The European Commission is preparing strict new rules to force European carmakers to stop relying on a single semiconductor supplier, especially those linked to China. Under a draft law that officials expect to present formally on June 3, major car companies such as Volkswagen, Stellantis, and Renault must source their microchips from at least two suppliers in certain critical cases.
This new law represents a major update to the bloc’s semiconductor legislation, officially named the Chips Act 2. This package of legal proposals aims to secure Europe’s tech sovereignty and economic security during a highly volatile period of global trade. The draft rules will force car companies to factor severe geopolitical risks directly into their daily purchasing decisions, ending the era of cheap, single-source buying.
The automotive industry has struggled with fragile supply chains for years. The COVID-19 pandemic initially triggered a massive spike in global demand for household electronic devices, which in turn sparked a brutal semiconductor shortage. Because modern cars rely heavily on these chips to run everything from electric windows to advanced braking systems, the shortage severely damaged car manufacturing. The global semiconductor market recently topped $600 billion, and car companies cannot survive without its products.
In response to that first major crisis, the European Union launched its original Chips Act, investing over $47 billion to build local factories and secure supplies. This law included early measures to predict and prevent supply chain disruptions across critical sectors such as banking, energy, and defense. However, when diplomats negotiated that first bill, they chose not to impose the strictest rules on car manufacturers. The original law did not force car companies to share their inventory data or prove they had taken steps to prevent shortages.
EU officials now believe the time for gentle recommendations has completely passed. They argue that car companies completely failed to learn their lesson from the pandemic. The primary catalyst for this sudden policy shift is the recent crisis surrounding Nexperia. Nexperia is a Netherlands-based chipmaker that a partially state-owned Chinese manufacturing giant, Wingtech, purchased in 2019.
At the time, European regulators approved the takeover because Nexperia only produced basic semiconductors, such as those used to power simple car headlights. However, the Dutch company quietly held a massive 10% share of the global market. Even more alarming, Nexperia supplied up to 40% of the total automotive chips used across the entire European car industry.
The massive risk of this arrangement became painfully clear in December 2024. The United States government placed Wingtech on its official blacklist due to the potential military uses of its chip technology. This blacklisting eventually extended to its foreign affiliates, including Nexperia. To prevent the transfer of valuable assets and advanced technology to China, the Dutch government had to step in and seize temporary control of the company.
The political fight quickly escalated. Beijing retaliated by completely halting the export of Nexperia chips manufactured inside China. This sudden export ban triggered an immediate, devastating shortage across the European automotive supply chain. European car companies quickly realized that their physical stockpiles of these basic chips would only last for a couple of months, threatening to shut down entire factory assembly lines.
Thomas Regnier, the European Commission’s official spokesperson for tech sovereignty, explained the logic behind the upcoming Chips Act 2. He told Euronews that the new law will directly reflect today’s harsh technology landscape and current geopolitical realities. He insisted that when it comes to vital semiconductors, building long-term resilience and tech sovereignty is absolutely crucial for the continent.
Regnier also tried to reassure worried business owners who fear more red tape. He promised that the new rules would not simply create more useless regulatory burdens for companies. Instead, forcing car manufacturers to diversify their chip suppliers will significantly bolster Europe’s strategic autonomy. By forcing companies to buy from multiple sources, the EU hopes to decrease their dangerous reliance on a single foreign provider and boost demand for home-grown European chip factories.
