An emerging U.S.-China detente gives European leaders breathing room to find a strategy on trade, raw materials and the war in Ukraine — but the thaw between the two great powers risks pushing European interests to the side.   President Donald Trump and his counterpart Xi Jinping agreed to a significant de-escalation in their trade spat during a head-to-head Thursday in South Korea, pausing export controls on rare earth magnets and other critical raw materials for 12 months.   While the move is good news for European companies that have been caught in the crossfire, other sticking points in the Europe-China relationship will be harder to resolve, even with the gift of time.  Brussels, under pressure from Trump and in pursuit of its own strategic interests, is trying — without notable success — to sway Beijing from supporting Russia in its war on Ukraine.   At the same time the EU is doing its best to keep the temperature down in its longstanding trade standoff with China, whose intensity has ratcheted up recently with the imposition of limits on exports of critical raw materials and microchips. Both measures have had an immediate negative impact on European industry, particularly automakers which were already struggling prior to the restrictions.  Fears of lasting, irreversible damage to Europe’s industries have led the EU to take a more conciliatory stance in its trade standoff, emphasizing engagement and dialogue rather than punitive measures.  Yet Chinese officials have balked at the slow and uncoordinated pace of discussions with the EU, leading Beijing to drop Europe down its list of priorities, according to Jeremy Chan, a senior analyst at Eurasia Group.  “The EU is a secondary at best, maybe a tertiary or a non-consideration for both Washington and Beijing in these negotiations,” Chan told POLITICO.  ‘LET THEM FIGHT’ The top political priority for the EU is ending the war in Ukraine — something that Trump while on the campaign trail promised to do within his first 24 hours in office. Almost a year into his term, the fighting continues, aided by China propping up Russia’s economy through investments and oil purchases.  At the urging of the White House, the EU included Chinese banks and refineries in its two latest rounds of sanctions targeting Russia, arguing the entities were helping Moscow evade sanctions. This prompted an angry response from top Chinese officials including Prime Minister Li Qiang, who branded the sanctions “unacceptable” during a meeting with European Council President Antonio Costa in Asia this week, per an EU official.  European Commission President Ursula von der Leyen and the bloc’s top diplomat, Kaja Kallas, have both called out Beijing’s support for Moscow in explicit terms, with the former saying in July that it has a “direct and dangerous impact on European security.”  The EU’s latest sanctions prompted an angry response from top Chinese officials including Prime Minister Li Qiang, who branded them “unacceptable” at a meeting with European Council President Antonio Costa, per an EU official. | Pool photo by Vincent Thian via AFP/Getty Images Ukraine had hoped Trump would pressure Beijing to stop buying Russian oil, but the American president told media on Air Force One that the issue was not on the table — although he did say the war in Ukraine “came up very strongly,” with both sides hoping to find an end to the fighting.   “He’s going to help us and we’re going to work together on Ukraine,” Trump said, referring to the Chinese president. INDUSTRIES HELD HOSTAGE While China’s export controls were not directed at the EU, the bloc’s companies faced long delays and sharp price hikes in contending with the subsequent shortage of raw materials and magnets. China accounts for 98 percent of the EU’s rare earth permanent magnets.  The geopolitical firestorm sent the European Commission into overdrive to secure its own supplies of the magnets and launch a plan to diversify Europe’s supply chain by the end of the year.   But the EU has been here before. Just two years ago it passed the Critical Raw Materials Act to solve this exact problem, and yet all the deals that have been signed have failed to deliver actual products. Its latest scheme is big on ideas and short on specifics.   