When Chips Run Short: The Crisis Regime of the Chips Act 2.0

I. Background and Objectives

Semiconductors have become one of the world's most strategically contested commodities. They rank among the most heavily traded goods globally, with forecasts expecting global revenues to surpass USD 1 trillion in 2026, and they underpin virtually every modern technology, from smartphones and vehicles to medical devices, defence systems and artificial intelligence data centres. For the European Union, this stands in stark contrast to its own productive capacity. The Union produces less than 10% of global semiconductors and is almost entirely dependent on the United States and Asia for leading-edge chips. This dependency is increasingly understood as a question of technological sovereignty and economic security, as it leaves European industries exposed to supply disruptions and systemic shocks.

The vulnerability of the European semiconductor ecosystem became particularly apparent during the COVID-19 pandemic and, more recently, in the supply disruptions surrounding Nexperia, which were triggered by disputes between the Dutch and Chinese authorities. Against this backdrop, the European Commission has published its proposal for a Chips Act 2.0 (COM(2026) 504 final) in June 2026, which would repeal and replace the current Chips Act adopted only in 2023 (Regulation (EU) 2023/1781, Chips Act 1.0; see here for an overview on the regulatory implications of the original Chips Act). The overarching aims of the Chips Act 2.0 are to reduce the Union's overdependence on third countries and to address its insufficient crisis-preparedness capabilities. It forms part of the European Commission's broader Tech Sovereignty Package, which also includes the proposed Cloud and AI Development Act (for a discussion of that wider package, see our colleagues' blog post ‘Shifting Away from Dependency: The EU's Tech Sovereignty Package’).

This briefing concentrates on the crisis instruments of the Chips Act 2.0, providing for monitoring, information requests, priority-rated orders and joint procurement in times of a “semiconductor crisis”. These provisions may reach deep into corporate autonomy and can affect undertakings across the entire semiconductor value chain.

II. The “Semiconductor Crisis" Test

The crisis regime of the Chips Act 2.0 is built around one central legal term, the "semiconductor crisis", which gates the entire emergency architecture. Without a semiconductor crisis, the Commission's most incisive powers (information requests, priority-rated orders and common purchasing) cannot be deployed. It is therefore worth looking closely at how the draft Act defines it.

The definition is set out in Article 39(1) of the proposal. A semiconductor crisis is considered to occur where both of the following conditions are fulfilled:

• “there are serious disruptions in the semiconductor supply chain or serious obstacles to trade in semiconductors within the Union causing significant shortages of semiconductors, intermediate products or raw or processed materials;” and
• “such significant shortages prevent the supply, repair or maintenance of essential products used by critical sectors to the extent that it would have serious detrimental effect on the functioning of the critical sectors due to their impact on society, economy and security of the Union.”

It is important to note that this definition is not new. It has been carried over essentially verbatim from Article 23(1) of the Chips Act 1.0. Existing guidance under the 1.0 regime will, therefore, remain relevant.

The "critical sectors" referred to in condition (b) are exhaustively listed in Article 2(20) in conjunction with Annex V of the Chips Act 2.0: energy; transport; banking; financial market infrastructure; health; drinking water; waste water; digital infrastructure; public administration; space; production, processing and distribution of food; defence; and security. This list mirrors the sectors of the Critical Entities Resilience Directive ((EU) 2022/2557), with defence and security added.

Two features of the definition deserve emphasis:

First, the definition is broad and built on undefined terms. Article 39(1) strings together several unspecific concepts – "serious disruptions", "serious obstacles", "significant shortages", "essential products", "serious detrimental effect" – none of which is separately defined in the Act. The one defined term that does provide an anchor is "crisis-relevant product" (Article 2(21)), which captures the semiconductors, chips, intermediate products and raw or processed materials deployed by, or used to produce devices used by, critical sectors – but it does not narrow the open-textured elements of the trigger. In practice, this leaves the Commission with considerable interpretative latitude.

