When the European Union unveiled its landmark Chips Act in 2023, the goal was ambitious: To double the bloc’s share of global semiconductor production to 20 per cent by 2030. 

It was the continent’s North Star, one that many hoped would catalyse efforts to build a more resilient and self-sufficient chips ecosystem in a world increasingly defined by strategic rivalry and supply chain risk.

But two years on, as competition for chip manufacturing hots up, Europe’s path remains anything but smooth. 

While construction of Taiwan Semiconductor Manufacturing Co’s (TSMC) first European facility began in Germany’s Dresden in 2024, plans by Intel to open a major €30 billion (S$44 billion) fab in Germany’s Magdeburg, along with a smaller supporting one in Poland, were postponed. The delay – due to the company’s financial difficulties, high energy prices in Germany and a shortage of skilled local workers – seemed a bad omen.

Today, Europe’s chips plan looks unlikely to achieve its target, the European Commission – the EU’s executive body – has conceded. The EU is projected to reach just 11.7 per cent by 2030, anchored still by the handful of European chipmakers like STMicroelectronics, Infineon and GlobalFoundries. 

So, rather than bank on mega projects to revitalise chipmaking in Europe, EU members are testing new ways to gain a bigger share of the semiconductor boom. But that requires countries striking different paths.

The Netherlands to boost chips made by Europe

Leading EU countries, restless for progress, are charting a new way to regain ground.

Speaking recently in Singapore, Dutch Economic Affairs Minister Dirk Beljaarts offered The Straits Times a glimpse into what some might call a Silicon Schengen – a new chips coalition launched in March that he said could be expanded from the nine announced at that time to “14 or 15” like-minded member states. 

The Schengen policy, which facilities free movement of people within the EU and a few non-EU countries, started as a 1985 inter-government initiative to promote labour mobility, economic growth and social integration among five countries, and was subsequently incorporated into EU law in 1997. Though it is controversial, more than eight in 10 EU companies today consider it one of the bloc’s key achievements and say it is good for business.

The Semiconductor Coalition started as a Dutch idea floated at the Group of Seven meeting in Rome in October 2024. It pulls together the fastest European champions – Austria, Belgium, Finland, France, Germany, Italy, Poland, Spain, and the Netherlands – in the chips race, enabling them to brainstorm and collaborate on how to run even quicker.

“We’re looking at what the industry needs to be successful. In this coalition, we are combining knowledge from the companies, research institutions and policymakers,” added the minister, whose key stated priorities include cutting red tape and lessening administrative burden.

The coalition seeks to grow its slice of the global chips pie by strengthening its foothold on the entire value chain – from research and design, to fabrication and packaging – in a way that complements the EU’s push to locate more of such facilities on European soil, Mr Beljaarts said. 

That hints at a different approach to not only growing the EU’s chips footprint but also managing supply chain risk – not by building manufacturing within EU borders but by creating reliable partnerships up and down the chain.

In other words: Focus on boosting chips made by Europe, rather than in Europe, and informally co-opt countries outside the EU into this Silicon Schengen.

During our interview, Mr Beljaarts highlighted his visit to a newly opened wafer chip plant in Singapore, a joint venture between Dutch chip champion NXP and TSMC-backed Vanguard constructed in record time, which he described as “mind-blowing”.

The momentum gained by the chips coalition appears aligned with industry calls for an EU Chips Act 2.0 – to fix a cumbersome model requiring European Commission approval for projects despite funding provided by EU members so that public policy supports business ambitions. Yet, Mr Beljaarts’ biggest challenge remains internal – in managing hard feelings.

“We are building the coalition not against the European Commission, but alongside it,” he told The Straits Times, careful to avoid any suggestions of supplanting the commission from the driver’s seat. As a single trading bloc, all 27 EU countries share a joint trade policy. 

“This is a positive agenda, aimed at self-reliance, resilience and strategic autonomy. It didn’t start because something was wrong with the current EU Chips Act. But obviously it’s something you have to do hand-in-hand, though it doesn’t need to be orchestrated by the commission.”

Will this coalition also grow in scope and teeth, and which are the additional countries?

In response to queries, the Dutch embassy said the expansion remains in an exploratory phase and any updates will follow, without a specific timeline in mind, perhaps keen to manage sensitivities and emphasise an incremental approach.

The push to catalyse new business opportunities in chips actually reveals what a tight spot the Netherlands is in. Its crown jewel, ASML, holds a virtual monopoly on the world’s most advanced lithography machines essential to making cutting-edge chips.

Yet, The Hague imposed added restrictions on some chipmaking tools in 2024, following pressure from Washington, a move that caused ripples, particularly in Beijing.

It must create more opportunities, given its target of training 33,000 new technical jobs in chips in the next five years – and fast.

Despite the challenges in walking this geo-economic tightrope, Mr Beljaarts is careful to keep the tone diplomatic. “Not another week goes by that we’re not talking or engaging with ASML on their expansion plans and the jobs they create… It is our gem, our key world player,” said the minister, who spent most of his career in the private sector. “We invest what we can in education and in their expansion plans.”