The one-year pause on export controls agreed between Trump and Xi affords the EU some time to put that plan into action and leverage its other alliances — including efforts unfolding at the G7 this week with Canada, along with the U.K., Italy, France and Germany seeking to diversify away from China’s grip.  But for companies looking for clarity, the catch is that none of the agreements made between Trump and Xi are binding.  “As long as we don’t see any details hammered out and put on paper it leaves a lot of room for both sides backtracking and applying various other conditions, so I don’t think that this is really settled,” said Alexander Gabuev, director of the Carnegie Russia Eurasia Center.  SECURITY CONCERNS  In the U.K., pressure is expected to build for policymakers to use the temporary U.S. truce to minimize the risks from China.  British PM Keir Starmer has thus far failed to resolve longstanding tensions between “securocrats” in parliament and Whitehall, who want to see a tougher stance toward Beijing, and those who argue for a closer embrace in order to boost inward investment. Prominent members of the government have traveled to Beijing in pursuit of strengthened ties since Starmer took office, despite his overriding foreign policy aim of cleaving close to Trump.  China has become a particular sore point for Starmer in recent weeks due to the collapse of the prosecution of two men accused of spying for Beijing, while ministers have yet to decide the fate of a planned Chinese “super-embassy” in London.  Back in the EU, divisions among member countries over how to counter China’s power — and any subsequent retribution — make a unified stance toward Beijing on trade or dumping measures unlikely.   Brussels got a glimpse of its internal factions when it slapped duties on made-in-China electric vehicles following an anti-subsidy investigation. Automakers and their political benefactors fear Chinese brands will dump their overcapacity in the European market, bringing a severe price war to Europe’s shores.   Yet for all the handwringing over how to protect domestic automakers, the votes of EU capitals on the duties revealed how economically exposed each is to China, with Germany launching a last-minute appeal to stop the duties.  The Netherlands is the latest EU member on the outs with China after Dutch authorities seized control of chipmaker Nexperia, prompting Beijing to hit back with export controls on Nexperia’s Chinese-produced chips. The shortage could halt production lines across Europe in less than a week, showcasing just how economically dependent Europe has become on China.  LET’S BE FRIENDS From the jump, Trump framed his sojourn to Asia as a “G2” summit, stoking fears that any deal would sideline other countries or that “British and European trade priorities could be overlooked or traded away without consultation,” said David Taylor, director of policy and programs at Asia House.  Sensing its declining influence in the Trump-Xi bromance, the EU is looking to bolster its trade ties elsewhere.  Trade chief Maroš Šefčovič is traveling to Australia in late November to chair an inaugural dialogue between the EU and the 12 members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership bloc, two diplomats told POLITICO. The dialogue is meant to deepen economic and political ties between the EU and countries keen to maintain established global trade rules.  Brussels, under pressure from Donald Trump and in pursuit of its own strategic interests, is trying to sway Beijing from supporting Russia in its war on Ukraine. | Jim Watson/Getty Images Brussels will have a chance to do just that when it hosts a delegation of high-level Chinese officials on Friday. They’re expected to meet with the Commission’s trade deputy-director general, Denis Redonnet, and other senior officials.  Experts caution that Europe will need to maintain pressure on Beijing to get any movement on its priorities.   “Europe cannot just simply be waiting to see what happens on talks between [the] United States and China,” said Ignacio Garcia Bercero, a former director at the Commission’s trade department. “It needs to develop its own channel of dialogue with China.” 

