🔒 Europe's new power map: From ASML to the Arctic

In a de-globalising world, Europe’s geography is reshaping with industrial hotspots emerging from the Netherlands to Finland. ASML in the Netherlands exemplifies this shift, influencing global chip wars. The war in Ukraine has prioritized defence, reviving munitions factories in France and shipyards in Italy. Europe’s connectedness is now seen as a vulnerability, prompting a focus on securing raw materials and bolstering economic security through innovation hubs and international alliances.

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By Lionel Laurent

When US officials wanted to pressure Europe to do more to stave off China’s technological advances, they didn’t call European Union headquarters in Brussels. They instead decided to travel to the Netherlands, home to ASML Holding NV, the world’s only supplier of very high-end semiconductor-making equipment and thus a critical global chokepoint in the $380 billion global chip wars. ___STEADY_PAYWALL___

The power wielded by ASML from its campus in Veldhoven is one example of how Europe’s geography is changing. French munitions factories and Italian shipyards are whirring as the war in Ukraine forces defense matters to front of mind. Chip factories are being built in cities that still bear the scars of World War II. Kalundborg, production hub for Ozempic maker Novo Nordisk A/S, is turning Denmark into a one-company country. Sweden is tapping raw-material deposits essential for the green transition; Finland is converting paper mills into supercomputers.

This is symptomatic of a bigger shift. Europe’s geography has for much of this century highlighted the soft power of an economic union — the cafes, canals and monuments pursued by tourists, the single market of 440 million consumers promoted by technocrats, the trial-by-telephone carnival of Eurovision. High-speed communications, travel and finance made connectivity key and saw jobs and capital flow to imperial centers like Paris and London, supranational hubs like Brussels and transnational clusters like the Manchester-to-Milan “blue banana.”

Today’s de-globalizing world has turned that connectedness into a weakness, particularly those dependencies and physical connections that Europe essentially took for granted. The Nord Stream pipeline’s sabotage in the wake of Russia’s invasion of Ukraine was a costly reminder of the vulnerabilities of Germany, and Europe. The export route to China has been tarnished by pandemic-era lockdowns, technology transfer and competition for raw materials. Dependence on the US for tech and security looks risky as political winds change. The result is a new focus on the “material underbelly of European economies and societies,” says Leevi Saari of the University of Amsterdam.

Hence, government officials and visiting dignitaries have more European stops to make than they used to. Dresden, a city whose name still carries the legacy of wartime bombing, is being revived as an innovation hub for designing and making chips — “the raw material of the 21st century,” according to German Chancellor Olaf Scholz. Taiwan Semiconductor Manufacturing Co., along with Infineon Technologies AG, NXP Semiconductors NV and Robert Bosch GmbH, has agreed to build a €10 billion ($10.8 billion) plant there. Among the attractions, apart from human capital: A granite soil base that protects against vibrations. The Belgian royal couple visited last year, and France’s Emmanuel Macron is due to go.

In Finland, the engines for artificial intelligence are being built on the ashes of old industries: A new supercomputer called LUMI, housed in a converted paper mill in a town called Kajaani, was unveiled in 2022 by EU Commissioner Margrethe Vestager as the world’s third-fastest. And catching up in tech and beefing up economic security increasingly mean securing access to raw materials and reducing resource dependencies — the EU relies on China for almost all of its rare-earth supply and processing, for example. The recent discovery of the largest known deposit of rare earths in Europe, just north of the Swedish Arctic town of Kiruna, could be a game-changer, even if it will take 10 to 15 years before mining there even begins.

Of course, it’s the war in Ukraine that has awakened the need for hard power of the crudest kind. Last month, Macron visited Bergerac, southwest France, where a gunpowder factory is being built that will produce 1,200 tons per year — on a site that was discontinued for lack of business in 2007. Nearby Merignac (population: 75,000) is also getting a boost as the home of the Dassault Aviation SA Rafale fighter jet, sales of which have lifted France to the rank of the world’s No. 2 arms exporter. And in Germany, in Unterluess in Lower Saxony, a new Rheinmetall AG factory is to produce shells and explosives to alleviate Ukraine-related shortages; the site is also home to the largest private weapons testing area in Europe.

It’s not just land power. The Italian port of Trieste has attracted the attention of the US for its rising geopolitical clout in Mediterranean trade. It’s also home to shipbuilder Fincantieri SpA, which is expanding its sub-sea business in a post-Nord Stream world where telecommunications cables and oil rigs need more protection.

To be clear, this burst of industrial activity across the European map has limits. Manpower and money aren’t infinite, especially when faced with demographic decline and stretched budgets. And big firms can break places as well as make them when their fortunes fade — think Nokia Oyj.

Which is why those abstract European ideals of old still have a role to play. A more geopolitically minded region is a good thing; a more fragmented one isn’t. These disparate power centers should inspire more pooling of financial resources at the EU level to sustain them, and more international alliances to defend them. Sander Tordoir and Zach Meyers of the Centre for European Reform suggest more targeted support for areas of dominance like ASML’s tech, a more pan-European approach to industrial policy and the creation of alliances with like-minded partners on chip supply chains. Let’s hope that means we’ll always have Veldhoven — not just Paris.

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