Scope: This dossier assesses Italy’s manufacturing position within the European Union, with separate German, French and British comparisons, using evidence available by 22 October 2026 and a strategic horizon extending to 2036.

Executive Summary / BLUF

Italy’s manufacturing position remains substantial, but preserving its European ranking requires converting industrial specialisation into sustained productivity growth.
A comparable 2023 structural benchmark records approximately €321 billion in manufacturing value added and 3.91 million persons employed, against €774 billion and 8.16 million in Germany, and €291 billion and 3.26 million in France. documenti.camera.it
Confindustria identifies Italy as the world’s eighth-largest manufacturing economy and reports exports equivalent to 48.2% of manufacturing output in 2023. These are dated measures, rather than an undifferentiated 2026 baseline. Confindustria
Assolombarda’s October 2026 survey establishes accelerating AI project activity in its territory; it does not establish nationwide manufacturing adoption or realised productivity gains. assolombarda.it
The central policy requirement is coordinated investment in production data, workforce capabilities, automation, affordable electricity and supplier integration.
The decisive uncertainty is whether adoption spreads through industrial supply chains or remains concentrated among firms already equipped to invest.

Italy’s Semiconductor Strategy: Industrial Strength and Sovereignty Gaps

Italy’s Factories Need Integration, Not Another Investment Announcement

Italy’s industrial policy faces a contradiction: it can finance more equipment without securing greater control over production. The Clean Industrial Deal State Aid Framework widens the scope for national support, while the Data Act changes access to industrial information and the Cyber Resilience Act turns connected products into continuing support obligations. Together, these instruments expose the weakness of an investment strategy measured chiefly through purchases and expenditure. Italy’s manufacturing position will endure only if public support and private capital connect machinery, engineering, qualified suppliers and operational control. Otherwise, taxpayers will help modernise factories whose critical inputs, software and customer relationships remain vulnerable to decisions taken elsewhere. The European consequence would be substantial productive capacity with insufficient resilience.

The numbers reveal a conversion problem

The financial evidence weakens the argument that Italian manufacturing primarily needs more credit. Confindustria’s 2025 report records an increase in own capital from 34.5% of manufacturing balance-sheet funding in 2007 to 48.9% in 2023. The EIB Investment Survey 2025 identifies financing constraints among 5.5% of Italian firms, against 6.1% across the EU, although its population extends beyond manufacturing. These aggregates do not remove individual financing difficulties. They suggest that stronger balance sheets and available funding can coexist with projects that firms cannot organise or execute.

The technological gap follows the same pattern. Official statistics assembled by Assolombarda put Italian enterprise AI use at 16.4% in 2025, compared with approximately 26.0% in Germany. Within Italy, adoption reached 53.1% among large enterprises but 15.7% among firms with 10–249 employees. These figures cover selected economic sectors, rather than factories alone. Their significance is organisational: the cost of combining technical expertise, usable data and management responsibility falls disproportionately on smaller businesses.

Equipment investment provides no automatic escape. Italy installed approximately 7,800 industrial robots in 2025, remaining the EU’s second-largest market, but installations declined by 11%. China installed approximately 354,000, an increase of 20%. Neither figure measures productivity. The longer record is more revealing: Confindustria reports growth in real manufacturing value added per hour of approximately 26% in Italy between 1995 and 2024, against around 80% in Germany and France. Italy has preserved substantial industrial capacity without matching its principal European competitors’ productivity improvement.

The skills pipeline also requires scrutiny. INDIRE’s 2026 monitoring records 9,991 ITS Academy graduates from courses completed in 2024, compared with 8,588 from courses completed in 2023. Yet employment within twelve months fell from 84.0% to 79.7% of graduates. Different cohorts prevent a causal judgment about programme quality. They nevertheless expose the distinction industrial policy must respect: expanding participation and improving outcomes are separate achievements.

A machine becomes productive only through an organisation

The EIB Investment Survey 2025’s relatively limited incidence of financing constraints makes project design more consequential. A manufacturer must pay for integration, qualification, training and disruption during installation, then maintain software and technical competence. An incentive that supports the purchase while leaving these costs unresolved can produce an installed asset without a functioning improvement in production.

The OECD’s December 2025 study of SME AI adoption illustrates the distance between experimentation and industrial change. In a representative survey cited by the study, only 29% of SME generative-AI users applied it to core activities. That is international evidence, not an Italian manufacturing estimate. Its relevance is the mechanism: cheaper administrative work does not establish better production scheduling, fewer defects or more reliable machinery.