BRUSSELS — The geopolitical war around Dutch-based, yet Chinese-owned, chip supplier Nexperia is terrifying Europe’s carmakers that they’ll be hammered by a chip shortage that could wreak havoc with supply chains and shutter production lines. The car industry’s supply of crucial chips from Nexperia is dwindling just weeks after the Dutch government seized control of Nexperia and both the U.S. and China imposed export controls on the company.  “We will see production stops and slowdowns in short order globally because a lot of suppliers don’t have the depth of stock of the chips,” said a senior automotive official who spoke on condition of anonymity because of the issue’s sensitivity. “The auto sector is at the heart of the storm.”  Nexperia chips are used throughout the automotive value chain in everything from airbags to entertainment systems. The shortage threatens a replay of 2022, when pandemic-era microchip shortages similarly brought car plants to a halt. Yet automakers have done little to shore up their supply chains against geopolitical shifts, and an EU plan to reshore some chip manufacturing is falling far short of its targets.  The Dutch-based chipmaker warned its customers of an “unforeseen development that may affect the availability of certain products,” according to a force majeure declaration issued on Oct. 9, reported on by several media and seen by POLITICO.  The notice lit a fire under automakers and their suppliers to get their hands on any available chips, provoking a run on the materials. “It’s like the pandemic when people went on toilet paper buying sprees,” said a second auto industry insider. TOP OF THE LIST Following the 2022 shortage, the EU passed the Chips Act to alleviate the sector’s dangerous reliance on other regions for advanced or “mature” chips. Fast forward three years, and seemingly not much has changed.  This time, mayhem kicked off when the Dutch government decided at the end of September to invoke a 1952 national law to seize control of Nexperia, which was acquired by Chinese company Wingtech in 2019. The Dutch government feared that Nexperia’s CEO, who founded Wingtech, was transferring the chipmaker’s technology and production assets out of the country. Its decision came a day after the U.S. extended export controls on Wingtech to its subsidiary Nexperia. Four days after the Dutch seized control of Nexperia, the Chinese Commerce Ministry imposed export controls on Nexperia China, prohibiting the export of components manufactured in China.  Chips are ubiquitously used in modern manufacturing, driving the green and digital transition. While Nexperia’s chips are not the most advanced ones, they are critical to automakers: A traditional car contains up to 500 of the company’s chips — an electric vehicle as many as 1,000. China’s export clampdown on the chips, coupled with its control of rare-earth magnets — an equally important vehicle component — have sent the Nexperia crisis to the top of Brussels’ list of priorities. “The issue of chips is one of big importance, for many aspects of our policy, most notably the energy transition,” European Commission chief spokesperson Paula Pinho said on Monday. She added that Industry Commissioner Stéphane Séjourné raised the issue in a meeting with industry leaders on the same day, “to hear from the companies whether there are shortages.”  The companies’ input fed into a call between EU trade chief Maroš Šefčovič and his Chinese counterpart Wang Wentao on Tuesday. Next up is an anticipated visit by Chinese officials to the EU to discuss the export controls. Companies have already begun publicly discussing the potential impact of what’s happening at Nexperia.  Car lobby group ACEA said last week that it was “deeply concerned by potential significant disruption” to manufacturing if there was no quick resolution of the interruption of Nexperia’s supply of chips.  The group argued that the chips coming from Nexperia could be sourced elsewhere, but shifting would take longer than the current stock of Nexperia chips would last.  Volkswagen has warned its workers that potential production stoppages are imminent, German outlet Bild reported.  “Nexperia is not a direct supplier of the Volkswagen Group. However, some Nexperia parts are used in our vehicle components, which are supplied to us by our direct suppliers,” a VW spokesperson told POLITICO. “At this time, our production is unaffected. However, given the evolving circumstances, short-term effects on production cannot be ruled out.” SECOND CHIPS ACT The Nexperia case and possible shortages have put the EU’s dangerous microchip reliance back on the political map.  The European Commission announced this week that it plans to introduce a second Chips Act in the first quarter of next year, following a scheduled review due by September 2026.  Currently, the bloc is nowhere close to reaching the goal of the first Chips Act, which was to boost the bloc’s market share in the global microchips value chain to 20 per cent by 2030 — about double its current share.  Both lawmakers and EU countries want a second Chips Act.  “The European Chips Act 2.0 is in the making. But the Nexperia case shows the time is short,” Herman Quarles van Ufford, senior policy fellow at the European Council for Foreign Relations, said in a blog post on Wednesday.

