Countries can build stronger semiconductor capabilities without wasting subsidies by defining the public goal first, identifying a specific supply-chain gap, and funding projects that can attract real customers and reach production. Support should be paid in stages against verifiable milestones, paired with workforce and infrastructure plans, and judged by additional capacity and public benefit—not by the size of an award or the announcement of a new facility.
Start with the public objective, not the subsidy
A semiconductor policy needs a clear answer to a basic question: what problem is public money meant to solve? Possible goals include national security, resilience to supply disruptions, economic competitiveness, innovation, or reducing a particular dependency. These goals overlap, but they are not interchangeable. The choice affects which technologies, locations, and supply-chain stages deserve attention.
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For example, a national-security objective may justify prioritizing domestic production of selected chips. A resilience strategy might instead value having production distributed across several trusted locations, even if every stage is not located within one country. An innovation goal may put greater weight on design, research, or links between companies and universities. Policymakers should name the primary objective and state how they will know whether the policy has advanced it.
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1Clear out junk files and repair common Windows errors2Fix the driver behind crashes, sound loss and screen glitches3Repair Windows errors before they cause bigger problemsThe OECD’s 2026 Industrial Policy Handbook offers a useful sequence for doing this work: set strategic orientation, coordinate across the economy and relevant sectors, establish effective delivery, then evaluate and adapt. Its implementation framework also calls for establishing the rationale, defining the scope, specifying the form and extent of support, setting selection criteria, and evaluating effectiveness. This is a planning structure, not evidence that any particular subsidy will succeed.
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Turn the goal into a testable outcome
Translate the objective into measures before inviting applications. A resilience policy might track whether a critical input has a credible alternative source; a workforce policy might track training completion and retention; a production policy might track qualified equipment, actual output, and delivery against schedule. Use more than one measure where necessary: a facility can be completed without meeting its intended production level, and output can rise without reducing a critical dependency.
Set the evaluation horizon to fit the project. Semiconductor facilities can take years to build and commission, so an early review should focus on delivery and risk—not treat the absence of mature production as proof of failure or count an announcement as success. Define milestones and the later outcomes they are intended to lead to.
Diagnose the bottleneck across the whole supply chain
“Semiconductor industry” covers distinct activities, not just wafer fabrication. A country’s best opportunity depends on what it already has, what customers need, and where a specific supply constraint exists. Subsidizing the most visible or capital-intensive project without first diagnosing that constraint can leave the real bottleneck untouched.
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|---|---|---|
| Chip design | Fabless firms design chips and contract manufacturing to others. | Are there design capabilities, customers, and routes to manufacturing and packaging? |
| Wafer fabrication | Foundries manufacture chips for design clients; integrated device manufacturers may also fabricate their own designs. | Is there sufficient demand, infrastructure, operating expertise, and a defensible reason to add local capacity? |
| Assembly, packaging, and testing | Outsourced semiconductor assembly and test (OSAT) firms provide downstream assembly, packaging, and testing. | Could downstream capacity close a more consequential gap than another fabrication facility? |
| Materials and equipment | Suppliers provide inputs and tools used to manufacture, assemble, and test chips. | Which inputs are difficult to obtain, and can local suppliers meet technical and commercial requirements? |
The categories are not mutually exclusive. Integrated device manufacturers combine stages, while some projects cover several parts of the chain. In its 2025 review of U.S. semiconductor awards, the Government Accountability Office (GAO) reported that supported projects covered wafer and chip manufacturing, assembly, testing and packaging, materials, and equipment; seven projects covered multiple stages. The implication for another country is not to reproduce that portfolio, but to map its own dependencies and capabilities before choosing projects.
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Check the practical constraints before selecting a location
Facilities require more than a financing package. GAO describes high capital costs, multi-year construction and commissioning, and specialized workforce requirements as implementation constraints. Its 2025 report says a new facility may take two to five years to become operational, based on regulatory approvals, construction, utility connections, and equipment installation. That is a range reported in the U.S. program context, not a universal schedule for every type of facility or country.
