Europe is accelerating investment in semiconductor manufacturing, but the continent’s push to expand chip production is exposing another strategic weakness: its continued dependence on imported technology materials and Asian processing capacity.
Several major semiconductor projects are moving forward in 2026. Intel is committing €5 billion to its Leixlip operation in Ireland, while Germany has approved €659 million in support for four semiconductor facilities. In Italy, STMicroelectronics is developing a €5 billion silicon-carbide campus in Catania, designed as an integrated 200mm manufacturing operation covering the production chain from silicon-carbide substrates and wafers to power devices, testing and packaging.
The scale of these investments is expected to increase demand for a much broader range of raw materials than conventional semiconductor-grade silicon. The challenge for Europe is that many of these inputs are either imported, processed predominantly outside the continent or recovered only in limited quantities from existing European industrial streams.
Semiconductor Expansion Creates Demand for Critical Materials
The semiconductor industry depends on a complex mix of specialty metals, minerals, gases and ultra-high-purity materials. As Europe expands chip manufacturing, demand is likely to rise across several strategically important categories.
Gallium is essential for gallium-nitride power electronics, radio-frequency components, radar systems and satellite communications. Germanium is used in fibre-optic systems, infrared equipment, silicon-germanium chips and specialized solar cells, while indium is important for displays, touchscreens, indium-phosphide optical devices and high-speed communications infrastructure.
Silicon carbide is becoming increasingly important as electrification expands. Its applications include electric-vehicle inverters, industrial drives, renewable-energy equipment and power supplies for data centres. Other materials also occupy critical positions in semiconductor manufacturing and electronics. Tantalum is used in capacitors and corrosion-resistant equipment, while tungsten, cobalt, ruthenium and copper are increasingly important in microscopic interconnects, electrical contacts and chip-production tools. Hafnium is used in advanced transistor dielectrics and control technologies.
The supply chain also depends on high-purity industrial gases, including helium, neon and argon, which are used in processes ranging from lithography and deposition to etching and cooling. Further down the electronics value chain, gold, silver, tin and palladium are used in connectors, solder, packaging and other electronic components. High-purity quartz is another essential input because it is used to manufacture crucibles required for growing semiconductor-grade silicon crystals.
Europe’s Weakness Is More About Processing Than Geology
Europe’s exposure does not necessarily stem from an absence of mineral resources. Several critical technology materials, including gallium, germanium, indium and tellurium, are generally produced as by-products of processing other metals rather than mined primarily from dedicated deposits. Gallium, for example, can be recovered from aluminium production, while germanium and indium can emerge from zinc and other metal-processing streams.
Europe retains significant smelting and refining capabilities, meaning some of the infrastructure required to recover these materials already exists. For years, however, recovery has often failed to make commercial sense because European producers have competed against lower-cost Chinese supply. Where material could be purchased cheaply on international markets, there was less incentive to invest in expensive recovery processes, additional refining capacity and specialized infrastructure.
That economic equation is now changing. European prices for gallium, dysprosium and terbium are approximately five times Chinese domestic levels, while germanium prices are nearly three times higher. The gap illustrates more than a simple commodity-price difference. It reflects the additional cost associated with sourcing materials outside dominant supply chains, including certification, stockpiling, logistics and geopolitical risk. For European manufacturers, that premium is increasingly becoming part of the cost of supply security.
Europe Has World-Class Chip Technology but an Incomplete Supply Chain
Europe remains home to several strategically important semiconductor and technology companies. ASML provides the continent with an indispensable position in advanced semiconductor lithography, while imec is a major centre for semiconductor research and development. Infineon, STMicroelectronics, NXP, Bosch and GlobalFoundries also give Europe strong positions in automotive electronics, sensors, power semiconductors, industrial applications and mature-node manufacturing. Yet semiconductor sovereignty cannot be achieved through wafer fabrication alone. Europe continues to import significant volumes of wafers, chemicals, photoresists, permanent magnets and processed minor metals. A substantial share of semiconductor assembly and testing capacity is also located in Asia.