BRUSSELS — Two of Europe’s tech powerhouses tied the knot on Tuesday in a landmark deal that bolsters a push by politicians to reduce reliance on the United States for critical technology. Dutch microchips champion ASML confirmed it was investing €1.3 billion in French AI frontrunner Mistral, one of the few European companies that is able to go head-to-head with U.S. leaders like OpenAI and Anthropic on artificial intelligence technology.  It’s a business deal soaked in politics. Officials from Brussels to Paris, Berlin and beyond have called for Europe to reduce its heavy reliance on U.S. technology — from the cloud to social media and, most recently, artificial intelligence — under the banner of “tech sovereignty.”  “European tech sovereignty is being built thanks to you,” was how France’s Junior Minister for Digital Affairs and AI Clara Chappaz cheered the deal on X. Europe has struggled to stand out in the global race to build generative AI ever since U.S.-based OpenAI burst onto the scene in 2022 with its popular ChatGPT chatbot. Legacy tech giants like Google quickly caught up, while China proved its mettle early this January when DeepSeek burst onto the scene. European politicians can showcase the ASML-Mistral deal as proof that European consumers and companies still can rely on homegrown tools. That need has never been more urgent amid strained EU-U.S. ties under Donald Trump’s repeated attacks against EU tech regulation. But the deal also illustrates that while Europe can excel in niche areas, like industrial AI applications, winning the global consumer AI chatbot race is out of reach. EUROPE KEEPS CONTROL Tuesday’s deal brings together two European companies that are most closely watched by those in power. ASML, a 40-year-old Dutch crown jewel, has grown into one of the bloc’s most politically sensitive assets in recent years. The U.S. government has repeatedly tried to block some of the company’s sales of its advanced microchips printing machines to China in an effort to slow down Chinese firms.  Mistral is only two years old but has been politically plugged in from the start, with former French Digital Minister Cédric O among its co-founders.      When the company faced the need to raise new funding this summer, several non-European players were floated as potential backers, including the Abu Dhabi-based MGX state fund. There were even rumors Mistral could be acquired by Apple. Apple’s acquisition of Mistral would have been “quite negative” for Europe’s tech sovereignty aspirations, said Leevi Saari, EU policy fellow at the U.S.-based AI Now Institute, which studies the social implications of AI. “The French state has no appetite [for] letting this happen,” he added.  Getting financing from an Abu Dhabi-based fund, conversely, would have reinforced the perception that Europe can provide the millions in venture capital funding needed to start a company, but not the billions needed to scale it.  With this week’s €1.7 billion funding round led by ASML, Europe’s tech sovereignty proponents can breath a sigh of relief. “European champions creating more European champions is the way to go forward and it needs further backing from the EU,” said Dutch liberal European Parliament lawmaker Bart Groothuis in a statement. The deal is also what officials, experts and the industry want to see more of: one where startups are backed by an established European corporation rather than a venture capitalist. “A European corporation finally investing massively in a European scale-up from its industry, even [if] it [is] not directly tied to its core business,” said Agata Hidalgo, public affairs lead at French startup group France Digitale, on Linkedin. A French government adviser, granted anonymity to speak freely on private deals, said they felt “hyped” by the news after months of uncertainty due to Mistral’s refusal to publicly deny talks with Apple. The deal is also expected to avoid any close scrutiny from Europe’s powerful antitrust regulators, which in the past have intervened in mergers and deals to keep the market competitive. Tuesday’s deal is not a full takeover and does not need merger clearance. Nicolas Petit, a competition law professor at the European University Institute, said there was “nothing to see here unless the EU wants to shoot itself in the foot with a bazooka.” “It’s a non-controlling investment, and neither ASML [nor] Mistral AI compete in any product or service market,” he added. REALITY CHECK While the incoming Dutch investment goes a long way toward keeping Mistral in European hands, it also determines the path forward for the French artificial intelligence challenger.  Mistral had already been struggling “to keep up with the race for market share” with other large language models, Saari claimed in a blogpost published last week, in which he cited numbers suggesting that Mistral’s market share is “around 2 percent.”  “Mistral was known to face challenges both technically and in finding a business model,” said Italian economist Cristina Caffarra, who has been leading the charge for European tech sovereignty through the Eurostack movement. “It’s great they found a European champion anchor investor” that will, in part, “protect them from the [venture capital] model.” Tuesday’s deal could mean that Mistral will get more support to work on industrial applications instead of a consumer-facing chatbot that venture capitalists like to propagate.  “With Mistral AI we have found a strategic partner who can not only deliver the scientific AI models that will help us develop even better tools and solutions for our customers, but also help us to improve our own operations over time,” ASML CEO Christophe Fouquet wrote in a post on Linkedin.  ASML’s main customers are the world’s biggest microchips manufacturers, including Taiwan’s TSMC and America’s Intel. The company also has a wide network of industrial suppliers, which could be leveraged as well. For Mistral, catering to European industrial applications could strengthen its business. But it could also be seen as a tacit admission that in the global AI race, Europe has to pick its battles.  Francesca Micheletti and Océane Herrerro contributed reporting.