The Made Smarter Adoption programme in England offers a useful organisational comparison because it combines expert advice, digital roadmaps, leadership development and grants. Its design recognises that technology diffusion requires managerial capacity. Italy’s corresponding test should be whether a smaller manufacturer can define a production problem, assess a supplier, retain responsibility after installation and reproduce the result across shifts or plants.

France 2030 supplies a further warning against premature declarations of success. The Direction générale des Entreprises’ October 2026 evaluation estimates that support raised total employment by 9%, R&D employment by 11% and productive fixed assets by 11% after two years in the evaluated early cohorts. It did not establish statistically significant effects on turnover or value added. Productive capacity can expand before commercial returns become measurable; evaluation must follow that sequence without confusing its stages.

European security depends on qualified output

Italy’s Catania semiconductor project shows what a capability-based policy can mean. The European Commission’s May 2024 decision approved approximately €2 billion of Italian support for STMicroelectronics’ €5 billion investment in integrated silicon-carbide production using 200 mm wafers. Its relevance lies in power devices for electrification and industrial applications. It cannot be interpreted as protection against shortages in every semiconductor category.

For the Catania project, the security return will depend on qualified output, technical performance, customer acceptance and dependable supporting supplies. An aid approval establishes permission to support investment; it does not establish that the intended capacity is operating commercially. Procurement and customer qualification transmit investment into resilience. Without them, Europe may finance facilities whose existence offers limited protection during an actual shortage.

The Net-Zero Industry Act applies the same question to a wider production system. Its benchmark seeks EU manufacturing capacity sufficient to meet at least 40% of annual deployment needs by 2030, while relevant procurement and renewable-energy auctions incorporate non-price considerations. For Italian suppliers, the commercial opening depends on satisfying the specifications buyers actually require. A European capacity target is not an order book, and equipment built for an obsolete specification remains commercially exposed.

The Critical Raw Materials Act further demonstrates why national production is insufficient. Its 2030 benchmarks distinguish extraction, processing, recycling and dependence on a single third country. An Italian factory purchasing through two European distributors may still depend on one upstream processor. Resilience requires tracing that common exposure and qualifying an alternative before disruption makes substitution urgent.

Digital control must survive a supplier’s departure

The Data Act, applicable since 12 September 2025, changes the bargaining relationship around connected machinery by establishing rules for access to generated data and switching between data-processing services. Italian equipment producers can use this framework to develop maintenance and optimisation services. They also face customers with stronger access rights and potentially more choice in the aftermarket.

The Data Act’s removal of provider switching charges from 12 January 2027 will not eliminate engineering costs. A manufacturer may retrieve files yet remain unable to recreate an application because its documentation, metadata or essential functions are tied to proprietary services. Operational control therefore requires a demonstrated migration or restoration capability. A contractual right that has never been tested offers uncertain protection when production is interrupted.

The Cyber Resilience Act makes the service obligation more explicit. Reporting requirements began on 11 September 2026, while the main obligations apply from 11 December 2027. Manufacturers within scope need continuing knowledge of their products’ software, vulnerabilities and support arrangements. For smaller industrial suppliers, this creates a fixed organisational cost that a machinery-purchase incentive does not resolve.

Under the Cyber Resilience Act, shared technical services could help smaller producers maintain these capabilities economically. But their value would depend on operational support after the initial assessment. A centre that produces demonstrations without maintaining deployed systems would reproduce the investment problem in institutional form.

National subsidies can weaken a European strategy

The Clean Industrial Deal State Aid Framework remains in force until 31 December 2030 and provides routes for support covering clean energy, industrial decarbonisation, electricity costs for energy-intensive users and clean-technology manufacturing. It permits compatible national assistance; it does not provide an automatic European funding allocation. That distinction exposes Italy to competition between national budgets as well as between factories.

Within the Clean Industrial Deal State Aid Framework, Italy should reserve selective support for a defined public problem: a shared capability that firms cannot coordinate, knowledge benefits they cannot fully capture, or a security exposure whose wider cost does not enter an individual company’s calculation. Preserving a difficult-to-replace process can justify intervention. Preserving every incumbent cannot.

