In the race to build smarter machines, the real battle isn’t in code; it’s in silicon. Advantage in AI follows advantage in chips, and today, Europe finds itself between two giants that command significant parts of the semiconductor economy: the United States and China.
At its core, the AI arms race is a competition for compute, living within semiconductors, memory, packaging, and the interconnects that move data between them. It is no coincidence that the regions leading in semiconductors are also those advancing fastestin AI adoption and innovation.
As global semiconductor competition intensifies, physical constraints like energy, bandwidth, and latency have become defining characteristics across regions. In this environment, Europe’s semiconductor strategy effectively is its AI strategy. By leveraging its existing strengths in innovation, diversified supply chains, and significant semiconductor infrastructure, Europe can still chart a clear path toward semiconductor and AI relevance in the years to come.
Where the United States and China Have Excelled
One of the United States’ main advantages has been early clustering. Designers, foundries, cloud builders, and research institutions created short feedback loops and a culture of rapid iteration, enabling the U.S. to push technologies forward quickly and scale production. Combined with the country’s long-standing tech leadership, this created a ripe breeding ground for semiconductors and AI proliferation. Capital met ideas at speed, and silicon roadmaps stayed close to model needs.
China followed a different path. It moved fast on domestic alternatives, aligned financing with national priorities, and pursued substitution where imports were restricted. In both cases, the advantage was converted at the silicon layer, where coordinated decisions about nodes, packaging, and interconnects translated directly into available compute.
The lesson for Europe is not to copy either model in full, nor would that be possible given the unique structures that govern and empower economic productivity on the continent. Rather, Europe should aim to borrow mechanisms that travel well, such as mission clarity, streamlined procurement, and patient capital tied to delivery.
Barriers Facing Europe
Scalability is one of the biggest challenges facing European semiconductor companies. Today, Europe accounts for roughly 10% of global semiconductor output – a modest share – making it unrealistic for the region to achieve dominance in advanced, high-volume manufacturing in the short term. The infrastructure to scale isn’t yet built. Fragmentation is the second constraint. Because Europe is not a singular nation with unified policies and public sector investment vehicles, as seen in the U.S. and China, national incentives and regulatory interpretations risk slowing cross–border execution.
Fortunately, none of these obstacles is insurmountable. By leaning into what makes itdoes best, Europe can turn its unique position into an edge in the semiconductor race. Sometimes, constraints are what sharpen strategy. They force prioritization and specialization. The surest way to matter in an AI race defined by watts and bandwidth is to lead precisely where those limits now live. With limited time and resources, Europe must decide where to lead, where to partner, and where to buy.
How Europe Can Compete
Europe’s constraints make partnerships and positioning even more important, especially as competition between the U.S. and China accelerates the diversification ofsemiconductor supply chains. Europe already operates with diversified links, so deepening and expanding international partnerships can strengthen access and position the region as a reliable manufacturing partner, not just a downstream buyer.
Although Europe may not fabricate at the largest scales, it has the potential to lead as an innovator. For example, in areas like FD SOI and silicon photonics, Europe can enhance performance per watt and bandwidth per watt. These are critical fields where today’s bottlenecks exist. Leadership in these technologies increases demand for European know–how and naturally pulls through deeper global partnerships and engagement, especially as data movement and energy constraints shape AI deployment.
In parallel, EU and national governments should foster cross border and public private programs, such as STARLight, a new consortium of leading industrial and academic partners that seeks to position Europe as a technology leader in 300mm silicon photonics (SiPho), to channel investment where it shortens time to prototype and accelerates production grade output, ensuring that Europe’s innovations move quickly from lab to market.
From Constraints to Advantage
Europe cannot out scale the U.S. or China in semiconductors, but it doesn’t have to. European relevance in the global semiconductor and AI race will come from reliability, specialization, and the ability to coordinate across borders with speed.
By diversifying supply, leading in targeted innovations, deepening partnerships, and turning standards into strategic assets, Europe can convert constraints into advantages.
If the AI contest is a race for compute, Europe’s path runs through the semiconductor levers it can move the fastest. The opportunity is present, not hypothetical. With clear missions and near-term execution, Europe can secure a durable role in the semiconductor economy and, by extension, in the future of AI.
