Why Global Manufacturing Policy Risks Leaving Small Firms Behind

The automotive sector offers the clearest warning of this divide. While software and autonomous driving present a potential USD 300–400 billion market by 2035, the transition to e-mobility is straining small suppliers. In Germany, automotive firms recently directed 28% of their investment toward electric vehicles, despite the segment generating only 10% of their profits. Meanwhile, in Korea, 84% of small enterprises report they are not ready for the shift, highlighting the risks for companies unable to absorb heavy transition costs.

Semiconductor policy faces a similar hurdle. With over 2,500 industrial interventions launched globally in the last decade, governments are fixated on massive fabrication plants. Yet, SMEs cannot compete in scale. Their survival depends on carving out niches in chip design, materials, and packaging. Successful models, such as Korea’s Semiconductor Mega Cluster, demonstrate that self-sufficiency depends on integrating smaller players into the broader ecosystem rather than relying solely on large-scale production.

Resilience is the ultimate casualty of this neglect. Between 2020 and 2024, nearly a third of French SMEs faced supply-chain disruptions, yet many firms globally lack basic risk-management strategies. Digitalization—through inventory systems and data analytics—offers a path toward stability, but only if companies can bridge the skills gap. Policymakers must shift from funding isolated flagship projects to creating accessible, regional support networks. Programs like the US Manufacturing Extension Partnership and Japan’s advisory services provide a blueprint: industrial policy succeeds only when it reaches the factory floor, ensuring that the next wave of manufacturing growth is shared rather than concentrated in a few corporate giants.