Companies based in the European Union control only a tiny slice of the bloc's datacenter infrastructure market, despite Europe being one of the world's largest buyers of AI-related hardware and services, according to a new report published September 28 by the Global Electronics Association. The study, titled "From Chips to Systems: Building an End-to-End EU Strategy for Data Centre, Cloud Infrastructure and AI," finds that EU-headquartered firms account for just six percent of the bloc's datacenter semiconductor market, seven percent of server manufacturing and assembly, and eight percent of cloud infrastructure. Foreign suppliers, primarily from the United States, Taiwan, South Korea, and China, dominate every layer of the supply chain that powers Europe's growing AI ambitions.
The disparity extends across the entire electronics supply chain, the report shows. Taiwan controls contract chip manufacturing and produces most of the world's leading-edge processors, many designed by American companies, while South Korean and US suppliers dominate memory markets. Most major server makers are American, with China's Lenovo standing out as a notable exception. US companies also lead in networking and storage, leaving Europe with few large suppliers of its own. The bloc's Cloud and AI Development Act aims to at least triple Europe's datacenter capacity within five to seven years, which the association says will generate unprecedented demand for servers, electronic systems, and semiconductor components.
The association argues that Europe needs policies to develop its own industrial ecosystem and capture more of the value that the Cloud and AI Development Act is expected to create. It identifies datacenter, cloud, and AI infrastructure as the most strategically important market for EU technological sovereignty, noting that server farms constitute the critical infrastructure on which a large number of essential services now depend. According to the report, "For the first time, printed circuit boards, electronic manufacturing services, advanced packaging, and substrates sit alongside semiconductor fabrication as explicit targets of European industrial strategy." The study warns that supporting individual parts of the supply chain in isolation won't create a competitive European industry, pointing to the Chips Act 2.0 and the Cloud and AI Development Act as steps in the right direction that need to be matched by other industrial policy instruments.
The report's case rests partly on forecasts showing that servers, driven by AI processing requirements, have become the primary growth driver of the entire electronics industry since 2024, overtaking other segments. Projections cited in the study expect servers to become the largest electronics segment by 2030, ahead of smartphones or automotive electronics. The association recommends that the EU pursue an end-to-end strategy for the datacenter supply chain, using European demand to encourage private investment while enticing global technology and manufacturing companies to expand production within the bloc. It acknowledges that Europe cannot realistically build this supply chain using EU-headquartered companies alone, saying policymakers should use the "attractiveness and growth of the EU market to encourage global leaders to expand their manufacturing footprint in Europe." That could involve partnerships with European technology companies and research organizations, spreading manufacturing expertise through the region's electronics industry.
The proposal echoes the Trump administration's push to rebuild American manufacturing, though it relies more on incentives than on tariffs or threats to exclude foreign products unless their manufacturers establish domestic production. The association says the European objective should be to progressively anchor a greater share of the end-to-end value chain within Europe. Whether EU members have the collective will to do this is another question, the report notes, as is whether it's possible to reverse the continent's deep dependence on overseas technology. The path forward requires coordinating industrial policy across multiple sectors simultaneously, a challenge that will test Europe's ability to translate strategic ambition into concrete manufacturing capacity. Policymakers face a choice between accepting permanent reliance on foreign suppliers or investing heavily in an ecosystem that may take decades to rival established competitors.