President Donald Trump on Friday said the U.S. government had reached a deal to take a 10 percent equity stake in the chipmaker Intel, worth approximately $10 billion. “I said, I think it would be good having the United States as your partner,” Trump said Friday at the White House. “[CEO Lip-Bu Tan] agreed, and they’ve agreed to do it.” Commerce Secretary Howard Lutnick confirmed the deal in a post on X on Friday: “BIG NEWS: The United States of America now owns 10% of Intel, one of our great American technology companies.” Intel posted details of the plan soon afterward, saying the administration would make an $8.9 billion investment in Intel common stock, paid for with the CHIPS grant money. The company said the stake would be funded with $5.7 billion in grants previously awarded but not yet paid, and $3.2 billion from a separate Defense Department program. It said the Trump administration will take “passive ownership, with no Board representation or other governance or information rights.” “We are grateful for the confidence the President and the Administration have placed in Intel, and we look forward to working to advance U.S. technology and manufacturing leadership,” Tan said in a statement. The deal appears to rewrite the terms of the 2022 CHIPS and Science Act, under which Intel received $10.9 billion in grants to boost American chipmaking. The unusual deal drew scattered criticism from Republicans who saw it as violating free-market principles. “I don’t care if it’s a dollar or a billion dollar stake in an American company, that starts feeling like a semi-state owned enterprise, à la [the Chinese Communist Party],” said Sen. Thom Tillis (N.C.), in comments that surfaced Friday. “You’re going to have to explain to me how this reconciles with free-market capitalism.” Sen. Rand Paul (R-Ky.) also publicly criticized the plan this week. Intel, which has struggled to compete against its global chipmaking rivals, was the largest recipient of CHIPS Act funds. Its continued business problems, as well as Congressional inquiries into CEO Lip-Bu Tan’s ties to Chinese industry, gave Trump an opening to attack the CEO on social media, and pull him into in-person negotiations. The Trump administration has been taking a heavier hand in the microchip industry overall, including a deal to let Nvidia and AMD export high-tech chips to China in exchange for paying Washington 15 percent of their revenues. As with the Intel investment, it’s unclear how the government would administer the novel arrangement. On Friday, several Democratic legislators introduced a bill to limit Trump’s ability to change policy on high-tech national security without consulting Congress, but without Republican support, it’s unlikely to move further.