A country-level diagnosis should establish whether the candidate location can support the project’s power, water, transport, permitting, and utility needs; whether construction and equipment can arrive on time; and whether workers and suppliers can be available when the facility is ready. It should also examine fiscal room, trade access, existing firms, and likely customers. The available evidence does not rank these inputs for an unspecified country: their importance must be established locally.
The European Commission’s June 2026 proposal illustrates a broader policy frame. It proposes reinforcing existing European strengths, including in mainstream chips, while building cutting-edge capacity and reducing dependencies. It is a proposal, not evidence of enacted policy or completed results. Its approach underlines a useful strategic question: how can new capabilities complement existing strengths rather than displace or duplicate them without a clear public benefit?
Choose projects for demand, execution, and additional public value
Selection should test commercial viability alongside strategic value. A project may address a real gap yet still fail if it lacks customers, suppliers, infrastructure, operating expertise, or a credible route to qualified production. Conversely, a commercially attractive investment may not need public support if it would proceed on similar terms without it.
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GAO reports that U.S. Commerce used formal criteria to select projects intended to address multiple supply-chain stages. It also notes that U.S. law requires support for multiple nodes and economic and national-security interests. That is an example of a statutory approach in one jurisdiction, not a default model for every country. Each government must set criteria consistent with its own objectives, laws, and budget.
Use a project screen before negotiating an award
- Evidence of a gap: Identify which specific capability, product, or input is constrained and why that matters to the stated objective. Distinguish a present dependency from a forecast risk.
- Demand and buyers: Test whether identifiable customers are likely to buy the output, and whether demand is durable enough to sustain operations. Treat expressions of interest differently from credible purchasing commitments.
- Execution path: Examine the project’s schedule, management experience, technology and equipment plan, permitting needs, utility connections, suppliers, and workforce pipeline. Look for dependencies that could delay commissioning.
- Additionality: Ask what the firm would do without public support. Would the investment occur anyway, at the same scale and timing? Support should buy a defined public benefit beyond business-as-usual activity.
- Proportionality and alternatives: Compare the requested support with the expected benefit, fiscal exposure, and other ways to address the gap. The sources establish no universal numerical threshold for either additionality or the appropriate subsidy size.
- Downside protection: Identify what happens if costs rise, demand weakens, milestones slip, or the project does not reach production. Set the reporting and recovery terms before funds are disbursed.
For a portfolio of competing proposals, apply the same questions to each option rather than letting a headline investment amount dominate. A useful comparison considers the targeted value-chain gap; market demand; capital and operating requirements, including utilities; time to capacity; worker and supplier availability; expected resilience or security benefits; fiscal exposure; and the outcomes that can be measured. These are decision axes, not a universal scoring formula: the evidence does not establish numerical cutoffs or a single winning segment for every country.
Make payment conditional on delivery
Public support should follow evidence of progress. GAO’s 2025 review says U.S. awards include milestones for facility construction, equipment installation and qualification, and minimum production levels. Award milestones in the program extend from November 2024 through October 2033, illustrating how long results may need to be monitored. Statutory guardrails can allow clawbacks when recipients miss specified target dates.
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GAO also reports that Commerce negotiated upside-sharing agreements for 27 of 40 projects, under which firms would share profits above a threshold. This is one example of sharing some gains when a publicly supported project substantially outperforms expectations; it is not a guarantee of success or a mechanism suitable in every legal and commercial setting.
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Design the award around verifiable stages
- Agree on the baseline. Record the project’s expected schedule, capacity, private financing, and public contribution before work starts. Specify what evidence will show that the investment is additional.
- Release funds in tranches. Tie disbursements to observable events such as construction progress, equipment installation, qualification, and agreed production milestones. Match the evidence required to the risk and size of each payment.
- Define remedies in advance. Establish reporting duties and terms for recovering support or otherwise addressing material nonperformance, subject to the country’s legal authority and the award agreement.
