ireland’s interests are reflected in it.

Sources:

• Proposal for a Regulation on a framework of measures for strengthening the Union’s semiconductor ecosystem, repealing Regulation (EU) 2023/1781 (“Chips Act 2.0”) Brussels, 3.6.2026 COM(2026) 504 final.
• Mariana Mazzucato (2018) Mission-oriented innovation policies: challenges and opportunities.
• Department of Finance, Economic Insights – Summer, 2023.
• Government of Ireland, “Silicon Island: Ireland’s National Semiconductor Strategy” (19 May 2025).

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