Why Europe fails to act Geopolitically: Institutional Fragmentation and Strategic Autonomy Failure in the Semiconductor Global Value Chain

Positioned at a geopolitical crossroads, the European Union aspires to act as a strategic actor capable of shaping the emerging techno-industrial order, particularly in sectors—such as semiconductors—central to economic security and great power competition. Yet despite its large market, globally influential regulatory power, and technological niches such as advanced lithography, the EU remains structurally dependent on external actors for the most strategic segments of the semiconductor global value chain (GVC). This counterintuitive outcome raises a core puzzle: why does the EU fail to convert its material resources and normative strength into strategic autonomy in a sector where geopolitical leverage is increasingly defined by control over high-value technological capabilities? This paper argues that the EU’s persistent underperformance cannot be attributed to an absolute technological deficit, but instead to a mechanistic failure in the conversion of institutional capacity into material power. Drawing on multi-level governance (Hooghe & Marks, 2001), neo-institutional theory (March & Olsen, 1984; Scharpf et al., 2000), and GVC strategic coupling (Yeung, 2021), the paper develops a causal explanation in which institutional incoherence—stemming from the interaction of fragmented authority, path-dependent logics of appropriateness, and misaligned state–industry incentives—prevents the EU from forming the coordinated industrial strategies required to upgrade into advanced manufacturing nodes. By contrast, other advanced economies, including Taiwan, South Korea, and the United States, exhibit institutional configurations where coherence and capacity reinforce each other, enabling successful upgrading and geopolitical leverage. Methodologically, the paper employs theory-testing process tracing (TTPT) to evaluate a four-step causal mechanism linking (1) institutional coherence, (2) coordinated policy formation, (3) capacity building, and (4) high-value GVC positioning, culminating in (5) strategic autonomy. The empirical analysis applies this framework to three critical junctures in recent EU semiconductor governance. Evidence from official documents, expert analyses, and elite interviews demonstrates recurrent breakdowns at the earliest stages of the mechanism preventing downstream capacity formation and sustained upgrading. The paper contributes to debates on the EU’s evolving geopolitical role by theorising how internal institutional structures condition its capacity to act strategically under conditions of great power rivalry. More broadly, it provides a mechanism-based account of why regulatory power does not automatically translate into material power in critical technologies, offering a structural explanation for the constraints on the EU's global geopolitical actorness in an era of rivalry.