The Commission’s 2026 recommendations for Italy identify the need for an implementable industrial strategy and effective governance. The practical response is a limited portfolio of objectives with named institutional responsibility, delivery milestones and evaluation. MIMIT, MEF, regions and technical authorities need to resolve dependencies between financing, infrastructure, qualification and workforce provision before those dependencies become project delays.

France 2030’s evaluation also provides the appropriate fiscal discipline: distinguish inputs, intermediate results and final outcomes. Public money should purchase additional capability that can be verified. Private investors should retain meaningful exposure, and programmes should be redesigned when expenditure fails to produce qualified commercial activity. Otherwise, taxpayers absorb investment risk while the industrial system retains its original weaknesses.

The next two years will expose who bears the gap

Between October 2026 and October 2028, Data Act switching provisions and Cyber Resilience Act obligations will make digital continuity and lifecycle support increasingly concrete commercial requirements. Suppliers that cannot provide usable data, maintain connected products or finance qualification may face higher costs or lose demanding contracts. Smaller manufacturers will bear integration expenses; workers will bear the consequences of postponed renewal; customers will finance inventories and alternatives. The Clean Industrial Deal State Aid Framework gives governments room to respond. If Italy uses that room chiefly to subsidise purchases, taxpayers will pay first for equipment and later for the capabilities those purchases failed to create.

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Navigational Index

Pillar I — Industrial Scale, Specialisation and Territorial Power

• Chapter 1 — Italy’s Manufacturing Position: Rankings, Definitions and the European Benchmark
• Chapter 2 — The Productive Architecture: Mechatronics, Machinery, Fashion, Food and Furniture
• Chapter 3 — Lombardy and the Geography of Industrial Capacity
• Chapter 4 — The Export Model: Domestic Value Creation and International Exposure

Pillar II — Technological Transformation and Competitive Constraints

• Chapter 5 — From AI Projects to Factory Productivity
• Chapter 6 — Enterprise Size, Skills, Capital and Industrial Organisation
• Chapter 7 — Energy, Logistics and the Economics of Production
• Chapter 8 — Competitive Dynamics: Germany, France, the United Kingdom and Non-European Rivals

Pillar III — European Economic Security and Industrial Choices

• Chapter 9 — Italy’s Contribution to European Supply-Chain Resilience
• Chapter 10 — Strategic Dependencies, Industrial Data and Technological Control
• Chapter 11 — Pathways to 2036: Industrial Upgrading, Uneven Diffusion and Capacity Erosion
• Chapter 12 — Policy Options, Implementation Conditions and Final Net Assessment

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Master Abstract

Industrial depth creates an opportunity; fragmentation determines its reach

Italy’s manufacturing strength rests on a combination of specialised production capabilities and participation in interconnected industrial markets. Its position should therefore be assessed through the functions its firms perform, alongside their aggregate economic weight. Confindustria reports that machinery accounts for approximately 14% of manufacturing value added, fabricated metal products for 13%, and food manufacturing for 9%. Italy also contributes unusually large shares of European value added in clothing, leather products and furniture. These activities create different competitive opportunities: industrial equipment can embed digital capabilities in customers’ production systems, while consumer-facing sectors can combine production expertise with design, provenance and customisation. A strategy centred exclusively on either advanced technology or traditional Made in Italy would consequently overlook part of the productive base. Confindustria

The organisational constraint is equally significant. Confindustria reports that large enterprises generated 42% of Italian manufacturing value added in 2023, compared with 75% in Germany and 74% in France. This does not establish that smaller firms are intrinsically uncompetitive. It indicates that Italy must distribute the fixed costs of technological upgrading across a more fragmented productive structure. Shared technical services, supplier programmes and collective training can reduce those costs, provided participating firms retain credible incentives to invest and sufficient control over commercially sensitive information. The strategic question is whether Italy can reproduce some advantages of organisational scale through cooperation while preserving the specialised capabilities that make its production networks valuable. Confindustria

Lombardy combines European reach with national concentration risk

Lombardy’s importance is visible in the distinction between regional exports and manufacturing exports. Assolombarda reported approximately €164 billion in regional exports for 2024. Its subsequent fourth-quarter 2025 internationalisation dashboard records €167.1 billion in total goods exports, including €162.3 billion in manufactured goods. These figures demonstrate the scale of the regional production and trading system, but neither measure represents regional manufacturing value added. Export receipts include purchased inputs and must not be interpreted as locally generated income. Cruscotto internazionalizzazione — IV trimestre 2025 — Assolombarda — 2026. assolombarda.it

Concentration offers a practical advantage for upgrading: closely connected producers, customers and technical service providers can share implementation experience and spread solutions between firms. The corresponding resilience risk is correlated exposure. Suppliers concentrated in the same production basin can face simultaneous infrastructure disruption, recruitment constraints or customer retrenchment. National policy should therefore connect Lombardy’s capabilities to additional productive locations and supplier networks. The relevant objective is to make industrial knowledge transferable and alternative production capacity credible. Regional diversification becomes economically useful when other territories can meet the same technical, logistical and delivery requirements.

