Europe's AI ambitions rest on somebody else's supply chain

Europe is one of the world's largest markets for AI datacenter infrastructure, yet its own companies capture only a fraction of the value. Chips, servers and cloud platforms are still mostly supplied from outside the bloc.

Single-digit shares in three key markets

The Global Electronics Association (GEA), an industry body, puts the gap in single digits. In its report "From Chips to Systems: Building an End-to-End EU Strategy for Data Centre, Cloud Infrastructure and AI", EU-headquartered companies account for only 6 percent of the bloc's datacenter semiconductor market, 7 percent of server manufacturing and assembly, and 8 percent of cloud infrastructure.

The report lands as Europe's Cloud and AI Development Act (CADA) targets at least a tripling of the bloc's datacenter capacity within five to seven years. GEA says new policies are needed to build a local industrial ecosystem and to keep more of the server, electronics and semiconductor demand CADA is expected to stimulate.

Where the supply chain sits today

Europe has fallen behind other regions across much of the electronics supply chain, the report says. Taiwan dominates contract chip manufacturing and makes most of the world's leading-edge processors, many designed by American companies, while South Korean and US suppliers dominate memory. Most major server makers are American, with China's Lenovo a notable exception.

GEA calls datacenter, cloud and AI infrastructure the most strategically important market for EU technological sovereignty: server farms are the critical infrastructure many essential services depend on. It adds that servers, driven by AI processing, have been the electronics industry's main growth driver since 2024 and are forecast to become its largest segment by 2030.

An end-to-end strategy, not isolated support

The association recommends the EU pursue an end-to-end strategy for the datacenter supply chain, using European demand to encourage private investment while persuading global technology and manufacturing companies to expand production inside the bloc. Partnerships with European technology companies and research organizations could spread manufacturing expertise through the region's industry.

GEA argues that backing individual parts of the chain in isolation will not create a competitive European industry. It calls the Chips Act 2.0 and CADA steps in the right direction, but says other industrial policy instruments must match them. The report accepts that Europe cannot build the chain with EU-based companies alone.

The proposal echoes US efforts to rebuild domestic manufacturing, though it relies more on incentives than tariffs. GEA says the European objective should be to progressively anchor a greater share of the end-to-end value chain within Europe. Whether member states have the collective will to do so remains an open question.