From Fortune:

Europe is locked in a “friendshoring” tussle that threatens its access to energy, food, and semiconductors, but attempts to shore up supplies of the latter will be a decades-long process. Increased nearshoring among business leaders aims to mitigate risk but faces formidable barriers to success.

Recent Houthi rebel attacks on the Red Sea shipping route have significantly impacted European manufacturers, leading experts to reconsider “friendshoring” and look for alternative supply chains, such as in Southeast Asia. However, Europe’s semiconductor trade gap is twice the amount produced, which the EU hopes to erase by 2030 with a $43 billion European Chips Act.

Taiwan Semiconductor Manufacturing Company’s €10 billion investment in a factory in Dresden, Germany seemed like a positive step, but Capgemini CEO Aiman Ezzat warns that Europe’s dependence on foreign chip suppliers will remain significant. Geopolitical issues and a lack of skilled workers could further impact the continent’s access to necessary technology.

Gita Gopinath, managing deputy director of the IMF, warned that a potential “Cold War II” due to trade wars could wipe $7 trillion off global GDP, but economic inefficiencies due to enhanced supply chain security could cost trillions. Despite these costs, nearshoring is seen as advantageous over the long term.

Europe’s attempts to become more independent in technology have been met with doubt, as the continent historically lags behind the U.S. in tech growth. European chip companies have distanced themselves from Europe’s anemic growth and are flocking to the promise of the United States, raising concerns about the continent’s technological advancement and reputation.



Read more: ‘Decades’ before Europe rids itself of global chip dependency, Capgemini’s CEO says