Europe wants to break free from Big Tech. It's easier said than done

Technology has become the new currency of power, and Europe is increasingly aware that it does not control enough of it. The EU plans to strengthen the growth prospects of European technology firms while limiting some advantages enjoyed by dominant US rivals. The move marks a critical moment for the bloc, which continues to lag behind the United States and Asia in key sectors such as artificial intelligence, semiconductors, cloud services, and data centres. While other regions are racing to lead at the cutting edge of emerging technologies, the EU's strategy is more measured and pragmatic.

The bloc intends to build on existing strengths, particularly around leading semiconductor equipment maker ASML and the broader ecosystem spanning materials, manufacturing equipment, and advanced chip packaging. It also plans to leverage public procurement and government demand to help European startups scale more effectively.

However, reducing reliance on foreign technology providers will not happen overnight. Europe currently lacks AI chip giants comparable to Nvidia and major semiconductor manufacturers such as TSMC. It also does not possess software companies of the same scale as many of the leading US technology firms.

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The strategy outlined by the European Commission contains limited new funding, especially when compared with the scale of investments being made in the United States and China. This leaves member states—many of which are already facing budgetary pressures—to shoulder much of the burden. At the same time, European companies continue to grapple with high energy costs, labour shortages, and fragmented capital markets.

As several experts have pointed out, the Commission's package represents an important acknowledgement of Europe's digital vulnerabilities. However, it falls short of delivering full technological independence. Analysts broadly view it as a pragmatic first step but stress that Europe will need significantly greater investment in innovation, infrastructure, and domestic technology development if it hopes to narrow the gap with the United States and China.

As part of the initiative, the Commission plans to introduce the Cloud and AI Development Act (CADA), aimed at reducing risks arising from the EU's dependence on foreign cloud-computing providers. The proposal seeks to establish an EU-wide framework that defines varying levels of sovereignty requirements for cloud services used in sensitive public-sector workloads.

The Commission has argued that the framework would help ensure that operators of critical workloads retain control over essential digital infrastructure and are not exposed to undue external influence or service disruptions.

An additional pillar of the strategy is the proposed Chips Act 2.0. The original Chips Act introduced a range of measures designed to strengthen semiconductor supply chains and increase the EU's share of the global chip market. The new proposal aims to address Europe's continued dependence on third countries for semiconductor design and manufacturing, while also improving preparedness for future supply-chain disruptions and crises.

Chips Act 2.0 will focus on building capacity in advanced semiconductor technologies that underpin AI systems and next-generation computing. The Commission has indicated that it will prioritise investments in advanced manufacturing capabilities and explore ways to expand Europe's domestic semiconductor production base.