BRUSSELS — The EU is set to deliver a sobering message to a growing movement in Europe calling for a detox from U.S. Big Tech. The message? That ain’t happening anytime soon. As the U.S. continues to up the ante in questioning transatlantic ties, calls are growing in Europe to reduce the continent’s reliance on U.S. technology in critical areas such as cloud services, artificial intelligence and microchips, and to opt for European alternatives instead. But the European Commission is preparing on Thursday to acknowledge publicly what many have said in private: Europe is nowhere near being able to wean itself off U.S. Big Tech. In a new International Digital Strategy the EU will instead promote collaboration with the U.S., according to a draft seen by POLITICO, as well as with other tech players including China, Japan, India and South Korea. “Decoupling is unrealistic and cooperation will remain significant across the technological value chain,” the draft reads.  It’s a reality check after a year that has seen calls for a technologically sovereign Europe gain significant traction. In December the Commission appointed Finland’s Henna Virkkunen as the first-ever commissioner in charge of tech sovereignty. After few months in office, European Parliament lawmakers embarked on an effort to draft a blueprint for tech sovereignty.  Even more consequential has been the rapid rise of the so-called Eurostack movement, which advocates building out a European tech infrastructure and has brought together effective voices including competition economist Cristina Caffarra and Kai Zenner, an assistant to key European lawmaker Axel Voss. There’s wide agreement on the problem: U.S. cloud giants capture over two-thirds of the European market, the U.S. outpaces the EU in nurturing companies for artificial intelligence, and Europe’s stake in the global microchips market has crumbled to around 10 percent. Thursday’s strategy will acknowledge the U.S.’s “superior ability to innovate” and “Europe’s failure to capitalise on the digital revolution.” What’s missing are viable solutions to the complex problem of unwinding deep-rooted dependencies. The EU has embarked on a journey to catch up on AI infrastructure, earmarking billions of euros for AI-optimized supercomputers in a bid to counter U.S. plans by OpenAI and others. Yet even tech-friendly lawmakers have expressed doubts this will succeed.  Europe should “sober up” in its quest for tech sovereignty and accept that “certain trains have left the station,” conservative Bulgarian lawmaker Eva Maydell told POLITICO’s AI and Tech Summit last month. “We need to have a very clear outline plan which, first and foremost, assesses where our strengths are, where we have certain dependencies, and where we need to cooperate,” said Maydell. Europe should “sober up” in its quest for tech sovereignty and accept that “certain trains have left the station,” conservative Bulgarian lawmaker Eva Maydell told POLITICO’s AI and Tech Summit last month. | Matthias Balk/Picture Alliance via Getty Images Thursday’s strategy is expected to do just that, with a long list of opportunities to collaborate in areas such as chips, quantum technology, AI and secure connectivity.  “[The strategy] is more pragmatic than being politically absolutist … [and saying] OK, we’re going to do everything in Europe,” said Dan Nechita, former head of Cabinet of European lawmaker Dragoș Tudorache and now EU director for the Transatlantic Policy Network. He likened it to growing tomatoes or potatoes at home: “It doesn’t mean that I could not, but sometimes it doesn’t make sense.” As even some of Europe’s most Atlanticist, free-market corners grow wary of their addiction to the U.S., a few countries and cities are embarking on their own political efforts to break free. National lawmakers in The Hague have been building pressure on the Dutch government to wean off its dependence on American providers — only for their efforts to be derailed by Geert Wilders’ decision to quit the government coalition.  The Danish cities of Copenhagen and Aarhus decided on Tuesday to look for alternatives to allow them to drop Microsoft productivity products and cloud services, as Denmark prepares to take over a leading role in Brussels running meetings of EU ministers from July 1. But Thursday’s strategy acknowledges skepticism as to whether the EU actually has alternatives for these political front-runners to fall back on, or whether it makes sense to splash billions of euros on getting them off the ground. The EU’s tech chief Virkkunen has underscored the Commission’s desire to keep the bloc open to the world in her first months in office, by taking trips to India, Japan and the U.S. and consistently emphasizing the importance of dialogue and close collaboration.  She has the backing of some of the most influential tech lobby groups in town — even on the need to continue to work with the U.S.  “We need a transatlantic tech alliance to jointly develop and protect the technologies that underpin our shared security and economic prosperity such as AI, quantum and semiconductors,” Cecilia Bonefeld-Dahl, director general of DigitalEurope, told POLITICO ahead of Thursday’s unveiling.

