Each sector includes the specific gap, sourced statistics, and the EU's policy response. Status indicators reflect conditions as of Q1 2026.
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Critical Raw Materials & Rare Earths
The EU's 2023 Critical Raw Materials list identifies 34 CRMs and 17 Strategic Raw Materials. China provides 100% of EU heavy rare earth supply and 98% of rare-earth magnets. In April and October 2025, China imposed export licensing on 12 rare earth elements and magnet-manufacturing equipment, causing price spikes of 200–300% for dysprosium and terbium oxides. The CRMA sets 2030 targets: 10% domestic extraction, 40% processing, 25% recycling, with no single non-EU country exceeding 65% of supply. In 2025, 60 strategic projects were approved across 13 EU member states and 13 third countries, covering 14 of 17 strategic raw materials. Norway's Fen Carbonatite Complex — confirmed as Europe's largest REE deposit by a maiden resource estimate in June 2024 — contains an estimated 15.9 million tonnes of rare-earth oxides (updated March 2026, up from 8.8 million tonnes in the 2024 estimate), including approximately 1.5 million tonnes of magnet-grade material. The European Raw Materials Alliance has identified €1.7 billion in potential investments targeting 20% of EU rare-earth needs by 2030.
60 Strategic Projects
Critical Gap
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Semiconductors & Advanced Chips
The EU produces approximately 9% of global semiconductors but consumes roughly 20%. It has no advanced logic fabs below 5nm — critical for AI and high-performance computing. The European Chips Act (in force September 2023) targets doubling EU market share to 20% by 2030 and has mobilised over €80 billion in combined investment. However, the EU Court of Auditors (April 2025) concluded this target is “very unlikely to be sufficient.” Key investments include: TSMC/ESMC's €10 billion+ Dresden fab (28/22nm and 16/12nm FinFET, ~40,000 wafers/month); STMicroelectronics' €5 billion Catania SiC plant; Intel's planned €30 billion Magdeburg fab (paused as of late 2024); and Infineon's €5 billion Dresden expansion. A Chips Act 2.0 proposal is expected Q1 2026, with the newly formed Semicon Coalition (9 member states) advocating for deeper investment. Europe retains key advantages in ASML lithography equipment (Dutch, sole global supplier of EUV tools), automotive semiconductors, and compound semiconductors.
€80B+ Mobilised
Critical Gap
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Defence Industrial Base
EU defence expenditure reached €343 billion in 2024 (1.9% of GDP) — up 62.8% since 2020 — with €381 billion projected for 2025. Equipment procurement hit €88 billion in 2024, expected to exceed €100 billion in 2025. However, between February 2022 and mid-2023, 78% of new defence acquisitions came from outside the EU, with 63% from the U.S. alone. 80% of EU financial support for Ukraine was spent on non-European products. Europe's defence industry generated €183.4 billion turnover and 633,000 jobs in 2024, but production remains nationally fragmented — the EU operates three separate combat aircraft programmes (Eurofighter, Rafale, Gripen) where the U.S. consolidated its latest multi-role fighter into a single programme (F-35, 3,556 units planned). The ReArm Europe Plan (€800 billion total ambition) includes the SAFE instrument (€150 billion in loans, adopted May 2025), EDIP (€1.5 billion in grants, adopted December 2025), and the EDF (€7.3 billion for 2021–2027). EDIS targets: 50% of procurement from EU suppliers and 40% of equipment jointly procured by 2030. NATO's new Hague benchmark (June 2025) calls for 5% of GDP on defence by 2035.
€150B SAFE Instrument
Critical Gap
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Energy Security & Gas Diversification
Russia's share of EU gas imports collapsed from 45% in 2021 to approximately 13% in 2025, driven by Russian supply cuts, sanctions, and diversification. EU gas demand fell 19% over the same period. Norway now supplies approximately 50% of EU pipeline gas; the U.S. provides 56% of LNG. The EU operates 33 large-scale LNG terminals with 215 bcm/year regasification capacity. In January 2026, the Council adopted a regulation prohibiting Russian pipeline and LNG imports, with full phase-out by end of 2027. However, Russian LNG imports rose 60% in the three years prior to 2025, and gas prices remained approximately double pre-crisis levels going into 2025. The EU-US trade agreement (July 2025) includes $750 billion in U.S. energy purchases through 2028. Critical risks: concentration on a small number of LNG suppliers, infrastructure bottlenecks in Central and Eastern Europe, and price volatility undermining industrial competitiveness.
