* Chinese export controls on minerals and magnets among

biggest supply threats

* Europe is heavily dependent on US chip technologies

* New US law could curb European exports

* Europe's high energy prices and scarce private capital

undermine competitiveness

By Toby Sterling

AMSTERDAM, July 2 (Reuters) - Chinese export controls,

dependence on the U.S. for technology and the structural

weakness of Europe's domestic chip industry mean it faces a

"bleak future," an EU-funded report found on Thursday.

The independent report by the European Union's Institute for

Security Studies and French think-tank Institut Montaigne

concluded that Chinese export controls on critical minerals and

magnets or the risk of a war in the Taiwan Strait were major

threats to supply.

Further vulnerability stems from the EU's dependence on the

U.S. for technology, including design software and the

possibility the U.S. could block exports to China by chip-making

equipment supplier ASML, Europe's most valuable

company.

The U.S. Congress is debating a proposed law that would give

Washington the power to unilaterally impose export controls on

allied nations and their companies.

"While Beijing still appears to be the biggest threat,

dependence on Washington seems to have become of much greater

concern under the second Trump administration," co-author Joris

Teer, a policy analyst at the Institute for Security Studies,

told Reuters.

The European Commission is seeking to shore up the bloc's

industry and in June proposed a Chips Act 2.0 that EU lawmakers

must now discuss.

The proposal includes incentives to improve demand for

domestically manufactured chips and it also joined Washington's

"Pax Silica," an initiative of allied countries cooperating to

secure supply chains.

In addition to cooperating with allies to counter China,

Teer said Europe's "only viable path" is to build on its

existing pockets of strength, such as in the chipmaking

equipment produced by ASML, to improve leverage.

The report, which drew on industry, political and academic

sources, also found that factors including Europe's continuing

high energy prices, lack of private capital, and the decline of

industries that use chips have undermined the sector's

competitiveness.