When German engineering and technology company Bosch inaugurated a new semiconductor plant in Dresden, Germany, earlier this year, it received extensive local media coverage. State-of-the-art chip production facilities are few and far between across the EU.

“Our semiconductor facility in Dresden is Bosch’s first AIoT factory, combining artificial intelligence (AI) with the Internet of Things (IoT),” Bosch spokesperson Annett Fischer told DW back in July.

The plant provides specialized chips for the automotive sector.

Technology expert Jan-Peter Kleinhans from the Berlin-based think tank Stiftung Neue Verantwortung (SNV) recently referred to it as “a state-of-the-art facility for power electronics for the automotive portfolio Bosch has been specializing in.”

All in all, though, the Bosch plant is little more than a drop in the semiconductor ocean.

Supply chain snarls

Toward the end of the year, European economies appear to be among those worst hit by a global chip shortage that continues to severely impact production flows.

Carmakers have had to postpone vehicle deliveries. There is a shortage of internet routers, as well as gaming consoles and many other items that depend heavily on semiconductors.

When it comes to chips for the consumer electronics sector, Europe is even more dependent on overseas suppliers. “We cannot hold a candle to the US, China and other competitors when talking about smartphones, laptops or cloud data centers — almost none of those come from European players,” Kleinhans told DW.

Lessons to learn

He and China analyst John Lee, who until recently was with the Mercator Institute for China Studies (MERICS), have co-authored an analysis on what Europe’s answer to China’s rise in semiconductors should be. They have formulated recommendations for policymakers on how to soften the impact of China’s growing clout in the chip industry on EU economies.

The European Commission is certainly aware of the recent chip supply bottlenecks and their far-reaching implications, and is working on the European Chips Act, a draft of which should be ready by the middle of next year. A lot of money is to be earmarked for strengthening the EU’s chip ecosystem and forging strategic alliances with international partners to achieve this goal.

Europe’s share across the whole chip value chain has been decreasing lately, including design and manufacturing capacity, relative to the growing capabilities of other nations. Brussels fully understands that relying too heavily on semiconductors from China and other major players can severely impact the EU’s tech sovereignty.

What makes the EU’s ties with China so complicated is that while still a cooperation partner, China is increasingly seen as a competitor and systemic rival, meaning that dependencies can also involve crucial security issues.

Read more in DW.