Phase-out by 2027
High Gap
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Pharmaceuticals & Critical Medicines
China and India together produce approximately 55% of all global APIs. The EU's share of active API Drug Master Files has declined from 22% in 2021 to 16% in 2024, even as EU annual filings increased — because non-EU growth (especially China's) accelerated faster. 80% of EU pharmaceutical ingredient imports come from just five countries (China, U.S., UK, Indonesia, India), with China accounting for 45% of the total. For specific compounds the dependency is extreme: 95%+ of vitamin B1 and chloramphenicol derivatives imported from China. India, the world's largest API producer by volume, itself imports approximately 70% of its bulk drug intermediates from China, meaning EU sourcing from India still carries indirect Chinese exposure. The EU Critical Medicines Act was proposed in March 2025, with the Council agreeing its position in December 2025. The Critical Medicines Alliance (established 2024) recommended boosting EU API manufacturing, improving supply chain transparency, and building strategic stockpiles.
Critical Medicines Act
High Gap
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Batteries, EVs & Clean Energy Supply Chain
China dominates battery midstream and downstream supply chains with 80%+ global share in key areas including cathode materials, anode materials, and cell manufacturing. China's October 2025 export controls extended to lithium-ion battery supply chains, covering cells, cathode precursors, anode materials, and production equipment. Europe is building gigafactory capacity — with Northvolt (Sweden, now in restructuring), ACC (France/Germany/Italy), CATL (Hungary), and Samsung SDI (Hungary) among key projects — but securing upstream mineral supply remains the binding constraint. The EU's 2035 automotive emissions targets and REPowerEU targets require vast quantities of lithium, nickel, cobalt, manganese, and rare earths. Each large offshore wind turbine can require hundreds of kilograms of permanent magnets containing rare earth elements. EV battery cathode and anode materials remain almost entirely Asian-sourced. Lithium refining projects are underway in Portugal, Finland, and Germany, but timelines extend to late decade.
Gigafactories Building
High Gap
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Industrial Metals — Aluminium, Magnesium & Steel
Europe's primary aluminium smelting capacity has declined substantially, with several smelters curtailed or permanently closed due to energy costs since 2021 (including facilities in Germany, Spain, and Montenegro). The EU depends on China for approximately 93% of its magnesium supply — a structural vulnerability exposed during China's 2021 production cuts, which nearly halted European auto manufacturing. The CRMA includes aluminium and magnesium as strategic raw materials. European steel production faces competitive pressure from Chinese overcapacity, with the EU maintaining trade defence instruments (anti-dumping and anti-subsidy duties) on steel imports. The EU Carbon Border Adjustment Mechanism (CBAM), entering its transitional phase, aims to level the playing field but adds compliance complexity for European producers. Critical shortage: Europe lacks domestic magnesia production at scale, creating dependency on Chinese and Turkish suppliers for steelmaking refractories.
Smelter Closures
High Gap
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Solar, Wind & Clean Energy Manufacturing
China supplies approximately 80% of global solar PV module production. European solar manufacturers face existential pressure from Chinese price competition, with several filing for insolvency or scaling back despite the EU Solar Charter and proposed anti-dumping measures. Wind turbine manufacturing remains a European strength (Vestas, Siemens Gamesa, Nordex), but supply chain components — permanent magnets, power electronics, gearbox materials — depend heavily on Chinese inputs. The EU's offshore wind target of 510 GW by 2050 requires securing rare earth magnet supply at scale. For wind, rare earth dependency is the critical bottleneck — each large direct-drive offshore turbine requires approximately 600 kg of permanent magnets. Polysilicon for solar cells is predominantly produced in China (especially Xinjiang). The Net-Zero Industry Act targets 40% of EU clean technology deployment to be manufactured domestically by 2030.
Net-Zero Industry Act
Moderate Gap