AI project activity is an early indicator, not the productivity outcome

Assolombarda’s survey, presented on 12 October 2026, covered 700 companies of different sizes and sectors in Milan, Monza and Brianza, Lodi and Pavia. It reported active AI projects at 49% of respondents, compared with below 20% at the end of 2024. The reported shares ranged from 40% among microenterprises to 79% among large enterprises. The association also identified industrial data quality as unfinished work even for many large companies. This supports a judgment of rapid local mobilisation; the release alone does not establish a representative national adoption rate, a matched longitudinal comparison or a causal productivity effect. assolombarda.it

The economic mechanism requires several complementary changes. Predictive maintenance needs reliable equipment histories; automated inspection needs validated defect classifications; production scheduling needs accurate information on orders, inventories and machine availability. Workers must be able to interpret exceptions, and managers must redesign processes around the information produced. Otherwise, software can improve an isolated task while leaving the production bottleneck intact. Italy’s opportunity is therefore strongest where AI can be integrated with existing process expertise and machinery. The appropriate tests are measurable changes in downtime, scrap, delivery reliability, energy use and real value added per hour, followed by evidence that these improvements support margins and export performance.

Energy and skills can restrict the return on technological investment

The European Commission’s June 2026 country report identifies persistent technical and digital skills shortages and high industrial electricity prices. For the first half of 2025, it reports industrial electricity prices of €203/MWh in Italy against €164/MWh across the EU, using the stated non-household consumption band. The same report records national enterprise AI uptake at 16.4%, illustrating why the Assolombarda results cannot be substituted for the national statistical baseline. 2026 Country Report — Italy — European Commission — Jun 2026, Annexes 4 and 9. economy-finance.ec.europa.eu

These constraints interact. Automation can ease recruitment pressure, but installation, maintenance and integration require scarce technical capabilities. Electrification can improve process control and reduce direct fossil-fuel use, but its financial attractiveness depends on electricity prices and connection conditions. Subsidising equipment without addressing these complements risks financing assets whose productive potential remains underused. The strategic implication is to assess industrial support at the level of the operating production system: equipment, software, workforce, energy supply and supplier coordination must function together.

European industrial competition also contains shared dependencies

Germany’s substantially larger manufacturing base makes it an essential benchmark for scale. France presents a different competitive challenge: its smaller aggregate manufacturing value added does not prevent targeted public investment in strategic technologies. The French administration describes France 2030 as a €54 billion programme spanning innovation and industrialisation. Its significance for Italy lies in the possibility that concentrated support can influence where future capabilities develop; the programme envelope itself is not evidence of completed production capacity. documenti.camera.it

The United Kingdom remains a separate industrial competitor and potential partner outside the EU. Its Advanced Manufacturing Sector Plan identifies advanced materials, aerospace, agricultural technology, automotive, batteries and space as priority industries, with an ambition to nearly double annual business investment in the sector. These are stated objectives. For Italy, they reinforce the need to compete for investment, engineering talent and commercialisation activity across the wider European industrial economy. Advanced Manufacturing Sector Plan — Department for Business and Trade — Jun 2025. GOV.UK

Italy’s contribution to European economic security should consequently be evaluated through specific supply-chain functions. A domestic producer strengthens resilience when it provides a qualified alternative, preserves difficult-to-replace process knowledge or reduces recovery time after disruption. Aggregate manufacturing strength does not establish autonomy in critical inputs: the Commission identifies continuing Italian dependence on imported critical raw materials. The policy implication is selective capability development, supported by diversified procurement and qualified European suppliers, rather than treating national production volume as a sufficient measure of security. economy-finance.ec.europa.eu

Key Evidence Table

The figures below retain their reference periods and statistical coverage. They should not be combined into a single synthetic “2026 manufacturing” total.

