European Rearmament: The Key Role of the Semiconductor Industry

With the seismic shift in the European approach to rearmament since the Russian invasion of Ukraine in 2022 and as NATO members strive to meet the 5% GDP defence spending target by 2035, technological mobilisation, with a view to total sovereignty, is essential. Over-reliance on the United States and Asia is no longer sustainable as the continent grapples with global tensions and volatile economies, especially when it comes to semiconductors for the defence industry. Developing a robust onshore semiconductor industry will be crucial.

In the last few years, the European Union has been forced to confront its glaring vulnerabilities in key sectors of defence and technology. The need to rearm and revitalise Europe’s defence industry has led to an increased focus on ensuring sovereignty and independence in technological domains such as semiconductors and microprocessors, which are crucial for modern weaponry and military systems, as well as the development of supercomputers and artificial intelligence capabilities. Technological sovereignty is impossible without them.

Rising geopolitical tensions and the spectre of conflict with an aggressive Russia have also led Europe to take stock and start asking some existential questions about sovereignty, defence and technology. Germany’s long cautiousness in defence spending is over with €153 billion in 2029, up from €86 billion this year. Chancellor Friedrich Merz told the Bundestag: “We will decide to invest significantly more in our security. Not to do the United States a favor — but because Russia actively threatens the freedom of the entire Euro-Atlantic area.”

The Chips Act as a path to technological sovereignty

An effective reinforcement of the European defence industry is not possible without a long-term solution to anchoring semiconductor manufacturing. Political decision-makers in Europe have spent years trying to find ways to tackle global microprocessor monopolies, because this vital industry remains dominated by just a handful of key players: the United States, Taiwan, South Korea… As a response to this, and in order to reinforce regional security and economic competitiveness and to give Europe a chance at true technological sovereignty, the European Commission introduced the European Chips Act in December 2022, a comprehensive plan to boost Europe’s semiconductor manufacturing capabilities and secure supply chains.

The Chips Act sets ambitious goals for the EU to produce 20% of the world’s semiconductors by 2030, up from about 10% in 2020. The act also includes provisions to attract private investments and secure public funding for semiconductor research, development, and manufacturing. The Commission has allocated €43 billion in public and private investments to meet these objectives.

“This European Chips Act comes absolutely at the right time. And it has two main goals: The first goal is, in the short term, to increase our resilience to future crises by anticipating and thus avoiding supply chain disruptions. And the second part is, of course, looking at the mid-term, and there to make Europe an industrial leader in this very strategic market,” stated Ursula von der Leyen, President of the European Commission

Semiconductors and the defence industry

The Chips Act sets out ambitious targets and a regulatory framework designed to guide the development of key European industries, including defence. Semiconductors are quite simply critical for warfare. From missiles and fighter jets to satellites and drones, advanced weapons systems rely heavily on sophisticated semiconductor chips to function. The war in Ukraine has underscored this dependency, as the conflict has seen the increasing use of technology-driven weapons systems, including precision-guided munitions and AI-powered drones, all of which depend on semiconductor technology.

The next generation of weapons, including hypersonic missiles and autonomous combat vehicles, will require cutting-edge semiconductor chips to perform at the necessary levels of precision and efficiency. This makes the need for Europe to ensure a reliable, domestic supply of semiconductors even more urgent. Without such a supply, European countries risk being left behind as other nations, particularly the U.S. and China, continue to dominate technological innovations in military systems.

A concrete example of this need is seen in the European Future Combat Air System (FCAS), a joint project involving France, Germany, and Spain. The FCAS program is a next-generation fighter jet that aims to replace Europe’s aging fleets, such as the Eurofighter Typhoon. It is designed to integrate advanced technologies like autonomous systems, AI-driven warfare systems, and hypersonic weapons, all of which require highly sophisticated semiconductors. The processors used in these systems must be capable of handling immense data processing at high speeds and in real-time, especially in combat scenarios where milliseconds matter.

Trusting European innovation

The role of semiconductors in these systems is not hypothetical. For instance, the European Processor Initiative (EPI), which is backed by the European Union, is developing SiPearl’s Rhea chip—a high-performance processor designed to power Europe's supercomputing infrastructure. The French firm acquired €90m in funding to launch the project. This chip’s capabilities are expected to be pivotal not only in scientific research but also in defense-related applications, such as missile simulations, complex military modelling, and autonomous vehicle operation.

“Historically lagging behind the US and China, Europe has become a global leader in HPC thanks to the EuroHPC initiative, ranking for the first time two machines among the four most powerful supercomputers in the world, with LUMI in Finland and Leonardo in Italy. The arrival on the market of SiPearl’s microprocessor Rhea, which will power European supercomputers with a limited environmental footprint, will be another decisive step for Europe's technological independence and sovereignty,” said Philippe Notton, CEO and founder of SiPearl.

Indeed, the industrialisation phase of the Rhea1 moved a step closer in July 2025 with the firm announcing the closing of its €130 million Series A financing round with a third and last tranche of €32 million. This funding will also help accelerate R&D activities for the launch of next-generation processors, designed to meet the needs of supercomputing and new market segments, such as data centres, AI, and enterprises—all crucial markets for European technological sovereignty.

"Sovereign hardware is mandatory to ensure Europe’s independence and sovereignty in AI and strategic fields such as security and defence. With the tape-out of the most complex processor ever designed in Europe, we are showing that Europe now has a competitor capable of challenging non-European leaders,” said Philippe Notton.

While the European Chips Act provides a framework for investments, experts argue that more needs to be done to ensure Europe’s semiconductor sector can thrive. One major hurdle is the lack of semiconductor fabrication plants (fabs) in Europe. Currently, Europe has only one large semiconductor foundry, GlobalFoundries, based in Dresden, Germany and is struggling to implement massive investments. Sébastien Dauvé, Director of CEA-Leti regrets the suspension of Intel's plans to produce in Germany and Poland. “This is bad news for Europe, because it would be in our interest to have more players established here. In microelectronics, the notion of ecosystem is very important” said Dauvé in a statement from polytechnique-insights. This gap means that Europe is forced to rely on external fabs for advanced semiconductor production, particularly for 7nm and 5nm process technologies.

But efforts are being made to expand. German firm Infineon Technologies recently confirmed funding for its Smart Power Fab in Dresden, a semiconductor development hub. "This government-supported investment by Infineon strengthens the position of Dresden, Germany and Europe as a semiconductor hub and promotes a state-of-the-art innovation and production ecosystem for microelectronics," said Jochen Hanebeck, CEO of Infineon. "We are increasing semiconductor capacity in Europe and thus helping secure stable supply chains in automotive, security and industrial fields.”

Despite the challenges, Europe’s semiconductor industry is slowly gaining momentum. The European Union’s decision to increase funding for semiconductor research and production is a positive step toward achieving long-term self-sufficiency and is a positive move for the European defence industry. However, much work remains to be done to ensure that Europe can meet its ambitious goals and fully realize the potential of the European Chips Act, with some calling for a Chips Act 2.0 to help Europe make the next step.