US hyperscalers control 70% of Europe’s cloud market, and the EU presents a potential remedy set to achieve greater strategic autonomy in Chips, Cloud, and AI.
The European Commission unveiled its long-anticipated Technology Sovereignty Package, a comprehensive set of initiatives aimed at reinforcing the European Union’s position in key digital and emerging technologies. The package includes two legislative proposals – the Chips Act 2.0 and the Cloud and AI Development Act (CADA) – alongside an Open Source Strategy and a Strategic Roadmap for digitalisation and AI in the energy sector. Both regulations, which Council and Parliament will negotiate in the coming months, are driven by the EU’s impetus to reduce dependencies and achieve greater digital autonomy amid intensified global technological competition.
Building on the 2023 Chips Act, which was introduced in response to Europe’s heavy reliance on third-country semiconductor production, the Chips Act 2.0 aims to further expand the EU’s manufacturing and innovation capacity in this critical domain. The vulnerabilities exposed during the COVID-19 pandemic have underscored the strategic importance of strengthening domestic capabilities. The updated framework focuses on four main priorities: (i) improve investment conditions and competitiveness across the semiconductor ecosystem, with strategic international partnerships expected to play a greater role, (ii) stimulate demand and industrial uptake, by strengthening links between chip producers and end-user industries, with innovation procurement as a tool for startups and scaleups, (iii) introduce measures to boost supply, including state aid for “first-of-a-kind” projects across the semiconductor value chain, and (iv) strengthen resilience and reduce dependencies, notably through the creation of a business-to-business platform for semiconductor supply chains and enhanced support for high-risk sectors.
The CADA represents the second pillar of the package and forms part of the EU’s broader ambition to become an “AI continent”, as outlined in the AI Continent Action Plan. Its objective is to triple Europe’s data centre capacity within the next five to seven years, while fostering research and innovation in cloud and AI technologies. CADA is structured around three central objectives: (i) innovation: promote the development of advanced AI domains – including frontier, industrial, and physical AI, (ii) capacity: simplify and accelerate procedures for data centres, improve access to key resources, and ensure sufficient computing power for data-intensive applications, and (iii) autonomy: introduce a structured approach to digital sovereignty, requiring Member States to assess their dependencies on foreign cloud providers and to align public procurement accordingly. That latter point seems to be among the most controversial. On the one hand, the Commission highlights concerns about market concentration – particularly the dominance of US hyperscalers, which accounts for more than 70% of the European cloud market. On the other hand, CADA falls short of imposing strict exclusionary measures, except for the highest level of sovereignty (Level 4), which would fully exclude non-EU providers. Further contentious measures, such as binding energy efficiency standards for data centres, have also been watered down during the drafting process.
Interestingly for the research and innovation landscape, both regulations foresee novel tools such as the “Grand Challenges”, defined as “large-scale, cross-sectoral initiatives addressing major technological and industrial challenges of strategic relevance for the Union” (see Annex 1, point 7 of the Chips Act 2.0 & Annex 1 of CADA for the technical description). Given the ever-increasing nexus between R&I and industry-driven projects, those challenges warrant further analysis, as they could serve as a blueprint for future industrial-policy-type R&I calls.
Complementing the legislative measures, the Commission’s Open Source Strategy adopts a holistic approach to strengthening the European digital ecosystem. It combines supply- and demand-side interventions, targeted investments, and support for strategic projects. For instance, the strategy aims to promote the wider adoption of open-source solutions across Member States, while strengthening key initiatives such as the Open Internet Stack (see previous SwissCore article) or the European Digital Infrastructure Consortium for digital commons (Digital Commons EDIC). It also seeks to support open-source actors across the entire lifecycle through improved funding opportunities – including through the Erasmus+ 2027 Work Programme for learning mobility, innovation-friendly procurement, and strengthened governance and security frameworks. A key focus is placed on the public sector, with administrations encouraged to systematically use and contribute to open-source solutions, supported by simplified procurement rules and enhanced digital skills.
From a Swiss perspective, the package deserves close attention. In Bern, the Swiss federal administration is increasing efforts to improve digital sovereignty and the open-source landscape, as elaborated in a recent column (available only in German) by the Swiss parliamentarian, Gerhard Andrey. At the same time, this new package at the EU level may create both constraints and opportunities, as the EU’s differentiated approach excludes third-country providers only at the highest level. Careful monitoring will therefore be essential to anticipate how these measures could affect Switzerland’s integration into European value chains and its broader positioning in the digital policy landscape.