What's Happening?
Frank Heemskerk, executive vice-president of ASML Holding NV, a critical player in the semiconductor supply chain, has stated that the company is not selling any chipmaking machines in Europe. This is attributed to a lack of investment in the region and
the absence of new chip factories being built there. ASML, the sole manufacturer of sophisticated lithography equipment essential for producing cutting-edge chips, noted that Europe contributed nothing to its net system sales in the second quarter, a decline from a 1% share in 2025 for Europe, Middle East, and Africa. Heemskerk highlighted that Europe risks falling behind the U.S., China, and India, which are heavily investing in their domestic semiconductor industries. Despite the EU's Chips Act, which came into effect in 2023 to boost the continent's share of global production, the law has largely failed to stimulate investment in new chip plants, with an auditing body suggesting the EU is unlikely to meet its target to double its market share by 2030.
Why It's Important?
This development underscores a significant challenge for the U.S. and its allies in securing a resilient global semiconductor supply chain. While the immediate impact is on Europe's manufacturing capacity, a weakened European semiconductor industry could indirectly affect global stability and supply, potentially increasing reliance on other regions. The U.S. has been actively promoting domestic semiconductor production through initiatives like the CHIPS and Science Act, aiming to reduce dependence on overseas manufacturing. If Europe continues to lag, it could create a strategic vulnerability, as a diversified and robust global supply chain is crucial for national security and economic stability. The U.S. relies on a global network for various components and technologies, and a decline in European manufacturing capabilities could shift more pressure onto U.S. and Asian producers, potentially exacerbating future supply chain disruptions. Furthermore, the competitive landscape for attracting semiconductor investment, as described by Heemskerk, indicates a global race where the U.S. must continue to offer compelling incentives to maintain its edge and attract key players like ASML.
What's Next?
ASML is being actively courted by the U.S., China, and India to expand its presence, indicating a potential shift in its global investment strategy. Heemskerk emphasized the need for ASML to scale up production beyond the Netherlands, with a fierce competitive battle among nations to host these expansions. The U.S. is actively seeking to increase its share of ASML's research and development, with suggestions to double its current quarter of research conducted in the U.S. This suggests that the U.S. will likely continue to offer incentives and engage in discussions to attract more of ASML's operations, including manufacturing and R&D. For Europe, the challenge remains to overhaul its Chips Act or introduce new policies that effectively stimulate investment and the construction of new chip factories to avoid further marginalization in the global semiconductor landscape. The ongoing competition for ASML's investment will likely intensify, with significant implications for the future geographical distribution of semiconductor manufacturing capabilities.
Beyond the Headlines
The situation with ASML in Europe highlights a broader geopolitical and economic struggle for technological sovereignty. The absence of new chip factories in Europe, despite the EU Chips Act, suggests that legislative efforts alone may not be sufficient to drive significant industrial investment without robust accompanying incentives and a conducive economic environment. This could lead to a more concentrated global semiconductor production, potentially increasing risks associated with geopolitical tensions or natural disasters in key manufacturing hubs. For the U.S., while it is actively attracting semiconductor investment, the long-term implications of a less diversified global manufacturing base could include increased costs, reduced innovation due to less competition, and heightened supply chain vulnerabilities. The aggressive courting of ASML by various nations also underscores the strategic importance of advanced manufacturing capabilities, not just for economic growth but also for national security and technological leadership in an increasingly digital world.