Indicator	Value/status	Reference date	Definition/scope	Issuer	Exact source
Manufacturing value added: Germany / Italy / France	Approximately €774bn / €321bn / €291bn	2023	Current-euro structural manufacturing benchmark	Eurostat, reproduced by Italian parliamentary documentation	Manufacturing comparison, “L’industria manifatturiera nell’UE”
Manufacturing persons employed: Germany / Italy / France	8.16m / 3.91m / 3.26m	2023	Persons employed; not restricted to employees	Eurostat, reproduced by Italian parliamentary documentation	Same comparative record
Italian manufacturing enterprises	Approximately 352,400	2023	Enterprises; not establishments or individual factories	Confindustria calculations using Eurostat SBS	Manifattura in trasformazione: rimarrà ancora competitiva?, Table 1.2
EU manufacturing scale	Approximately 2.2m enterprises; 30.2m persons employed; €2.5tn value added	2023	NACE Section C; rounded structural business statistics	Eurostat	Businesses in the manufacturing sector, data extracted Dec 2025
Italian export intensity	48.2%	2023	Manufacturing exports divided by gross manufacturing production	Confindustria, using Istat data	Manifattura in trasformazione, section on international production links
Lombardy total goods exports / manufacturing exports	€167.1bn / €162.3bn	2025	Nominal cross-border goods flows; distinct from value added	Assolombarda, using Istat data	Cruscotto internazionalizzazione, tables 1.1–1.2
Active AI projects in surveyed companies	49%; 79% among large companies	October 2026 release	Territorial, cross-sector survey of 700 companies	Assolombarda and Politecnico di Milano	Assembly statement, 12 Oct 2026
Industrial electricity: Italy / EU	€203/MWh / €164/MWh	First half of 2025	Non-household band ID; excludes VAT and recoverable charges	European Commission, using Eurostat	2026 Country Report — Italy, Annex 9

These records support Italy’s substantial manufacturing position while qualifying several supplied headline figures. €337.3 billion has not been reconciled to a verified year, statistical framework and revision vintage, so it is not adopted as the comparative baseline. “Four million” is a reasonable rounded description of the cited employment scale, but “persons employed” is more accurate than “employees.” The supplied Lombardy manufacturing value-added figure above €80 billion likewise requires its underlying regional series before use in a concentration calculation.

From adoption to competitive advantage

The component below represents an analytical dependency structure. It assigns no numerical effect sizes and does not imply that the survey demonstrates the causal relationships.

Competing Pathways

These pathways can coexist across sectors and regions. Their standing is qualitative; no numerical probabilities are assigned.

Pathway	Supporting mechanism	Evidence that would weaken it	Observable indicators	Current standing
Broad industrial upgrading	Firms integrate AI with production expertise; shared services reduce implementation costs for suppliers	Projects remain isolated from production or fail to improve operating results	Sustained improvements in real value added per hour, defects and delivery performance across firm sizes	Credible opportunity; aggregate outcome not yet established
Uneven technological diffusion	Better-equipped firms absorb integration costs while smaller suppliers face skills and financing constraints	Supplier programmes deliver comparable improvements beyond leading firms	Productivity dispersion, deployment by firm size, supplier participation and technical training	Central risk given the organisational differences documented above
Capacity erosion despite adoption	Energy costs, external competition or weak demand outweigh efficiency gains	Productive investment and viable domestic capacity expand alongside adoption	Plant investment, closures, utilisation, supplier exits and domestic value retained in exports	Material downside; AI activity alone cannot exclude it

Principal Gaps and Watch Indicators

Consequential gap or indicator	Record or observation required	Decision consequence
Comparable current manufacturing baseline	A complete common-year Eurostat extraction for value added, employment and enterprises, reconciled with national accounts	Distinguishes genuine structural change from revisions, prices and statistical coverage
Cross-country export intensity	Harmonised manufacturing exports and gross output for Germany, France, Italy and the EU, with intra-EU trade treatment explicit	Prevents misleading comparisons between national openness and EU external exposure
Lombardy’s manufacturing concentration	Regional manufacturing value added by year and price basis, reconciled with the national denominator	Establishes the scale of productive concentration beyond export flows
AI projects reaching production	Survey methodology, production-deployment shares and repeated operating outcomes	Determines whether support should emphasise experimentation or implementation
Supplier diffusion	Comparable outcomes by enterprise size, sector and supply-chain position	Reveals whether technological gains strengthen production networks or widen capability gaps
Energy competitiveness	Repeated electricity and gas comparisons using identical consumption bands and tax treatment	Tests whether operating-cost disadvantages persist despite investment
Critical production dependencies	Product-specific supplier concentration, qualification lead times and substitution tests	Identifies where European capacity materially improves economic security

The policy choices developed in the chapters will therefore be judged against three concrete outcomes: additional productive capability, wider diffusion of operational improvements, and reduced exposure to difficult-to-replace dependencies.

