EU Chips Act II and the Push to Diversify Automotive Chip Supply

The EU’s long‑term goal is ambitious: increase Europe’s share of global semiconductor production to 20% by 2030.

Chips Act II is expected to refine and extend these policies rather than replace them, with a stronger focus on industrial resilience and strategic autonomy.

Why the EU Wants Carmakers to Diversify Chip Suppliers

One of the most discussed ideas tied to the new legislation is requiring automakers to diversify their semiconductor suppliers.

Draft plans reported in European media indicate that car manufacturers may be required to source certain chips from at least two suppliers and incorporate supply‑chain resilience into procurement decisions.

The logic is straightforward: a single missing component can halt vehicle production lines. When critical chips come from only one supplier—or one geopolitical region—the risk of disruption rises sharply.

European policymakers increasingly view semiconductor supply not only as an economic issue but also as a strategic security concern tied to technological sovereignty.

The 2025 Nexperia Crisis: A Warning for Europe

The push for stricter resilience rules gained momentum after the 2025 Nexperia crisis, which disrupted the global automotive supply chain.

In late September 2025, the Dutch government took control of Nexperia, a Dutch semiconductor manufacturer owned by China‑linked Wingtech Technology, citing national security concerns.

China responded with retaliatory export restrictions affecting Nexperia’s supply chain, intensifying tensions and threatening the availability of automotive semiconductors.

Because Nexperia produces widely used chips for vehicle electronics, the disruption quickly triggered fears of production stoppages across the European automotive industry.

The episode revealed several structural vulnerabilities:

• Heavy dependence on a limited number of suppliers
• Concentration of manufacturing in geopolitically sensitive regions
• Weak visibility across complex semiconductor supply chains

For policymakers in Brussels, the crisis reinforced the need to treat chip supply as critical infrastructure rather than a purely commercial issue.

Measures Being Discussed for Chips Act II

While the final legislative text has not yet been published, policy discussions and reporting point to several potential tools.

Risk‑based sourcing rules

Automotive manufacturers may be required to demonstrate supply diversification for key semiconductor components, including sourcing from multiple suppliers in some cases.

Conditional subsidies

Public funding could be tied to resilience goals—similar to the first Chips Act, which links financial support to projects that strengthen European supply capacity.

Expanded EU funding for semiconductor projects

Industry groups and policy discussions around “Chips Act 2.0” have proposed stronger centralized EU financing mechanisms to accelerate semiconductor investment and competitiveness.

Broader supply‑chain resilience tools

The EU is also exploring ways to improve monitoring, demand coordination, and industrial scale‑up across the semiconductor value chain.

These measures are still under discussion, and the final law may differ from current proposals.

How the Plan Fits Europe’s Semiconductor Strategy

Chips Act II is part of a broader European effort to strengthen technological sovereignty in critical industries.

Europe currently relies heavily on semiconductor manufacturing outside the region. The original Chips Act was designed to address this gap by mobilizing more than €43 billion in public and private investment to expand research, design, and manufacturing capacity.

The strategy combines several elements:

• Subsidies and incentives for new semiconductor fabs
• Support for research and chip design capabilities
• Crisis monitoring and coordination across EU member states
• Supply‑chain resilience measures for key industries

Automotive manufacturing plays a central role in this strategy because it is one of Europe’s largest industrial sectors and among the most sensitive to chip shortages.

What Happens Next

Chips Act II remains a planned proposal rather than enacted law. The European Commission’s timeline indicates a legislative proposal could be released in 2026 after reviewing stakeholder feedback and the performance of the original act.

If adopted, the new framework would mark a shift in how Europe treats semiconductor supply—moving from a purely market‑driven model toward a strategic industrial policy focused on resilience, diversification, and domestic capability.

The Nexperia crisis showed how quickly a geopolitical dispute can ripple through supply chains. For European policymakers, Chips Act II is an attempt to ensure the next disruption does not stop the continent’s factories.