Getting What You Want from Industrial Policy
How CHIPS used milestones to shape program outcomes
The first paragraph of every final CHIPS award announcement contained a crucial sentence: “The Department will disburse the funds based on [the] completion of project milestones.” This condition received little attention — most public discussion focused on headline numbers and on how much money went to which company, but little was said about how that money would actually flow, or what companies had to do to earn it.
The CHIPS statute did not mandate a detailed milestone regime, which allowed us to devise our own approach. CHIPS milestones were not the check-the-box, activity-oriented progress payments typical of government grants. In practice, milestones became our most effective tool for enforcing accountability and shaping outcomes. We defined customized, enforceable commitments tied to the results we actually cared about — not just fabs built, but output, technology readiness, customer acceptance, financial viability, national security commitments, and supply-chain resilience.
For us, milestones were policy instruments for shaping industrial outcomes rather than mere safeguards for appropriations.
Building an outcomes-oriented mindset
Most traditional government grant programs disburse funding based on standardized cost- or activity-based “milestones” that prioritize compliance and process over outcomes. For example, they may be procedural (like those tied to the OMB Uniform Guidance) and related to demonstrating that allowable costs have been incurred, or that certain activities have been fulfilled, such as entering subrecipient agreements or executing a contract. This approach can validate progress and guard against fraud or mismanagement, but it does not help steer program outcomes.
To be fair, there are a few major programs that engage serious private sector companies and use milestones to drive accountability. Examples include DOE’s Loan Program Office, ARPA-E, and NASA’s Space Act Agreements. In these cases, the government funds some combination of execution, scale-up, technology, or visible failure risk; the milestones aim to mitigate those risks and ensure operational readiness.
CHIPS took this to a new level. Beyond mere accountability and risk mitigation, we used milestones to shape strategic behavior and build ecosystem resiliency. We wanted to both manage project risk and drive national strategy alignment.
There were other tools available to us for taxpayer protection, like the completion clawback mandated by the statute:
“...the Secretary shall 1) determine target dates by which a project shall commence and complete, and 2) set these dates by the time of award. If the project does not commence and complete by the set target dates … the Secretary shall progressively recover up to the full amount of an award.“1
Most grant programs would have relied on this clawback, paired it with standardized progress payments (such as a certain percentage of allowable capital expenditure spent), and called it a day. Instead we chose the harder — and more consequential — path. We viewed the statutory clawback as the hook that allowed us to build a much more ambitious milestone framework. But designing customized results-oriented milestones requires significant upfront effort and industry expertise, and puts more weight on post-award monitoring.
Rather than treating milestones as an afterthought, we began deliberating on them early in the award process. Before any project reached our Investment Committee (IC), it went through multiple rounds of review in our twice-weekly, multi-hour CIO/CSO (Chief Investment Officer/Chief Strategy Officer) meetings. The core investment team would present to me, my Chief of Staff, our Chief Economist, our Chief Strategy Officer, and a panel of senior semiconductor and national security experts from our strategy team. As we approached recommending an investment, the team had to present a page on milestones, which was subject to a set of core questions:
Which milestones will be critical to this project and why?
What are the risks we are concerned about and how can we use milestones to protect against them?
What would real success look like for this project or company and how can we use milestones to incentivize that outcome?
What could this company uniquely contribute to the overall ecosystem and how could milestones draw that out?
These were always my favorite meetings, because we rigorously debated and challenged one another on these questions. Revisiting them week after week, over months, built a culture focused on shaping outcomes and set high expectations for the team. We didn’t simply accept what companies told us — we vetted it.
These deliberations slowed down negotiations and announcements. In our preliminary memorandum of terms (PMTs), we decided to negotiate the details of the milestones, while using boilerplate language for most other commitments (e.g., workforce, environmental, cybersecurity), postponing those decisions to final documentation.2 Our milestone discussions were often the most challenging conversations with applicants — on par with negotiations over total funding. But because they were critical to driving outcomes, we wanted to reach agreement before making any announcements.
