7. Discussion: Institutional Governance and Value Capture
The intersection of state subsidy mechanisms and global value chain structures establishes a complex governance environment for semiconductor manufacturing. While fiscal incentives stimulate initial capital deployment and production scale, domestic value retention remains contingent on the absorptive capacity and technological capabilities of local enterprises [6]. When industrial policies prioritise immediate output metrics over systemic supplier integration, the distribution of developmental benefits tilts disproportionately toward global lead firms and primary assemblers. As established in value chain strategy, suppliers require robust appropriability regimes and access to complementary assets to transform production linkages into sustainable technological upgrading [3]. Absent targeted governance arrangements that encourage knowledge transfer and contractual equity, domestic enterprises risk remaining confined to lower-tier assembly roles rather than ascending to proprietary component design and fabrication. Moreover, regulatory stringency and governance enforcement operate unevenly across supply tiers, frequently imposing heavy compliance obligations on emerging suppliers while lead firms retain strategic flexibility in procurement [1]. Achieving balanced industrial upgrading therefore demands a governance realignment where incentive disbursements are tied directly to supplier capability development, equitable joint-venture structures, and long-term technological spillovers.