This creates a structural gap between Europe’s ambitions to expand chip manufacturing and its ability to secure the materials and downstream services required to support that production. The resulting opportunity may therefore lie less in developing dozens of new mines and more in improving refining, recovery and recycling capacity.
Recycling Could Become Europe’s Fastest Route to Critical Materials
European metal producers and specialist chemical companies could play a central role in closing the technology-materials gap. Companies such as Aurubis, Boliden and Umicore already operate within sophisticated European metals-processing and recycling ecosystems. Greater recovery of tellurium, selenium, indium, germanium, gallium and precious metals from concentrates, electronic waste and smelter residues could provide an additional domestic source of strategically important materials.
This is particularly relevant for urban mining. Discarded circuit boards and other electronic waste contain substantial quantities of copper, gold, silver, palladium and tin. In some cases, the concentration of valuable metals in electronic waste can exceed that found in conventional primary ores. As Europe increases efforts to secure domestic supply chains, electronic waste could therefore become an increasingly important source of raw materials for the semiconductor and wider technology industries. The approach also offers an environmental advantage by extracting value from existing waste streams rather than relying exclusively on new mining projects.
AI Data Centres Add Another Layer of Material Demand
The rapid expansion of artificial intelligence infrastructure is creating another source of pressure on Europe’s technology-material supply chains. Large data centres require significant quantities of copper and aluminium for grid connections, transformers, electrical distribution systems and busbars. Cooling infrastructure adds further demand for metals and power equipment. The requirements inside computing clusters are more specialized.
As data-centre networks move toward increasingly high-speed optical communications, demand is rising for materials including indium phosphide, germanium, gallium arsenide and ultra-pure silicon. The shift from 800-gigabit to 1.6-terabit optical connections is expected to strengthen the market for advanced photonics. Optical fibre can replace some short-distance copper connections, but the growth of optical networking simultaneously increases demand for specialized semiconductor and photonic materials. This means Europe’s AI infrastructure ambitions are linked directly to its ability to secure a wider portfolio of critical raw materials.
Rare Earth Magnets Are Becoming Strategic Technology Inputs
Permanent magnets should also be viewed as technology materials rather than simply as another category of rare-earth products. Neodymium and praseodymium provide the magnetic strength required by high-performance permanent magnets, while dysprosium and terbium help magnets retain their properties at elevated temperatures. These materials are used in robotics, industrial automation, precision motors, wind turbines, drones, data-centre cooling systems and defence technologies.
Europe has begun developing its own rare-earth separation and magnet-production capabilities. However, access to heavy rare earths, particularly dysprosium and terbium, remains one of the continent’s most significant vulnerabilities. The issue is particularly important because these materials are difficult to substitute without compromising performance in many advanced applications.
A Two-Tier Market for Critical Materials Is Emerging
Europe’s semiconductor expansion is therefore creating a new economic reality in the market for technology materials. Companies may increasingly face two different prices: the conventional international commodity price and a higher price for verified, traceable and non-Chinese supply. The premium reflects the cost of diversification. It can include additional refining, certification, inventory, logistics and the expense of building alternative supply chains outside established Asian processing networks.
Not every manufacturer will be willing or able to pay that premium. But semiconductor producers, defence companies and other high-value technology manufacturers are better positioned to absorb it because raw materials generally represent only a relatively small share of the final value of their products. For Europe, this could turn supply security into a commercially viable market rather than simply a strategic policy objective.
The continent’s semiconductor strategy is consequently becoming about more than building fabs. Securing copper, gallium, germanium, indium, silicon carbide, rare earths, precious metals, high-purity gases and other critical materials will be equally important. Europe already possesses world-class semiconductor research, equipment manufacturing, metal processing and recycling capabilities. The next challenge is connecting those strengths into a more complete domestic value chain—one capable of turning imported-resource dependence into a more resilient European technology and raw-material ecosystem.