Our layered milestone strategy
The CHIPS milestones could be categorized into three buckets and goals:
Protect against the obvious downside risks. These milestones focused on construction, technology, and production: Is the facility built? Is it operational? Does the technology work? These were table stakes and classic taxpayer protection.
Incentivize desired commercial and financial outcomes. The next layer of milestones focused on commercial and financial viability. We wanted to avoid scenarios where a company built operational facilities, but lacked customers, commercially sustainable yields, or enough capital to sustain the facility. These were company-specific risks that needed a customized approach. The milestones in this category addressed downside risk, but with a more offensive, results-oriented objective.
Drive outcomes related to national security, supply chain resiliency, or overall ecosystem health. These milestones were pure offense, and the most differentiated aspect of our approach. Beyond the individual project, we considered what a particular company could do to further overall programmatic goals, such as bringing more of the supply chain to the US, or committing to other technologies or products critical to national defense.
This combination of milestones required specificity and robust post-award data collection and monitoring. We needed to build deep semiconductor industry expertise and company-specific knowledge to be able to design them and verify that they were achieved. And it required us to establish deep, ongoing relationships with recipients to surface problems early rather than after commitments were missed.
Bucket 1: Protect against the obvious downside risks
The fundamental goal of milestones was to get facilities built and operational as quickly as possible. While this seems straightforward, “built and operational” is open to interpretation. For example, Intel had a widely known “shell-first strategy” in which they would build the fab structure, including installing and sealing the cleanroom (the critical space in a fab where sensitive manufacturing can occur without risk of contamination), but then pause before installing tools (which typically amount to 70-75% of the total cost of a leading-edge fab) or producing anything. Would this satisfy our definition of “built”? Would we have been considered successful if we stood up multiple shells across the country, but without tools or production? For us, the answer was no. In most cases, success required installed and operational tools, with wafers and chips coming off the line.
Our work therefore required building a detailed understanding of each company’s operational plan and translating that into customized, verifiable stage-gates for disbursement. This approach called for extensive early engagement with applicants, and deep industry expertise. It also kicked up considerable internal debate about timelines, grace periods, and how we would handle waivers if milestones were not met (whether due to construction delays or lack of demand).
CHIPS milestones were tied to specific events and conditions: shell completion, cleanroom sealing, tool installation, defined levels of wafer production capacity, and production volume.3 We also tied milestones to proof of technology capability, such as proof of tech-transfer from an overseas fab. This required the company to prove the transfer of process databases, tool configurations, and other components necessary for manufacture, and demonstrate that the chips could now be produced in the US.
One additional design choice proved especially important in negotiations. We added language to the NOFO that signaled the customized nature of these milestones and stated that “The rate of disbursement is generally expected to be proportional to the rate at which non-Federal dollars are expended over the course of the project.” This set the expectation that the government would fund a consistent percentage of total capital spent at each milestone. Establishing this expectation created an important negotiating tool for us. While we had little flexibility on total award size, we could pull forward disbursements; by placing a higher percentage of funding on earlier milestones, we increased the award’s effective value and shifted negotiations from the headline amount. The trick was to find the right balance between earlier funding and driving accountability in later milestones.4
Bucket 2: Incentivize desired commercial and financial outcomes
Even with facilities built, tools installed, and production underway, a project could still fail commercially or financially.
To manage that risk, our second layer of milestones focused on viability. We asked ourselves what success would look like for a given project, and used our milestones to encourage that outcome. We had to game out the following scenarios:
If the facility installs equipment that has the potential to produce at a stated capacity, can the company actually produce at required technical standards and economically competitive yields?
If a facility is completed, is there customer demand for its output? Are customers qualifying products? At what stage? Are there committed volume contracts?
Is the company financially viable? Do they have the required capital to achieve profitability at the fab over time?