Second, the finding of a crisis must rest on evidence. Under Article 39(2), where the Commission becomes aware of a potential semiconductor crisis, it must assess whether the conditions of Article 39(1) are met, taking into account the potential positive and negative impacts of a crisis stage on the Union's semiconductor industry and critical sectors. Crucially, it may propose activation to the Council only "where that assessment provides concrete and reliable evidence". This requirement is a meaningful safeguard. It disciplines the broad, open-textured definition in Article 39(1) by an evidentiary standard that a mere suspicion or speculative risk will not satisfy.

To illustrate this high statutory threshold in practice, one may consider the hypothetical case of a major disruption affecting a dominant manufacturer of leading-edge chips. Should the operations of such a manufacturer, which, in the case of the current market leader, is estimated to account for approximately 90% of global leading-edge production, be severely disrupted, for instance by geopolitical conflict, an export blockade, or a natural disaster, both limbs of the test could arguably be satisfied. Such an event could cause systemic global shortages (condition (a)) that would likely disrupt the functioning of Europe's critical sectors, such as defence or digital infrastructure, which depend on these advanced nodes (condition (b)).

The procedure for activating the crisis stage is addressed in Section V. below.

III. Addressees of the Crisis Regime

The crisis regime under the Chips Act 2.0 is structured in three successive stages: (1) strategic mapping and monitoring, (2) alert and activation of the crisis stage, and (3) shortage response. The significance in the monitoring process or obligations imposed on undertakings differ from their role and importance in the semiconductor supply and value chain. In principle, all undertakings along the value chain are affected, however, the impact of the measures may intensify, subject to the respective crisis phase (as further described below) and particularly for the following actors:

• European semiconductor technology initiatives (ESTIs) (cf. Article 14 et seq. of the proposal) are European undertakings along the semiconductor value chain that introduce something genuinely new to the Union. They succeed the integrated production facilities and open EU foundries of the Chips Act 1.0 and now cover not only chip manufacturing but also, among others, the production of equipment and materials, packaging and certain design activities. The status is conferred by the Commission on application, following an assessment of defined criteria .
• Strategic Projects (Article 16 et seq.) are a new category for major cross-border ventures of particular importance to the Union that deliver substantial benefit and reduce its strategic dependencies. Like ESTIs, they acquire their status through a formal procedure. If Strategic Projects meet the corresponding criteria, they are subject to the same rights and obligations as ESTIs .
• Key market actors (Article 36) are undertakings in the European semiconductor supply chain, whose reliable functioning is essential for the supply of semiconductors and are identified as such by the member states singled out on the basis of criteria such as the number of dependent undertakings, market share and importance for adequate supply.

IV. Phase 1 – Strategic mapping and monitoring

Monitoring forms the first stage of the crisis mechanism and is, for the most part, an administrative activity. Its purpose is the continuous, occasion-independent observation of the European semiconductor sector, so that risks can be identified and anticipated and enabling the Commission to implement mitigating measures at an early stage. In principle, the mapping and monitoring powers of the European and national authorities remain unchanged and the Chips Act 2.0 largely adopts previous provisions within the new Articles 33 to 36:

• Strategic mapping: The strategic mapping provides the analytical foundation for the monitoring system. The Commission, together with the European Semiconductor Board, an expert group steering and coordination the implementation of the Chips Act, analyses the Union's strengths and weaknesses in the global semiconductor sector taking into account, inter alia, key products and critical infrastructures that depend on the supply of semiconductors, main user industries and their current and expected needs and dependencies or the dependencies on third-country technology and providers. Based on the outcome of such strategic mapping, the Commission develops and regularly updates a list of early-warning indicators (e.g., supply bottlenecks, demand or price surges, geopolitical tensions or natural disasters). This mapping rests primarily on publicly and commercially available data and, where these do not suffice, on voluntary information requests to actors on the semiconductor value chain.
• Regular monitoring: With a particular view to the identified early-warning indicators, the Commission in consultation with the European Semiconductor Board carries out regular monitoring of the semiconductor value chain. This is supported by the member states’ obligation to monitor and report major events that my hinder the regular operations carried out by national key market actors. Therefore, in the course of the regular monitoring, key market actors are invited to provide information upon request on a voluntarily basis.
• B2B Semiconductor Supply Chain Platform: The genuinely novel element introduced by the Chips Act 2.0 is the B2B Supply Chain Platform. The platform is conceived as an industry-led "digital twin" of the semiconductor supply chain, with the aim of enhancing its transparency and resilience. It collects data from participating undertakings, provides aggregated risk analyses and early warnings, and conducts stress tests. The regulation stipulates a differentiated participation regime, pursuant to which participation is mandatory for (i) ESTIs and (ii) Strategic Projects that are production facilities and (iii) voluntarily for all other undertakings. For the latter, the Commission seeks to encourage undertakings to proactively participate, thereby de-risking their supply chains and enhancing their resilience without sovereign interventions.

