Europe and chips: Aspirations versus reality

The European Chips Act, which came into force in September 2023, had a very clear goal: for Europe to produce 20% of the world's semiconductors by 2030. This regulation was put forward as part of a broader package of measures to strengthen the EU's semiconductor ecosystem. Five years after its approval, the real figure stands at around 8%.

While Brussels is already preparing a second version of the law, Xavier Ferràs, Associate Dean of Esade's Executive MBA and Full Professor of Operations Management, Innovation and Data Sciences, argues that the failure is not just a matter of budget: it is the result of eighty years in which Europe chose not to pursue industrial policy.

We spoke with him about why the first attempt failed and what would need to change in the second.

A goal that was never realistic

Ferràs is blunt when it comes to summing up the situation: compared with what the United States and China have done, the Chips Act "has clearly failed." Europe, he points out, has no real capacity today to produce advanced semiconductors, and the pandemic made clear what that means: from shower thermostats to airplanes, and from traffic lights to cars, practically everything has a chip inside it. If those components —made mainly in Asia— stop arriving, "Europe goes back to the Stone Age." The first Chips Act was born as a reaction to that panic, with a very specific goal: reaching 20% of global semiconductor production by 2030. Five years later, Ferràs calculates that the real figure doesn't even reach 8%.

Was that goal realistic from the outset? According to the professor, no. Building a semiconductor supply chain —or, more accurately, a complete ecosystem around it— is "decades of work," requiring a long-term vision, political stability, and a sustained effort to attract the three factors he identifies as the key to power and progress in the 21st century: technology, talent, and capital. Japan started 80 years ago. South Korea, 60 years ago. Taiwan, 30 years ago. All three succeeded, but none of them did it in five years.

"It's impossible for Europe to make up for lost time in three years."

What would have been realistic, Ferràs argues, was not to promise 20% by 2030, but to set a long-term vision that would bear fruit in 20 years. The problem, he admits, is that that timeframe fits poorly with political timelines: a four-year goal is much easier to turn into a slogan than a two-decade strategy.

Eighty years of technological naivety

To understand why Europe is lagging behind, Ferràs goes back much further than the Chips Act. For 80 years, since the end of the Second World War, the continent has done almost no technology or industrial policy. The reason, he says, has a name: "naivety." Europe trusted American economists, very neoliberal at the time, who insisted there was no need to intervene because the market would decide on its own, based on cost. And the market did indeed decide: it allowed much of the technological activity to move to Asia in search of cheaper supply chains.

The paradox, Ferràs notes, is that while American economists preached laissez-faire, their own country's engineers were doing the opposite: sending rockets to the Moon and, in doing so, de facto sustaining an aggressive technology policy in strategic sectors. Europe, meanwhile, ignored that ground for eight decades. Only with the pandemic, when supply chains broke down, did European elites —says Ferràs— "panic" upon discovering that they were not independent, whether technologically, industrially, in energy, or militarily. The response was ambitious plans, but poorly funded and far too short-term for a type of policy that only delivers results over the long run.

What Europe can learn from Asia (without copying the model)

Should Europe simply copy the Asian formula? Ferràs believes not, and explains why by looking at how Japan, South Korea, Taiwan, and, more recently, China got to where they are. Their path always followed the same sequence: first attracting basic manufacturing, purely for cost reasons; then copying other countries' products; later developing their own technology —that's how brands like Sony or Panasonic were born—; and finally, generating their own science. In two decades, Ferràs recalls, China has followed that same path, from the supply chains of low cost electronics to controlling the physics of semiconductors.

It's a very different model from the American one, which Ferràs describes as also top-down but driven through a different route: strategic policies tied to defense and space, combined with ultra-fast financial markets capable of scaling up any startup at top speed. Neither of the two models, the professor argues, fits Europe entirely. And that, precisely, is the opportunity: the continent has its own pieces with which to build a different path. A very dense network of small and medium-sized enterprises. A greater capacity for medium- and long-term thinking than the United States, being less constrained by the pressure of financial markets. And science of a very high standard. The problem, Ferràs sums up, is that Europe "has all the pieces, but they don't fit together."

Attracting factories is not enough: an ecosystem is needed

Should Europe prioritize manufacturing chips or designing them? For Ferràs, the question is framed the wrong way: it's not about choosing one bet over the other, but about consistency and long-term vision. The European Union itself has been talking since 2000 about "enabling technologies" —those capable of impacting the economy as a whole— which it identifies as including microelectronics, semiconductors, new materials, biotechnology, advanced manufacturing, and, now, also artificial intelligence. It's not about betting on just one, but about creating an ecosystem capable of attracting talent, mobilizing capital, and developing technology in all of them at once. It is, at once, a matter of regulation, budget, and mindset.

The concrete recipe Ferràs proposes starts with something Asia did decades ago: attracting foreign investment. Europe, he says, can still bring back Intel factories, TSMC plants, or Nvidia research centers, in the same way the United States is doing right now, aggressively attracting TSMC and Samsung manufacturing plants to build its own industrial platform. Developing your own technology from scratch, he warns, would be extremely difficult; anchoring yourself first in foreign technology, on the other hand, is a proven path. But securing supply isn't enough: it's also necessary to boost research and develop sophisticated homegrown suppliers who, over time, can come to surpass the very foreign technology that made them possible. It is, in Ferràs's words, "a parallel path to the one Asia took years ago": attract one major anchor company, let a dense network of suppliers grow around it, and from that network, watch the industrial leaders of the future emerge.

The next version of the Chips Act: less slogan, more discipline

If one thing is clear from the conversation with Ferràs, it's that, for him, no technological ecosystem emerges spontaneously. The next version of the Chips Act, he argues, will need to rely on top-down policies and budgetary frameworks that truly match the goal, with "very significant" intervention from governments and equally significant investment behind it.

"It's not just decisions or bets, it's also budgetary discipline."

Europe, the professor insists, still has time to build its own successful model in semiconductors. What it doesn't have time to do is make up, in three or four years, for ground lost over eight decades. And that leaves the underlying question Ferràs himself raises: if the original problem was promising short-term results for something that only works over the long term, will Europe be capable of sustaining a twenty-year strategy within a political system that thinks in four-year cycles?