But he bristled at the idea that the Netherlands is merely acquiescing to US demands, or any suggestions that it has chosen a side. “China is a very important country for the Netherlands. We have a lot of trade going back and forth,” he added, pointing to his upcoming visit to China some time in September or October.

Mr Beljaarts was one of the most proactive European trade ministers to engage with the incoming Trump administration, having visited the US twice over the past year when it became clear Mr Trump could win the election, during which time he also touched base with Mr Robert Lighthizer, the former US trade representative and chief architect of the aggressive use of tariffs and other trade restrictions during the first Trump administration. 

But with new tariffs from Mr Trump covering 70 per cent of EU exports to the US, how effective was that engagement?

“It always pays off,” he said. “Sitting at home behind your desk, there is only so much you can do, and the world is out there.”

The Finnish formula: Go niche, go deep

Finland, another small and trade-oriented economy in the Semiconductor Coalition, is taking a markedly different tack from the Netherlands.

Unlike the US$1.1 trillion (S$1.4 trillion) Dutch economy that is deeply embedded in the global chip sector through national champions like ASML, ASM and NXP, Finland – a US$300 billion economy – lacks a major domestic foundry industry. 

But what it lacks in manufacturing heft, it makes up for with high-end innovation and research in system chip design and development – critical areas in its “Chips from the North” strategy launched in 2024 to triple value-add and quadruple hiring to 20,000 in a decade. 

Finnish Minister for Foreign Trade and Development Ville Tavio was clear-eyed about both Finland’s limitations and advantages. “In global quantum computing, we already have the fastest supercomputer, we are investing in another and improving the supercomputer network,” he said.

He and his Dutch counterpart were in Singapore for Semicon South-east Asia, a trade conference bringing together industry champions and innovators to showcase advances in the chips field. 

Competition will enable the Finns to prevail, the thinking goes. “The free market drives itself and money will flow to the best technologies,” he added.

Finland is leaning into its niche, investing in chip design, photonics and embedded systems, and leveraging its technical depth in quantum computing, 5G – built off a sprawling telecommunications ecosystem that is Nokia’s legacy – and other chips-adjacent sectors to drive demand.

Finland’s approach stands in contrast to the EU Chips Act, which has thus far focused on reshoring high-volume chip manufacturing to European soil, with countries such as Germany and France vying to host fabs.

Mr Tavio was not concerned about any perceived misalignment: “We are the ideal subcontractors,” he said. “Business-to-business is our model. Our companies make the components, equipment and software the bigger players rely on.”

When asked how he was helping Finnish firms capture business opportunities in a variegated South-east Asian landscape, he was careful to avoid talk of pulling away from the pack and seeking preferential treatment for Finnish companies, pointing to the EU’s primacy in pushing for treaties like the EU-Singapore Digital Trade Agreement, signed in early May.

Engagement and pragmatism

While in Singapore, both ministers had the opportunity to meet Singapore counterparts.

Singapore and the Netherlands marked 60 years of relations, anchored by deep economic collaboration and individual ties, like with famed Dutch economist Albert Winsemius, who served as Singapore’s economic adviser. 

Their balancing act on chips – between entrepreneurial state action and transatlantic consensus – is a reminder that even within a unified European strategy, national strategies to seize new opportunities in a growing field can differ.

The headwinds posed by uncertainties wrought by US tariffs announced in April are significant, with the European Commission downgrading EU growth forecasts last week.

Finland’s response? Aggressive hunting.

“Smaller companies have a real drive to find an international market and new target countries. So the growth could actually be reasonable,” Mr Tavio said.

“They can actually come to Singapore and be successful,” he added, pointing to the Tuas mega port and plans to make it an intelligent system leveraging new technology solutions for port management, and Changi Airport Terminal 5’s construction, both of which play to Finland’s strengths in the maritime domain, green economy and clean energy.

Opportunities for Asian countries

Europe’s strategy on chips and trade is entering a new phase. There is commonality on the level of values. Both Beljaarts and Tavio speak passionately about the need for openness, trade and multilateral rules.

But they differ in execution.Where the Dutch see an opportunity to scale up industrial capacity and expand European supply chains, the Finns see an opportunity to specialise – and in doing so, avoid overreach.

That is not a contradiction – the EU’s strength lies in uniting diverse models. 

Here, there is opportunity, too, for Asia, as more European companies look east for markets, partnerships and investment opportunities. 

Both Mr Beljaarts and Mr Tavio spoke of Singapore in similar terms: as a hub, a gateway, a partner of trust. And that may be the lesson here. In a fragmented world, countries that can offer a friendly policy environment with networks to other investment destinations and access to international partners could see more business come their way.

Europe’s semiconductor project is a story still being written. As the chips fall where they may, the question is not whether the EU can stay unified – it is whether individual EU countries can create and seize new opportunities for the continent.

• Lin Suling is senior columnist at The Straits Times’ foreign desk, covering global affairs, geoeconomics and key security developments.

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