- Protect the public if results exceed the plan. Consider a suitable upside-sharing or other risk-sharing arrangement where the project performs far beyond its projections. Set its trigger and calculation transparently rather than negotiating them after success.
- Provide for review and adaptation. Make it possible to investigate delays, revise a feasible schedule, or stop further payments when evidence shows the original case no longer holds. Document the reasons for changes.
These are policy recommendations, distinct from the specific features GAO documented in U.S. awards. Conditions have little value if they cannot be checked, enforced, or changed when circumstances warrant. Governments also need adequate staff and expertise to monitor technical and financial reporting over the award’s life.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Fund the people and supporting capabilities, not only the facility
A facility award without workers and enabling capacity can produce a completed building that is not ready to operate. Workforce planning should therefore be part of the project design, with timing linked to construction, equipment qualification, and the skills required for production. Depending on the diagnosed gap, related needs may include technical training, supplier development, materials, equipment, packaging, utility readiness, and coordination with research institutions.
In a 2022 GAO summary of interviews with 17 selected experts, all 17 agreed that workforce development required action. GAO also reported that the experts did not see a single policy option as sufficient. This was a selected interview group, not a representative poll, so it should not be read as a measurement of wider public opinion. It is still a clear warning against treating workforce capacity as an afterthought.
GAO’s later review found that 13 of 19 recipient companies received workforce-development funds tied to their projects. Those figures describe the U.S. program, not a general estimate of how many companies in any country need support. For policymakers, the practical test is whether the people, training providers, and operating skills required by a particular investment will be ready on its schedule—and how that readiness will be measured.
Evaluate outcomes and change course when evidence warrants
Publish a scorecard that separates what government spends from what a project delivers and what changes in the economy. The distinction prevents a large award, a groundbreaking ceremony, or a planned capacity figure from being mistaken for an outcome.
| Scorecard layer | Examples of measures | What it answers |
|---|---|---|
| Inputs | Public support committed and disbursed; private investment expected and verified. | What resources were deployed? |
| Delivery | Construction progress, equipment installation and qualification, schedule performance, and workforce training. | Is the project becoming operational as planned? |
| Outputs | Actual production and capacity that meets agreed specifications; trained workers placed or retained. | What capability did the project produce? |
| Outcomes | Change in a defined dependency or supply risk; genuinely additional private investment; subsidy per unit of additional capacity. | Did the public objective advance, and at what cost? |
These are suggested measures, not a scorecard mandated by the cited reports. GAO specifically documents tracking award milestones and minimum production levels; the broader framework helps connect those delivery checks to the policy’s stated purpose. Publish definitions, baselines, reporting intervals, and the responsible evaluator so that measures can be compared over time and across projects.
The OECD’s 2025 analysis found that subsidies relative to firm revenue in the semiconductor firms covered by its MAGIC database increased considerably since at least 2020. It also found that those firms did not appear to reshore production activities between 2017 and 2023 despite relatively large recent subsidies. This aggregate, database-specific finding is a caution against treating higher subsidy totals as proof of relocation. It does not show that every supported project failed, or prove that subsidies can never influence location decisions.
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What the available evidence can—and cannot—settle
GAO’s U.S. program oversight provides concrete examples of award milestones, workforce funding, project coverage, and delivery timelines. OECD’s subsidy analysis offers a cross-country perspective for firms in its MAGIC database, while its 2026 handbook supplies a policy-design sequence. The European Commission page describes a June 2026 proposal. These materials support a transferable way to frame decisions, but they do not determine which semiconductor segment a particular country should subsidize.
That decision requires country-specific evidence on capabilities, demand, utilities, skills, suppliers, fiscal room, trade access, and existing firms. A government should be prepared to conclude that its best move is not a new fabrication plant. It might be a different stage of the chain, a targeted workforce or supplier capability, or no subsidy where the market can address the gap. The purpose of diagnosis is to make that choice on evidence rather than prestige or the size of a proposed investment.
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