These milestones also required customization. If we were concerned about the viability of the technology, one option would be to align milestones with the targeted yields the companies share with their customers. Or we may have required documented volume commitments from customers for a certain amount of output. For smaller or less well-capitalized companies, we created explicit financial milestones, such as raising outside capital or refinancing debt, which had to be met to release additional funding. Companies could then use our funding commitment to engage with customers and/or financial partners to catalyze those outcomes. This approach allowed us to support companies earlier in their lifecycle while still protecting taxpayer capital and forcing proof points before scaling.
There are a few milestone examples that have been well publicized. Intel reported in its 2024 10-K that their agreement “contains detailed milestones we must achieve for us to receive the funds, including the achievement of various milestones with respect to capital expenditures, facility completion, process technology development, wafer production, Intel products insourcing, and external foundry customer acquisitions.” Unlike most leading-edge semiconductor companies, Intel is vertically integrated and really consists of two businesses. Its products business designs the chips inside most PCs and is similar to NVIDIA and AMD; its manufacturing business, which is more akin to TSMC, is responsible for producing chips for Intel products (and, in the future, for other companies). Only the manufacturing business is important for our national security interests, so our milestones focused on that business demonstrating success with both Intel’s own products and external customers. Unfortunately, when the Trump administration converted the Intel award to an equity stake, our award agreement was nullified and the milestones holding Intel accountable disappeared (and its manufacturing business lost over $10 billion in 2025).
Another notable example was our negotiation with Wolfspeed, a US silicon carbide company creating power semiconductors for electric vehicles, industrial power, and data centers. We announced a PMT with them in October 2024, but did not reach a final agreement before the end of the Biden administration due to their challenging financial situation. The company’s announcement of their PMT details the financial milestones we set when financial viability was in question:
“...funds will be conditioned upon the achievement of certain operational and construction milestones and other requirements. The PMT includes an obligation for Wolfspeed to raise an aggregate of $750 million in debt financing … [It] also requires Wolfspeed to undertake further actions with respect to its capital structure, including (a) restructuring or refinancing its … convertible notes; (b) deferring … cash interest payments … and (c) raising up to $300 million in additional capital.”
In this case, we structured milestones to ensure no federal dollars would be disbursed unless Wolfspeed resolved its financial situation. We could have foregone the engagement altogether given the circumstances, but their technology was critical for national and economic security. We wanted to use our milestones to encourage a successful outcome by signalling to the market that, if the company could meet these milestones, there was a strong possibility of an award. Our announcement could potentially catalyze customers and financial counterparties to come together more rapidly to put the company on a solid footing.
Bucket 3: National security, ecosystem resiliency, and other offensive measures
Some of our milestones aimed to transcend the specific project and push outcomes focused on broader national security and resiliency goals. While we wanted each project to succeed individually, the ultimate goal was a robust, interconnected ecosystem with the full range of critical technologies, resilient access to upstream and downstream supply chains, and investment in R&D and talent. Every time a project came to our screening committee, I would always ask the same question: what else could this company do to further our overall goals and build greater resiliency?
Defense and national security were the top priorities for CHIPS. We built an exceptional national security team within our strategy group. The team scored every application based on their deep understanding of specific technical requirements necessary to enhance our security, input from the broad government national security ecosystem, and the project’s potential contribution as described in the application. They would then make specific recommendations on what more the company could do to enhance that score. We converted these recommendations into formal commitments and incremental milestones to strengthen the project’s contribution to national security. Examples included commitments to:
develop or transfer onshore specific technologies for defense applications;
continue to produce certain products for longer tail periods and extend notice periods if a technology was going to be phased out;
take action to make their fab or governance structure more secure so incremental classified engagement could happen with the DOD; and
strengthen cybersecurity, localized IP, or other operational security metrics to reduce risks of technology leakage.
We also worked to build a more resilient ecosystem. Semiconductor fabs sit within a deeply interconnected global supply chain of materials, chemicals, equipment, components, and packaging. That supply chain is centered in Asia, and largely concentrated in China and Taiwan. For example, most advanced packaging is done at TSMC facilities in Taiwan — how could we build resiliency if any US-manufactured chips would still need to be sent to Taiwan for packaging?
