Inside the EU's Tech Sovereignty Package: A $140 Billion Bid to Break Up with US Tech

Chips Act 2.0: From Building Fabs to Buying European

Three years after the original Chips Act, which focused on massive subsidies to attract advanced chip manufacturing to Europe, the sequel represents a strategic U-turn. The original law failed to meaningfully grow the EU's global semiconductor market share, which remains well below its 20% target . The new approach pivots from supply-side subsidies to demand-side measures.

The €120 Billion Bet
The proposal's headline number is a €120 billion ($140 billion) combined public and private investment target to be mobilized by 2035, a major escalation from the original €43 billion goal . This is a mobilization target, not a direct allocation from the EU budget, and its success hinges on unlocking matching private capital.

Demand Accelerators and Preferential Procurement
The core mechanism of Chips Act 2.0 is the creation of "Demand Accelerators." In practice, this means the EU will incentivize national governments and public-sector bodies to purchase chips designed and manufactured by European startups and SMEs . The draft legislation explicitly aims to "link suppliers with users via offtake agreements and a demand forum," effectively creating a preferential procurement channel for EU-made semiconductors .

Crisis Powers
The act also introduces tools for demand aggregation and emergency procurement, allowing the EU to centrally coordinate strategic chip purchases during a supply crisis . An even more aggressive draft provision, reported by the Financial Times, would let the Commission override private supply contracts and force manufacturers to prioritize crisis-critical orders, with potential fines of up to €300,000 for companies that withhold supply-chain information .

Cloud and AI Development Act (CADA): The U.S. Cloud Curtain

The second pillar of the package is equally significant for the tech industry. The CADA legislation is built on a three-pillar framework: advancing EU research and innovation, creating conditions for data center investment, and—most critically—ensuring a highly secure, EU-based cloud and AI capacity for sensitive use cases .

A Tiered Sovereignty Framework
While official Commission documents have not yet confirmed the precise structure, multiple media reports describe a four-tier sovereignty classification for cloud services based on data sensitivity. Under the highest tiers, U.S. hyperscalers—Amazon Web Services, Microsoft Azure, and Google Cloud—would be effectively excluded from handling sensitive government data in sectors like healthcare, finance, and judicial administration .

The Commission’s logic is succinct: “The basic premise is to identify certain sectors that must be hosted in European cloud capacity,” one official noted . This would not be an outright ban on U.S. companies but a de facto restriction through strict procurement and security requirements.

The U.S. CLOUD Act as the Legal Catalyst
A crucial, often overlooked driver of this policy is not a European law, but an American one. The U.S. CLOUD Act of 2018 permits American law enforcement to compel any U.S.-headquartered company to produce customer data, regardless of where in the world that data is physically stored . This creates an irreconcilable conflict with EU data protection laws, and EU officials increasingly frame reliance on U.S. cloud providers as an unacceptable legal vulnerability to “the whims of foreign governments” .

Transatlantic Tensions and a Long Legislative Road

The package has been widely characterized as a European attempt to “break up with US tech” . It arrives amid already heated transatlantic relations, with the Trump administration having threatened retaliatory tariffs against what it calls “discriminatory” EU digital rules . The new cloud restrictions and chip-purchasing preferences are almost certain to trigger a fresh wave of diplomatic friction and potential trade retaliation.

Critically, the package unveiled on June 3 is just a Commission proposal. It does not become law immediately. It must be approved by both the European Parliament and the Council of the EU—a process that requires navigating the political interests of all 27 member states. The exact legislative path, final shape, and timeline remain uncertain .

The Tech Sovereignty Package is not a finished product, but the opening bid in what will be a defining European industrial and geopolitical negotiation.