Europe’s Structural Leverage in the Semiconductor Ecosystem
The race for technological leadership is often portrayed as a duel between Washington and Beijing. Maya Dreier and Robert Schuett argue that this misses a structural reality: Europe’s upstream technologies shape access to the technological frontier.
At this year’s Munich Security Conference, “Under Destruction”, one theme dominated nearly every panel: acceleration. Europe must move faster, especially in defence, in AI, in digital infrastructure. The language was one of urgency, especially relating to the challenges or needs posed by hybrid threats, system integration, interoperability, digital backbones. Yet beneath the calls for speed lies a structural reality that is rarely stated explicitly. Europe remains deeply dependent on others for security and technological infrastructure, even as it seeks greater strategic autonomy.
In one critical domain, however, it is not merely a bystander. In the semiconductor ecosystem that underpins AI, defence systems, and digital sovereignty, Europe occupies a system-critical upstream position within the semiconductor ecosystem, particularly in the provision of key enabling technologies for frontier manufacturing. As this ecosystem has moved to the center of strategic competition between the United States and China, Europe is not a bystander but is embedded in the upstream technologies that shape who can operate at the frontier. The key question is whether Brussels and EU member states recognize and deliberately manage the leverage that follows from this position.
Understanding Europe’s structural role requires moving beyond the dominant interpretation of the semiconductor competition as a symmetric industrial race.
The semiconductor competition is commonly portrayed as a race to rebuild domestic manufacturing through subsidies and factory construction. This framing assumes that technological leadership can be reconstructed through national effort alone.
In reality, semiconductor leadership is cumulative and networked. Each technological generation builds on dense learning loops linking designers, equipment suppliers, materials firms, and fabrication plants. In such systems, ecosystem position often matters more than raw expenditure.
Once viewed through this lens, the U.S.-China race appears far less symmetric than commonly assumed. The two countries are not starting from comparable structural positions within the system that governs frontier learning.
If semiconductor leadership is ecosystem-dependent rather than modular, then the critical question is not who spends more, but who remains embedded in the frontier learning system.
For its part, the United States is not rebuilding its semiconductor capacity from scratch. Although much of advanced fabrication migrated abroad over the past decades, the United States never fully exited the ecosystem that governs frontier innovation. It retains leadership in chip design, maintains deep relationships with key equipment and materials suppliers, and remains central to the research networks that define next-generation architectures.
In other words, current policy efforts are best understood as re-anchoring manufacturing within an ecosystem that the United States continues to shape and inhabit.
China’s position is structurally different. Beijing is attempting to build advanced manufacturing capacity largely parallel to the dominant ecosystem rather than within it. Export controls and chokepoints limit access to critical equipment and advanced tools. More importantly, they constrain access to the iterative learning loops that characterize frontier semiconductor development.
Capital can accelerate infrastructure buildout, but cumulative technological systems depend on dense, repeated interaction between firms at the technological edge. Building such capabilities outside the established ecosystem slows iteration and narrows the pathways for rapid catch-up.
The U.S.-China competition is therefore asymmetric not because one side invests more than the other, but because ecosystem position determines learning speed.
If ecosystem embeddedness determines the contours of this competition, then actors who influence access to that ecosystem hold disproportionate strategic weight.
Europe is one such actor.
Europe is often portrayed as peripheral in the semiconductor race, neither a fabrication powerhouse nor a design hegemon. Yet this misses its structural position within the ecosystem. Critical upstream technologies that enable frontier manufacturing are concentrated in Europe, particularly in the Netherlands, where ASML, a Dutch semiconductor equipment manufacturer, anchors the extreme ultraviolet lithography segment that makes frontier manufacturing possible.
These upstream nodes do not merely supply components, they anchor the iterative learning process that defines technological advancement. Access to them shapes who can operate at the frontier and how quickly.
In most domains of great-power competition, Europe occupies a reactive position. It depends on the United States for security guarantees and remains deeply intertwined with American digital infrastructure. Strategic autonomy is frequently discussed from a position of constraint.
Semiconductors are different. Here, Europe is not merely dependent; if it plays its card in a prudent way, “the old world” occupies a position of structural indispensability within the frontier ecosystem. Europe hosts a broader concentration of upstream capabilities in semiconductor manufacturing equipment, precision optics and critical inputs (including ASML, Carl Zeiss SMT and ASM International) that shape access to advanced production within a tightly interdependent value chain, where such upstream technologies are difficult to substitute and essential for operating at the technological frontier.
As transatlantic relations become more transactional and the global technological order fragments, structural leverage becomes more valuable. In such an environment, the ability to shape access to critical technologies offers Europe a form of agenda-setting influence that it rarely possesses in major geopolitical competitions.
This does not amount to dominance, nor does it allow Europe to determine the outcome of the U.S.-China race. It does, however, allow Europe to influence the conditions under which that race unfolds.
The question, therefore, is whether Europe recognizes and deliberately manages the structural position it already occupies within it. But recognizing structural leverage is only the first step. The more difficult question is how Europe chooses to manage it.
One option is to treat semiconductor technologies primarily as commercial export goods. Under this approach, market logic dominates and strategic implications are minimized. While politically comfortable, this path gradually erodes leverage. In cumulative technological systems, symmetric access accelerates diffusion and reduces the influence of chokepoint holders over time.
A second option is overt politicization, which means the explicit weaponization of technological chokepoints. While this may yield short-term bargaining advantages, it risks encouraging others to reduce their reliance on European technologies, fragmenting the ecosystem, and to build parallel supply chains that ultimately reduce Europe’s long-term influence.
A third path lies between these extremes: the deliberate management of chokepoint power. This does not require confrontation, nor does it entail technological autarky. Rather, it involves recognizing that control over critical enabling technologies shapes who can operate at the technological frontier and under what conditions and coordinating policy accordingly to preserve Europe’s embeddedness in the frontier.
In this view, the goal is not dominance, but durability, namely maintaining Europe’s relevance within the system that governs technological leadership.
Such an approach should not be mistaken for geopolitical escalation. It is neither anti-American nor an argument for autarky. Europe’s leverage is most effective when exercised within an interdependent ecosystem, not against it. It does not imply aligning with China or predicting a winner in the U.S.-China competition. The issue is about agency: whether Europe remains a passive participant in a bifurcating technological order or deliberately manages the structural position it already occupies within it.
The semiconductor race is often framed as a contest between two superpowers. Yet its outcome will be shaped not only by capital and policy, but by its ecosystem structure.
Europe influences the conditions under which it is run. In a geopolitical environment marked by fragmentation, accelerating technological competition, and growing dependence, the ability to shape the terms of competition is rare.
Whether Europe chooses to recognize and manage that influence will shape not only its economic future, but its standing in a world increasingly defined by technological power.
Maya Dreier is a postgraduate student in Digital International Affairs at the Diplomatic Academy of Vienna. Her work focuses on global governance, security and technological transformation, including cybersecurity and AI.
Robert Schuett is a career civil servant (currently on leave), serving as Chair of the Austrian Political Science Association and as the 2025-26 Fulbright-Botstiber Visiting Professor of Austrian-American Studies at Stanford University.
Photo by SHVETS production