We knew that solving the bottleneck of sufficient US semiconductor fabrication would inevitably expose other chokepoints across the system. Semiconductor manufacturers themselves often play a decisive role in shaping their supply chains; given their power to move their business to alternative companies, they often can require their suppliers and other partners to follow their manufacturing footprint. Our job was to use our funding and milestones to push companies to onshore more of the supply chain or otherwise build resiliency upstream or downstream of their facilities.
Our program requirements often included providing some data and transparency on upstream suppliers. Beyond that, we knew we had to get creative and ask applicants the right questions: Where will you send chips to be packaged? What actions could you take to have that happen here? If we can’t onshore, can you commit to moving a certain percentage of that function outside of China or Taiwan? What would it take to find alternative sources for a Chinese-sourced material? We would then document these commitments and tie them to milestones.
A few other unique milestone approaches come to mind. To manage product availability and inventory, we at times negotiated commitments for company-wide or product-specific days of inventory on-hand (DOH). During the pandemic, inexpensive semiconductors, such as windshield wiper chips, halted entire manufacturing lines because inventory buffers had disappeared — we didn’t want that to happen again.
There were a myriad of other customized commitments that were one-off in nature or negotiated on a case-by-case basis:
To encourage investment in R&D, we often set a minimum US-based R&D spending or percentage-of-sales floors, requiring R&D to be some minimum percentage of total sales for the company.
We also set cross-project conditions — for example, some of our funding on one facility could be clawed back if a related project did not happen within a certain timeframe or if the company decided to build a scaled facility outside of the US.
Some milestones tried to manage idiosyncratic outcomes, like targeted reductions in outsourced chip manufacturing if the project aimed to bring chip manufacturing in-house, or a minimum percentage of total capex to be spent in the US to prioritize domestic development..
Designing broader milestones for these big-picture outcomes was one of the more innovative aspects of CHIPS. We worked to create a connected and sustainable US semiconductor ecosystem for both commercial and defense applications.
Milestones are not just a defensive game
Effective industrial policy is not defined by how much money the government commits, but by how that money is structured, conditioned, and enforced over time. Milestones were the mechanism through which we translated national and economic security objectives into concrete, enforceable actions by private companies. They protected taxpayers against failure, delay, and drift. But more importantly, they allowed us to shape outcomes – to push beyond construction toward operational fabs, viable technologies, committed customers, national security commitments, and a more resilient semiconductor ecosystem. We played offense from the start, challenging companies to stretch beyond their initial proposals.
In a December report on the CHIPS Act, the GAO identified 161 total milestones across the 40 projects that CHIPS awarded. As of July 2025, 24 of those had been completed and Commerce had disbursed $6 billion of funding with incremental disbursement requests being reviewed. Though we’re still in the early days, the evidence suggests that our milestone approach is working.
Public attention focused on headline awards and how much was given to TSMC, Intel, Micron or others — we looked beyond that. We considered what those companies would actually do: when they would build, what they would produce, who they would serve, how they would finance themselves, and how their investments would strengthen US resilience rather than simply add capacity. We set highly negotiated, forward-looking milestones with real consequences. Those details rarely made headlines, but they will determine whether the CHIPS Act ultimately succeeds.
There were also provisions for clawing back funds if award recipients entered into research or licensing agreements with Foreign Entities of Concern, or opened new facilities or expanded existing facilities in China and other Foreign Countries of Concern for 10 years from the date of award, with some limited exceptions.
PMTs are high-level preliminary agreements on major terms, which we negotiated and announced before confirmatory due diligence and signing of a binding contract. There was pressure to announce PMTs as early as possible to demonstrate tangible progress on awards, so the decision to negotiate milestones up front was both controversial and consequential.
For example, as Micron detailed in its 8-K announcing the deal, “Under the Funding Agreements, the Department will disburse the funding…based on the achievement of construction, tool installation and wafer production milestones.”
Since funds would be disbursed over multiple years, the actual value of the award was lower than the headline value due to the time value of money. Shifting more funding earlier increased the present value of the award to the company.