After the COVID-19 pandemic exposed most countries’ reliance on China for their semiconductor supplies, the US and the European Union passed the Chips Acts that allocate just over $50 billion each to support their chip industries. The UK is spending a mere $1.3 billion, and Canada only has individual publicly subsidized projects.

The allies are pursuing a common quest to achieve independence from China and secure supply in case of a global chip shortage. However, they differ in the resources deployed and their strategic goals. The US aims to prevent China from obtaining the latest technology. Europe, in contrast, emphasizes self-sufficiency.

Both goals look challenging.

In its 2022 CHIPS and Science Act, the US allocated a whopping $280 billion to boost domestic research, of which $52.7 billion goes directly towards semiconductor manufacturing. The Act specifies where it spends the funding, strategically targeting different sectors.

The Department of Commerce manages the CHIPS fund and has used it to support the construction of large Taiwanese and American fabs. In April, Taiwanese chipmaker TSMC announced it is building a third factory in Phoenix, Arizona, with $6.6 billion in CHIPS money. The total investment will be worth $65 billion. Intel received $8.5 billion in grants and another $11 billion in loans for projects in four states.

It remains to be seen how realistic the US ambitions are. Delays, labor shortages, and conflicts plague the much-vaunted TSMC projects. Intel, the US national chip champion, is running up huge losses in an attempt to compete against Asian manufacturers. The US Commerce Department has not yet distributed any of the $39 billion allocated to semiconductor companies, other than $35m to BAE Systems – a British company — for manufacturing specialist semiconductors for defense applications.

For the US, a priority is staying ahead of China for the most cutting-edge chips rather than legacy chips. Washington has aggressive export controls to keep China from obtaining advanced US-made chips. The controls are proving difficult to enforce — and driving transatlantic tensions.

The EU is spending a similar sum — €46.3 billion ($51 billion) — on semiconductors. It aims to achieve 20% of the global market share by 2030. Individual EU governments are spending more: Germany is dishing out €5 billion for a single TSMC plant in Dresden. European and German leaders broke ground on construction in August 2024.

In September 2024, the EU suffered a major blow to its chips strategy. After its heavy losses, Intel announced a two-year delay for the construction of its €30 billion plant in Germany and another investment in Poland. The delays put the EU even further behind other countries, especially the US, in terms of semiconductor production. It also throws a spotlight on the flaws and risks inherent in the European Chips Act, which stakes the lion’s share of funding on the giants of yesteryear.

Even before the delay, semiconductor analysts were skeptical of the EU’s strategy. Instead of aiming to capture a fixed global market share, Berlin-based researcher Jan-Peter Kleinhans says the EU should focus on innovative R&D while supporting its strengths in advanced imaging and chemical compounds. Both fields are crucial to the semiconductor supply chain, and the EU holds a competitive advantage in them, with ASML in the Netherlands, imec in Belgium, and BASF and Merck in Germany.

The European Chips Program overlaps with its US counterpart. It aims to produce cutting-edge chips. Instead, Europe should focus on supporting startups, and specific chip-hungry industries requiring legacy products, particularly for the automobile industry.

The UK approach is much more modest than those of its larger allies. Under previous Tory Prime Minister Rishi Sunak, London allocated £1 billion, or $1.3 billion, to R&D in startups and small-to medium-sized enterprises. Instead of far-reaching subsidies like those in US legislation, the UK targets “bang for the buck,” focusing on the traditional UK’s strengths in design.

Critics say the UK’s strategy lacks a plan for where to source semiconductors in case of a supply-chain breakdown. Beyond a £35 million to join the EU Chips Joint Undertaking, it offers no clear plan to cooperate with its European neighbors and link into the new capacity built in France and Germany.

Canada has a solid semiconductor history, including wafer fabrication (“fabs”), R&D facilities, packaging and assembly operations, and testing companies. Much of its semiconductor expertise came from its once-mighty telecoms industry, which was based around Nortel, later taken down in a Chinese state-assisted military attack, and Bell Northern Research.

Since 2021, the Canadian government has spent around $550 million on individual projects to support its semiconductor industry. It has no pot of money allocated to semiconductors specifically. Punctual initiatives from federal and provincial authorities promote the country as a semiconductor leader, but no overarching strategy exists. Canada’s Innovation, Science and Economic Development department said they plan on “carving out a niche role for Canada by leveraging areas where [they] have a competitive advantage (i.e., compound semiconductors, MEMS and sensors, advanced packaging).”

Although European and North American allies wish to strengthen their semiconductor supply chains, they must still achieve their goals. The US and EU established the Trade and Technology Council to avoid a subsidy race that might result in redundant and inefficient spending. But the Council neglects both the UK and Canada and has yet to produce a meaningful plan. These gaps must be filled.

Christopher Cytera is a Non-resident senior fellow with the Digital Innovation Initiative at the Center for European Policy Analysis and a technology business executive with over 30 years of experience in semiconductors, electronics, communications, video, and imaging.

Sara Oversteyns attends the University of St Andrews and William & Mary in a Joint Degree Program.

Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions are those of the author and do not necessarily represent the position or views of the institutions they represent or the Center for European Policy Analysis.

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