The European Union has introduced its most comprehensive strategy to date aimed at bolstering technological sovereignty, with a clear objective to lessen its reliance on American technology supply chains. The strategy, unveiled on Wednesday, focuses on critical sectors including semiconductors, artificial intelligence, and cloud computing. Its central legislative pillars are the proposed Cloud and AI Development Act (CADA) and an upgraded version of the European Chips Act.
Henna Virkkunen, an Executive Vice-President of the European Commission, emphasized the need to ensure critical cloud service providers do not possess a "kill switch" capability, stating that dependencies can pose security risks. Commission President Ursula von der Leyen added that the EU cannot rely on others to keep hospitals running, power grids stable, and public services secure.
Should these proposals become law, they would directly impact the market position of Amazon.com's AWS, Microsoft Azure, and Alphabet's Google Cloud in handling sensitive government data within the EU. Currently, these three US-based companies collectively hold over 70% of the EU's cloud computing market.
Sovereign Cloud Tiers Create Hurdles for US Firms
The Cloud and AI Development Act (CADA) forms the legislative core of the new strategy. Under this bill, member state governments would be required to store critical data on cloud services owned within the EU. It would also mandate a "sovereign risk assessment" for cloud providers, classifying them into four tiers based on whether their services, supply chains, data processing, and physical infrastructure are under EU control.
Executive Vice-President Virkkunen explicitly stated that US companies are unlikely to achieve the highest sovereign rating. This is primarily due to the US CLOUD Act, which grants American law enforcement agencies access to data stored overseas by US firms.
In anticipation of a stricter regulatory landscape, some US tech giants are already adapting. Alphabet (Google) has established a joint cloud venture with French defense electronics group Thales SA called S3NS, which was recently selected as one of four providers for EU institutions. Both Microsoft and Amazon.com have also launched "sovereign cloud" solutions in Europe.
Catherine di Lorenzo, a partner at law firm A&O Shearman, described CADA as representing a "significant shift," noting its scope extends far beyond data localization to encompass ownership structures, exemptions from foreign laws, operational control, and supply chain transparency.
Upgraded Chips Act Focuses on Advanced Manufacturing and Local Demand
In the semiconductor sector, the European Commission has presented a draft for a "Chips Act 2.0," a major upgrade to the legislation that came into effect in 2023. The original act was a response to pandemic-era chip shortages and set a goal to double the EU's global market share by 2030, a target an EU audit body last year deemed unrealistic.
The revised bill's key adjustments include empowering the Commission to directly invest in large-scale cross-border projects, offering a streamlined public funding path compared to navigating individual national subsidies. It also aims to stimulate local demand to improve the economic viability of new semiconductor plants. The Commission further stated it would "prioritize" establishing a foundry for advanced chips within the EU to support AI computing needs.
Regarding financing, investments will be channeled through existing programs until 2028, with future funding subject to the EU's next multi-year budget negotiations. The Commission estimates that reviving the EU's semiconductor industry will require a total public and private investment of €1.2 trillion (approximately $1.39 trillion) by 2035.
Long Road Ahead with Legislative and External Risks
The European Commission acknowledges that building domestic technological alternatives will be a lengthy and challenging endeavor. Executive Vice-President Virkkunen noted that 80% of Europe's technology comes from outside, and building capacity in these areas "does not happen overnight." She anticipates significant results will not be visible until 2030 at the earliest.
On the legislative front, the draft proposals must now undergo potentially months of negotiations between EU member state governments and the European Parliament. The strategy's release, originally scheduled for March, was delayed several times due to opposition from some governments and criticism from the Commission's oversight body.
While the EU emphasizes the plan is "not about isolation, protectionism, or technological decoupling," analysts express reservations. Leonardo Quattrucci, an adjunct professor at Sciences Po and a digital policy expert, warned that the EU lacks the capacity for a complete AI technology stack. He cautioned that overly stringent standards could drive major companies to other markets, alienate trade partners, and prevent Europeans from benefiting from the best available tools.
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