Europe has struggled to build its chip industry. Ireland may have answers

In July 2025, Intel cancelled a €30bn ($34.2bn) mega-fab in Magdeburg, Germany. The cancellation came as a huge blow to the EU’s Chips Act from 2022, which was focused on supporting the construction of semiconductor fabs in Europe. The Intel cancellation cemented the perspective many already had of the policy – that it had failed in reaching ambitious targets and fostering the EU’s chip sector.

Recently, the bloc presented its official proposal for the Chips Act 2.0. It seeks to address the shortcomings of the original policy and shifts the focus towards creating more demand for semiconductors in the EU. It will facilitate more public and private investment for strategic projects, matching EU-made chips to EU AI and cloud infrastructure and supporting research and development (R&D). The proposal is now entering the EU’s legislative process and is expected to be implemented by mid 2027.

At the same time as these negotiations begin, Ireland takes its turn holding the rotating EU presidency, from July to December, enabling the country to lead negotiations and broker compromises between states. Other tech issues will be in the spotlight during this time aside from the Chips Act, such as the bloc’s approach to tech and AI regulation. Ireland has an established tech manufacturing sector and launched its own semiconductor industrial policy – Silicon Island – last year. In contrast to the cancellations in Germany, in 2022, Intel announced a €17bn ($19.4bn) investment into its Leixlip campus to build its Fab 34 facility in Ireland.

“From an Ireland perspective, we do see the presidency as an opportunity to spotlight the country, and to that end, we will be hosting the International AI summit in October, which is the flagship European event for AI,” Industrial Development Agency (IDA) Ireland divisional manager for technology, content and consumer services Anne-Marie Tierney tells Investment Monitor. Whichever country holds the EU presidency chairs meetings of the Council of the EU, sets the priorities and the agenda, and helps broker compromises.

Ireland is well-placed to lend its point of view to the EU. The country’s semiconductor sector was born in the 1970s, and for decades the government has worked to expand the industry beyond its manufacturing origins. A series of generous incentives, talent development programmes, and the country’s strategic placement as a bridge between the US and Europe has helped it keep tech companies on the island for decades.

“They are already ahead of the game in terms of what the Chips Act 2.0 is trying to do. They have been doing that for the past 40–50 years,” says Malcolm Penn, a long-time industry observer and CEO of Future Horizons.

The growth of foreign direct investment (FDI) in Ireland’s tech sector and adjacent industries like pharma and finance has on many accounts been a success. It has provided an estimated 300,000 Irish jobs and put the relatively small country at the forefront of some of the world’s most strategic industries.

This growth has not come without controversy. Critics often highlight that Ireland has become overly reliant on these foreign companies, making the country’s economy sensitive to the decisions of a few major players. The country’s infrastructure has also struggled to keep up with this growth, creating difficult bottlenecks.

What can Ireland teach the EU about building a semiconductor sector and will its infrastructural obstacles prevent it from continuing to grow its own ecosystem?

Consolidating the sector

As Penn noted, Ireland already has a good reputation in the semiconductor industry. Major foreign manufacturers who arrived in the 1970s and 1980s – such as Analog Devices in 1976 and Intel in 1989 – have stayed in the country and expanded operations, even as they have retreated from other parts of Europe.

“We saw that in the north of England and Scotland in the early 2000s. There were a lot of factories. Infineon had two factories in Newcastle, Fujitsu, NEC, etc,” Penn explains. “They have all gone, except one very boutique fab, but they have gone because they didn’t have any reason to stay, and I think that is down to the government. When they encourage FDI, it is easy to attract anybody […] but to keep them there is another matter.”

While the country’s legacy industry revolves mainly around manufacturing, the Irish Government has worked for decades to expand it so that it holds space for every part of the semiconductor supply chain.

The launch of last year’s Silicon Island initiative sought to strengthen this ecosystem and give it some clear goals. The policy has a range of priorities, from strengthening manufacturing by investing in ready-made sites, to expanding R&D through tapping into EU funding, growing talent pipelines and numbers of jobs in the industry, and supporting the domestic start-up ecosystem.

Part of this strategy is investing in next-generation sites to attract manufacturing investment. The IDA already owns more than 42 industrial parks, and is now developing three next-generation sites along with the Department of Enterprise, Tourism and Employment specifically for energy intensive industries.

One part of the strategy IDA officials highlighted to Investment Monitor were pilot lines, shared facilities where companies and researchers can design, test and process products before scaling them. These were co-founded by IDA Ireland and the European Commission and represent an investment of more than €70m ($80mn) in the country’s leading deep-tech research institute, according to IDA Ireland’s Semiconductor unit lead Seamus Carroll.

R&D focus

A major bottleneck for the semiconductor industry worldwide is talent. Ireland is investing in talent pipelines across the supply chain, from R&D to mechanics that can work in fabs and data centres. At the University of Limerick, for example, many programmes hold recurring consultations with industry partners, which help them adjust the content to industry needs as these evolve. Work placements are also a compulsory part of graduate programmes, which the university says enables students to hit the ground running if they secure jobs in these same companies following graduation.