V. Phase 2 – Alert and activation of the crisis stage

The second phase is triggered where a national authority becomes aware of a risk of serious disruption in the supply of semiconductors and issues a corresponding warning to the Commission. Subsequently, the Commission takes preventive measures stipulated in Article 37 et seq., including:

• Convening an extraordinary meeting of the European Semiconductor Board for assessing the severity of the disruption in supply and the necessity of further measures;
• Consulting and cooperating with relevant third countries in search of cooperative solutions;
• Asking the national authorities to assess the state of preparedness of key market actors in their territory; and
• Issuing information requests to the B2B Supply Chain Platform or individual undertakings to assess and enable the early detection of a semiconductor crisis and the preparation of the activation decision. Contrary to requests for information in phase 1, requests during phase 2 are mandatory and sanctioned with fines of up to EUR 300,000 or EUR 50,000 in the case of an SME, if the undertaking’s response turns out to be incorrect, incomplete or misleading.

Should the Commission find, following its assessment, that the requirements of Article 39 are met and, thus, the threshold of a semiconductor crisis has been reached, it initiates the activation procedure by proposing to the Council that the crisis stage be activated. The Council decides by resolution with qualified majority on adopting the corresponding implementing act within which the duration is further specified. The initial term may not exceed 12 moths but can be prolonged once ore several times at a later stage. The conferral of the activation decision on the Council reflects the sensitivity of the measure and the significant impact that the subsequent powers may have on private undertakings. On the expiry or early termination of the crisis stage, the shortage-response measures cease to apply immediately

VI. Phase 3 – Shortage response: the Emergency Toolbox

The third phase contains the actual intervention powers, available only once the crisis stage has been activated. The Commission may take the measures further described below to address the crisis, and their use must be proportionate, limited to what is necessary. The emergency toolbox stipulated in Article 40 as a framework provision, comprises three instruments, all of which impose obligations on undertakings but differ markedly in their addressees and in their intensity of interference. In substance, the emergency toolbox corresponds to the measures laid down in the Chips Act 1.0 but the scope of addressees extents from mere production facilities to the entire value chain:

Information requests (Article 41)

• The request may be addressed to all undertakings operating along the semiconductor supply chain, which makes it the instrument with the broadest reach and the lowest intensity of interference.
• It concerns the addressee's production capabilities, production capacities and current primary disruptions, that is, the operational data the Commission needs to form a picture of the supply situation. Its scope is confined to what is necessary to assess the nature of the crisis or to identify and assess potential mitigation or emergency measures, and it may not extend to information whose disclosure would run counter to Member States' national security interests. Where an undertaking provides incorrect, incomplete or late responses, it may be subject to fines of up to EUR 300,000, or EUR 50,000 in the case of an SME.
• Where an undertaking is asked by a third country for information relating to its semiconductor activities, it must in turn share both the requested and the provided information with the Commission. Non-compliance with this notification duty may be subject to fines of up to EUR 150,000, or EUR 50,000 in the case of an SME.