BRUSSELS — The European Union secured a rare transatlantic win after the U.S. decided on Tuesday to roll back upcoming Biden-era caps on the export of artificial intelligence chips. As one of its final acts in office, the Biden administration in January placed some EU countries into a group that would continue to have unlimited access to sought-after AI chips, while others, among them Poland, would have their access restricted from May 15. AI chips are key to training the most complex AI models and vital for the EU’s AI plans. The U.S. Commerce Department announced on Tuesday that it had started the process of rescinding those planned export controls to so-called second-tier countries, much to the European Commission’s delight. Spokesperson Thomas Regnier told POLITICO that the Commission welcomed the U.S. decision to rescind the rule. “We are pleased that the Administration recognizes that the AI Diffusion Rule would undermine U.S. diplomatic relations with dozens of countries by downgrading them to second-tier status,” Regnier said. The reversal could ease tensions after a months-long attack by the American administration and tech executives on the EU’s rules on content moderation, digital competition and artificial intelligence. The European Commission’s Executive Vice President Henna Virkkunen is in the U.S. Wednesday, where she will meet with representatives from Nvidia, a critical supplier of AI chips. Virkkunen and her trade colleague Maroš Šefčovič had pushed back against the planned U.S. export controls. Both said after the U.S. imposed the rules in January that it’s in the “U.S. economic and security interest that the EU buys advanced AI chips from the U.S. without limitations.” Virkkunen said this is an area where the EU will buy from the U.S., appealing to the Trump administration’s trade deficit grievances. Some EU countries had contacted the U.S. separately seeking to better understand the caps, which would have affected their ambitious AI plans. Poland, in particular, was one of those second-tier countries that would have been restricted in buying U.S. AI chips. For months, the country tried to understand why it was in tier two but never got a clear answer from Washington, so it kept on pushing to have the rule revoked. The threat of U.S. caps has inspired the EU to review its chip-making plan, the Chips Act, with AI chips at the center.

BRUSSELS — European Union auditors on Monday warned that the bloc is dangerously reliant on China for mainstream microchips powering everything from cars to washing machines. In a report published on Monday, the European Court of Auditors (ECA) said one in three low-tech chips comes from China. It warned the EU is “nowhere close” to meeting its own goal of making up 20 percent of the global value chain for microchips by 2030, a target set in its 2023 European Chips Act that intended to make the bloc less reliant on foreign regions. The report is yet another sign that the EU is struggling to reduce some of its most glaring dependencies on foreign technology for critical and essential services, despite attempts by Brussels to make the bloc more “technologically sovereign.” Europe has some leading companies in the field of less advanced microchips, including Germany’s Infineon, the Dutch NXP and French-Italian STMicroelectronics. These firms cater to the needs of Europe’s powerful car industry. But the auditors wrote that demand in Europe “is currently growing more quickly than EU-based chipmakers can supply it.” In 2024, the EU ran a €9.8 billion deficit with China on chips; it also had deficits with other chipmaking hubs like Taiwan. Globally, Taiwan has emerged as the leading hub for more advanced chips, which have smaller nodes than low-tech varieties and are used in smartphones and data centers. But demand remains high for low-tech chips as well, including to power the transition to more sustainable, less energy-consuming technologies. The auditors warned that the gap Europe has with other regions will only widen. “As this type of microchip is needed for technology associated with the green transition, this trade deficit is likely to increase in the future.” As the EU’s independent auditor, the Court of Auditors reviews the EU’s finances, its spending and the implementation of its policies. The auditors’ message arrives as Brussels gets ready to review its Chips Act, which formulated the goal of 20 percent by 2030. The auditors dismissed that goal as “aspirational” and not grounded in reality. Last July, the Commission acknowledged the goal was far from attainable, projecting that the EU would hit 11.7 percent in 2030 rather than 20 percent. The EU executive has been investigating the bloc’s reliance on China for low-tech chips. Last year it surveyed microchip suppliers and their customers about the older-generation technology used in cars, household appliances and medical devices over fears that China-subsidized firms were undermining them. That move was coordinated with Washington under then-President Joe Biden, which ran a similar survey. Annemie Turtelboom, a member of the Court of Auditors, said geopolitical tensions between the U.S. and the EU have made the issue of reducing dependencies even more pressing than a year ago. “We already know about the risks that come with importing from countries [with which] we have an uncertain relationship. But maybe we cannot even rely on our traditional allies for the supplies of chips,” she said. European Commission spokesperson Thomas Regnier said in a response that the Chips Act was “a strong foundation” after two decades in which Europe’s share had declined, and that it had “put Europe back on a path of growth.”