Europe just dropped a bombshell industrial policy that could reshape how tech companies operate across the continent—but there’s a glaring problem: software doesn’t exist in this new framework.
What Happened
The European Commission unveiled the Industrial Accelerator Act (COM(2026)100) on March 4, 2026, designed to accelerate industrial capacity and decarbonization in strategic sectors. The proposal establishes a framework with “Made in EU” content requirements starting at 5% for qualified products in critical sectors like semiconductors, batteries, and clean technology.
Here’s the kicker: the entire regulation conspicuously avoids mentioning software, despite it being the backbone of modern manufacturing, AI systems, and industrial automation. This omission is either a massive oversight or a calculated decision that raises serious questions about Europe’s strategic vision.
Key Points
The 5% threshold appears modest on the surface, but it’s designed to scale upward over time, creating increasing pressure on manufacturers to source components and materials from EU suppliers. The rules target physical goods—chips, batteries, and manufacturing equipment—but completely ignore the digital infrastructure running these systems.
For US tech companies, this creates an awkward middle ground. American software firms won’t face the same localization pressure as hardware manufacturers, but they could benefit from increased demand for industrial automation tools. Conversely, if Europe eventually closes this software loophole, companies like Microsoft, Salesforce, and industrial software providers could face significant compliance challenges.
The proposal’s silence on software also reveals Europe’s mixed messaging. While the EU pushes digital sovereignty through regulations like the Digital Services Act, the Industrial Accelerator Act treats software as invisible—neither protected nor regulated within these critical manufacturing frameworks.
What This Means
This is a critical moment for tech companies operating in Europe. The immediate impact favors those in the software space, as they’re currently exempt from these localization requirements. However, expect this exemption to be short-lived as regulators realize the inconsistency.
For American hardware manufacturers and suppliers, the trajectory is clear: expect increasing pressure to establish EU manufacturing footprints or risk losing access to lucrative contracts in strategic sectors. The 5% threshold may be low today, but it signals Europe’s commitment to reshoring critical production.
The real question is whether Europe intentionally excluded software to avoid angering US tech giants, or whether Brussels simply hasn’t figured out how to regulate digital production. Either way, software companies should prepare for the regulatory hammer to fall within 18-24 months.