Priority-rated orders (Article 42)

• The priority-rated order may be addressed to ESTIs, Strategic Projects and to undertakings that have accepted this obligation in return for public support, so that the duty follows either from the regulatory status or from a funding condition.
• The Commission may require the addressee to accept an order for crisis-relevant products and to treat it as a matter of priority, overriding the addressee's own production planning. The definition of a crisis-relevant product is rather broad. It captures (i) semiconductors or chips or (ii) intermediate products or (iii) raw and processed materials that are either (x) deployed directly by critical sectors or used to produce devices used by critical sectors, or required to produce semiconductors or chips or (z) intermediate products, and that are relevant to ensuring the essential functions of a critical sector.
• The beneficiaries are restricted to users from critical sectors and their suppliers whose activities are disrupted and who were unable to avert the shortage through their own risk-mitigation measures, so that the instrument operates only where the affected sector could not help itself. Indirectly disadvantaged "ordinary" customers must yield, since the priority-rated order takes precedence over any other performance obligation under private or public law. Accordingly, the addressee of such an order is not liable for any breach of its contractual obligations that results from compliance.
• A priority-rated order is a measure of last resort, and the addressee must be heard on the feasibility and details of the order. It may not be issued where the undertaking is technically unable to perform it or where performance would impose an unreasonable economic burden threatening business continuity. Where an undertaking fails to comply with an priority-rated, it may be subject to periodic penalty payments of up to 1.5% of its current daily turnover for each working day of non-compliance, or 0.5% in the case of an SME.

Common purchasing (Article 43)

• The common purchasing instrument is addressed to the member states rather than to undertakings, which are affected only indirectly as potential contractual partners.
• It is not a sovereign intervention instrument but a cooperative coordination tool on the demand side, designed to pool purchasing power of the member states. On the request of two or more Member States, the Commission may act as a central purchasing body and procure crisis-relevant products for critical sectors on behalf of the participating member states, thereby preventing the member states from competing against one another and strengthening their negotiating position vis-à-vis large manufacturers, a mechanism modelled on the joint vaccine procurement conducted during the COVID-19 pandemic.

VII. Practical Implications

The central practical consequence of the instruments of the Chips Act 2.0 is that crisis preparedness becomes a permanent compliance and risk-management task, and one that does not begin only with the formal activation of a semiconductor crisis. The reason lies in the forward-shift of binding obligations into the pre-crisis and alert phases, which means that (certain) undertakings must organise the fulfilment of their crisis obligations before any crisis has actually materialised. The undertakings best placed to navigate the new framework will be those that determine their own exposure early and build the corresponding compliance and risk-management structures in advance. The scope and configuration of this task depend decisively on the category into which an undertaking falls:

Actor	Information & Platform duties	Risk management	Impact on contracts
All value chain undertakings	Keep data on capacities, stocks and disruptions ready to submit on short notice. B2B Semiconductor Supply Chain Platform participation voluntary.	Track whether the undertaking may qualify as a key market actor, raising the likelihood of being addressed.	Review supply contracts for exposure to priority orders, whether the undertaking itself could become subject to one or be affected through a supplier or customer.
ESTIs / Strategic Projects	Mandatory platform participation, also covering ongoing data provision.	Keep production-switch capability ready for a crisis and monitor compliance with ongoing status conditions.	Anticipate priority orders, e.g. through force-majeure, hardship or regulatory-intervention clauses.
Publicly supported undertakings	Same readiness as all undertakings. Platform participation voluntary.	Reflect the accepted priority-order duty in risk management and reconcile it with existing supply commitments.	Build in safeguards for priority orders in supply contracts.
Application industries (indirectly affected)	n/a	Align supply-chain risk management to the risk that own orders are deferred in favour of critical sectors.	Secure information and protection rights from suppliers in case a supplier becomes subject to a priority order.

VIII. What comes next?

The Chips Act 2.0 is at present a Commission proposal and remains subject to the ordinary legislative procedure, so that the text discussed here may yet undergo change before adoption. It is worth recalling in this connection that the crisis activation mechanism in particular has been carried over unchanged from the Chips Act 1.0, while the broadened circle of addressees may be among the elements most likely to attract debate in the further legislative process. The materials also envisage the development of an so called “EU Blueprint for semiconductor crisis management” by the second quarter of 2027, which intend to further specify the framework in the crisis regime by adopting clear procedures, roles and responsibilities across pre-crisis and crisis phases.

In forthcoming contributions, we will examine further dimensions of the proposal.