The crown jewel of Ireland’s R&D efforts, however, is the Tyndall National Institute. It is known for its deep-tech research in microelectronics and photonics, with medtech, life sciences, and information and communications technology/electronics being its biggest application sectors. The centre has strong ties to University College Cork, which is only a short walk away, as well as to industry players like Nvidia and Boston Scientific.

Tyndall recently announced a five-year strategy to increase its commercial impact through encouraging researchers to become entrepreneurs. Tyndall 2030 looks to position itself at the helm of semiconductor research in Europe, grow its annual income by €80m ($91.4mn), its workforce by 30% and deliver ten new spin-outs. Talent development is also at the heart of the strategy, with a target to train more than 200 postgraduate students, 40 senior researchers and 20 new principal scientists.

Retaining this talent in Ireland can be a challenge, especially given the many opportunities worldwide for workers with these skills. Tyndall’s director of strategic development, Giorgos Fagas, tells Investment Monitor that 50% of the institute’s post-graduates stay once they have finished their degrees, with the others leaving to pursue other opportunities.

“We don’t see it as a net loss. It is an investment in partnerships. There are many examples in other big players around the world, where we have people coming out from the Irish workforce, and they move into those companies and pick up a vice-president, c-suite-type role and then they develop further partnerships with Ireland and Europe,” Fagas explains.

Balancing its research and commercialisation priorities is also a tension for Tyndall. The institute invests a lot of resources into training its researchers, so on one hand it wants them to stay to continue to pursue it but also to encourage them to become entrepreneurs and contribute to the endogenous tech ecosystem. Silicon Island’s focus on spinouts from Tyndall and start-ups aims to foster a better balance between foreign multinationals and domestic players.

Tyndall has seen some success in this regard. Some of the start-ups to come out of the institute include Bcon Medical BV, which focuses on electromagnetic navigation solutions for doctors, and BioPixS, which develops optical phantoms and standards for the biophotonics market. A few of these spin-outs have ultimately been acquired by bigger tech players.

From a company perspective, Ireland produces high-quality talent at a lower cost than other locations. Infineon’s senior director of technical marketing, Paul Walsh, tells Investment Monitor that when competing for internal resources in a global company, Ireland is at an advantage because cost per engineer is still relatively low. He adds that while prices have risen in Ireland, R&D tax credits from the government help balance out the costs.

In 2024, the company launched the Step Up programme, aimed at increasing its competitiveness and reaching annual savings of €1bn ($1.14bn) by 2027.

“As part of that programme they allocated best-cost countries to certain locations. It doesn’t always mean the cheapest, but it is means best cost, and as a result of that they will remove jobs from places like the US, which are much more expensive, and replace them in Ireland, Portugal locations,” Walsh tells Investment Monitor.

Infrastructural bottlenecks persist

Ireland is not immune to the infrastructural bottlenecks the semiconductor and AI industry face in many locations, particularly in terms of energy and data centres. In 2021, the country passed a moratorium on new data centres after the grid began reaching the limits of what it could absorb. Data centres’ share of the country’s energy consumption grew from 5% in 2015 to around 22% by 2024, and is projected to reach 31% by 2034.

That moratorium was lifted in December 2025 but reopened the sector under new conditions set out by the Commission for Regulation of Utilities. New projects subject to the conditions will have to install on-site generation or battery systems capable of meeting their full demand and source 80% of energy from renewable sources.

In January, the Irish Times reported on a private document for IDA Ireland’s directors from a year ago that laid bare the extent of the country’s energy limitations. The document warned that energy-intensive projects were “not considering Ireland as a viable location”. Last July, Amazon cancelled plans to build a €300mn ($342.mn) industrial plant in Dublin because it could not secure a power supply.

This may explain IDA Ireland’s decision to buy the next-generation plots specifically for energy-intensive industries as the country aims to show investors it can still accommodate these types of projects.

Ireland’s other major bottleneck is housing, where demand far outstrips supply. According to the country’s Housing Commission report, the housing deficit stands at between 212,500 and 256,000 homes.

The problems are similar in nature, as they both stem from Ireland’s rapid growth in the past few decades. The country’s population grew from 3.79 million in 2000 to an estimated 5.38 million in 2024. Critical infrastructure like housing and the energy grid did not grow at nearly the same pace, making it so that one problem compounds the next.

Conclusion

Geopolitical realignment continues to draw attention to strategic sectors. Countries and regional blocs rightly consider semiconductors – along with defence, energy and quantum – to be one of these industries, particularly as AI continues to be integrated into the global economy.

The Silicon Island initiative paves a way forward for Ireland. As Europe revamps its policy around semiconductors, Ireland will certainly have a lot of lessons to share.