Buy European

ARM was European. Until its shareholders agreed for it to be acquired by SoftBank.

That's a large part of the problem, I think: shareholders and "number must go up!" mentality can change a company's nation of ownership/influence overnight. And a private European company can choose to go public on a foreign stock exchange (eg. Spotify).

If a viable competitor to Intel or AMD was to come into being in Europe, there's currently nothing* stopping its shareholders selling the company to non-European venture capital whenever they want (eg. ARM).

*There is usually a competition or monopoly regulator, but they typically have no teeth, have been captured by industry interests, or have to bow to political pressure.

It would take hundreds of billions of dollars and a decade of so.

First we would need European made, or open source architecture long before talking about manufacturing. It's doable but it would require massive investment and support to make it work and convince people to switch to it.

May or may not be interesting to you: https://www.european-processor-initiative.eu/

Necessity is the mother of innovation, that is why the Chinese do have domestic manufacturing of processors and the EU doesn't.

What it will take in my opinion is American processors becoming unviablly expensive (tarrifs) or unavailable alltogether (export controls) for the will/market to arise for EU domestic processors.

Basically slave labor and environmental deregulation.

Advanced production requires unfathomable amounts of work hours. Effective environmental protection equipment for this type of production would probably cost more than production itself and still would be wasteful and imprefect. No capitalist is gonna gobble the cost from the goodness of their heart.

There is a need to do that, but nobody will foot the bill until it's too late.

Aaaand, one very important thing, - if, for some reason, regular chips would become unavailable, there is a chance that new, arguably better - but certainly better in some applications - machinery might emerge. Like proper photonic processors! I had a dream vision of photonic logic and even power lines, with smaller losses and better wireless transfer, safe sockets (due to total internal reflection in absence of matching prism), low crosstalk and signal leakage, no corrosion, etc. And very, very fast chips. To cross the death valley, competition with transistors should be won, and that's no small deal, unless something happens.

It takes cheap labor. EU has tech. If I’m not mistaken Netherlands one of few who has capabilities to produce machines for photolithography. Question is how to make it competitive.

Just end of dumping from other manufacturers relying on less ethical labor and/or subsidies produced by less ethical labor than we have. Most of equipment for those fabs is made here anyway, one way or another. And we have plenty of people who know exactly how it is done, including me (yeah, I had 8nm tech in my hands before Intel, and they didn't hire me, so if you manage to get the economy of this - you know where to find me). Once we are ready to start paying fairly for things (from food to chips), they become local. Magic!