EU pivots Chips Act from factory subsidies to demand measures

The European Commission is preparing to unveil a revised Chips Act on June 3, marking a major shift from the original legislation's focus on building semiconductor manufacturing plants through public subsidies toward demand-side measures aimed at stimulating the European chip market. The new proposal comes after Intel abandoned plans to construct two mega-fabrication facilities in Germany, exposing the limitations of a supply-driven approach. According to an early draft seen by Euronews, the revised legislation will emphasise demand aggregation to consolidate fragmented markets, along with procurement coordination and consumption incentives to improve the commercial viability of European chip production in strategic sectors, particularly artificial intelligence technologies. The revamped Chips Act forms part of a broader push for European technological sovereignty, accompanied by a separate strategy document highlighting the bloc's critical dependencies on foreign providers across semiconductors, cloud technologies and consumer applications. In response to deepening geopolitical fragmentation and increasingly weaponised supply chains, the Commission is also proposing a Cloud and AI Development Act that would establish four levels of sovereignty for cloud services based on criteria including control over the service, supply chain infrastructure, data processing location and cybersecurity standards. Cristina Caffarra, founder of the EuroStack Initiative, welcomed the emphasis on capturing economic value along the entire technology stack and praised the focus on open-source technologies as "Europe's magic sauce" for building independent technological capacity. The strategy aims to strengthen Europe's industrial capacity and diversify supply chains while basing sovereignty efforts on fair competition rather than isolationism or protectionism, echoing comments made by EU digital chief Henna Virkkunen.