EU Seeks to Double Share of World Chip Market by 2030 in ‘Digital Sovereignty’ Drive

BRUSSELS—The European Union is pledging more than $150 billion to develop next-generation digital industries this decade as it seeks to reverse a widening gap with the U.S. and East Asian rivals in advanced technologies like chips and artificial intelligence.

Europe’s need to improve what politicians have termed digital sovereignty was highlighted by trade disputes with the U.S. under former President Donald Trump and growing geopolitical tensions with China. Over the past year, supply-chain bottlenecks from coronavirus lockdowns and a shortage of microchips crucial to the automotive industry—a pillar of the region’s economy—have further increased Europe’s awareness of its industries’ reliance on other economies for daily essentials.

The U.S. is also addressing reliance on foreign technology, particularly from China. Last month President Biden issued an executive order launching a review of products and sectors where the country could face supply-chain disruptions from factors including “geopolitical and economic competition.” An initial review will focus on high-tech products including semiconductors, electric-vehicle batteries, certain pharmaceutical ingredients and critical elements and minerals.

Europe’s new plan, which builds on a digital agenda the EU issued last year, seeks to make European businesses and public services more digital, improve Europeans’ digital skills and upgrade digital infrastructure. Funding will come from the €672.5 billion ($796.6 billion) Recovery and Resilience Facility in the EU economic package agreed last summer, of which at least 20% has been pledged to promote Europe’s “digital transition.”

Among the plan’s specific goals is for Europe to produce at least 20% of the world’s semiconductors by value in 2030, compared with 10% last year, according to the European Commission, the EU’s executive arm.

The EU will vie against other chip initiatives around the world. China in 2019 set up a government-backed $29 billion fund to boost its domestic chip industry, and this week it announced plans to speed up development in advanced technologies, including chips, over five years. In the U.S., Congress recently passed legislation to give chip companies grants and financial incentives, which could be billions of dollars per project.

Shifting market share to European companies from American and Asian chip giants will be a challenge. Europe lacks heavyweights such as Intel Corp. or Taiwan Semiconductor Manufacturing Co. that make chips for industry’s biggest segments, which include data centers, smartphones and laptops.

Europe’s biggest semiconductor companies include the Netherlands’ ASML Holding NV, which builds machines that make chips, as well as Germany’s Infineon Technologies AG and the Netherlands’ NXP Semiconductors NV. Both make chips for the comparatively small automotive and industrial sectors.

It has proven hard to upend the chip industry’s status quo, said Dan Wang, a technology analyst at Gavekal Dragonomics. “As China has shown, throwing money at chips does not guarantee success,” he said. “For the last few decades, Europe has seen its number of semiconductor companies shrink, and it will require a mighty effort to wrest leadership from the U.S. and Asia, which are also investing heavily.”

While there is broad acceptance across Europe of the need to reduce reliance on others in critical areas, divisions remain among EU members over how to avoid protectionism and whether EU-manufactured products are a better path than widely diversifying supply chains.

Europe has a mixed record promoting technology industries. Airbus SE, TGV high-speed trains and GSM cellphones all stemmed from government-sponsored projects. The EU’s Horizon technology-research programs for years have funded development of basic know-how such as making quieter helicopters, but European companies were often unable to turn the research into commercial gains.

More recently, the EU in 2017 launched the European Battery Alliance, a public-private partnership to develop electricity-storage technologies needed for electric vehicles, low-emission power grids and other applications. Germany, France and other EU countries in 2019 began a European public-private cloud-computing project, Gaia-X, that seeks to reduce reliance on U.S. and Chinese tech giants.

Write to Daniel Michaels at daniel.michaels@wsj.com and Stu Woo at Stu.Woo@wsj.com

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