By Nathan Vifflin

AMSTERDAM (Reuters) -The European Union should quadruple its spending on chips and allocate a separate budget for it, industry group SEMI said on Tuesday in its official response to EU consultations for its upcoming investment budget.

European lawmakers and industry groups are gathering momentum for a "Chips Act 2.0", pushing to quickly fill the gaps in the continent's semiconductor strategy.

The 27-country bloc is consulting industry stakeholders, including the Brussels-based European arm of SEMI, as it plans its long-term spending for the period between 2028 and 2034, with a budget announcement scheduled for July.

The European Commission will need to allocate 20 billion euros ($22.64 billion) across the entire semiconductor supply chain, triggering total investments of more than 260 billion euros from public and private entities, SEMI said in the letter seen by Reuters.

In late March, the European Court of Auditors said that the EU's objective to reach 20% of the world's chip market output by 2030 was unreachable at the current pace.

The European Commission has so far only contributed 4.5 billion euros into the 43 billion euro European Chips Act, while about 80% of the public funding came from the member states, the bloc's top audit institution said in the report.

SEMI said a separate EU budget would help level the playing field across the region, as each member state presently invest in their own national industry first.

"Semiconductors are the foundational component underpinning virtually every sector of the modern economy – Automotive, aerospace, industrial robotics and medical devices – and yet the EU continues to rely extensively non-European suppliers for the vast majority of its advanced chips and critical supply chain components," it said.

Cutting-edge and AI chips, along with quantum technologies, were some of the gaps the industry group identified in its response.

Europe is projected to reach 11.7% of the global semiconductor market share by 2030, just over half of its ambitious goal, according to the Court of Auditors.

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(Reporting by Nathan Vifflin in Amsterdam, editing by Milla Nissi-Prussak)