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Pillar I — Industrial Scale, Specialisation and Territorial Power

Chapter 1 — Italy’s Manufacturing Position: Rankings, Definitions and the European Benchmark

Italy’s manufacturing position is stronger than a simple reading of its economic growth record would suggest, but its industrial ranking conceals substantial differences in enterprise scale, sectoral composition and the capacity to retain value. The central distinction is between possessing a large manufacturing base and organising that base so that productive knowledge generates sustained investment, higher incomes and influence over European supply chains. Italy has the first attribute. The strength and distribution of the second require closer examination.

Industrial rankings measure different forms of economic power

Manufacturing value added measures the contribution generated by production after intermediate inputs have been deducted. Gross output measures the value of production before that deduction. Turnover measures sales and can include activities that do not correspond exactly to production during the same period. Exports measure cross-border transactions and contain both domestically generated and imported value.

These distinctions change the interpretation of industrial strength. A country can export expensive equipment assembled from imported components while retaining a relatively modest share of its final value. Conversely, a specialised component producer can generate significant domestic income through supplies incorporated into another country’s exports. Neither relationship is adequately captured by a ranking of gross merchandise exports.

Eurostat’s manufacturing framework covers NACE Section C and classifies enterprises according to their principal economic activity. Regional statistics can instead observe local units, whose activities and locations need not coincide with those of the enterprise as a whole. Consequently, national enterprise statistics and regional establishment statistics cannot automatically be combined. Businesses in the manufacturing sector — Eurostat — data extracted December 2025.

Table 1.1 — What the principal industrial indicators establish

Indicator	What it measures	Decision-relevant interpretation	Main limitation
Manufacturing value added	Production less intermediate consumption	Income generated by manufacturing activity	Current-price changes include price effects
Gross manufacturing output	Production before intermediate inputs are deducted	Scale of productive transactions	Repeated transactions along supply chains can inflate comparisons
Manufacturing turnover	Enterprise sales	Commercial reach and revenue generation	Sales and production are different accounting concepts
Manufacturing employment	Labour engaged in manufacturing	Employment scale and workforce exposure	Persons employed, employees and full-time equivalents differ
Manufacturing exports	Cross-border manufactured-goods flows	External market participation	Includes imported content and may differ from enterprise export turnover
Manufacturing share of GDP	Manufacturing value added relative to GDP	Direct contribution to the whole economy	GDP includes net taxes on products
Manufacturing share of total value added	Manufacturing relative to all production branches	Sectoral weight within the production economy	Numerically different from the GDP share
Domestic value added in foreign demand	Domestic income ultimately absorbed abroad	Underlying exposure to foreign consumption and investment	Requires input-output estimates with a publication lag

The approximately 15% manufacturing contribution to Italian GDP should therefore not be compared directly with a manufacturing percentage calculated against total value added. Such comparisons can create an apparent disagreement where the underlying issue is the denominator.

Confindustria’s 2025 report describes Italy as the eighth-largest manufacturing economy globally. That statement is retained as an attributed, dated assessment, rather than converted into a continuously current ranking. Global positions depend on reference year, valuation and exchange rates; they do not independently establish technological leadership or strategic indispensability. Manifattura in trasformazione: rimarrà ancora competitiva? — Centro Studi Confindustria — November 2025.

The European comparison reveals an organisational difference

The common-year figures established in the dossier opening permit a further calculation: how much manufacturing activity is organised around the average enterprise and person employed.

Using the rounded 2023 values reproduced in Italian parliamentary documentation, Germany’s manufacturing value added per enterprise was approximately €3.85 million, compared with €0.91 million in Italy. The corresponding gap in value added per person employed was much smaller. These calculations indicate that organisational scale is a more pronounced difference than the aggregate per-person value-added comparison. L’industria manifatturiera nell’UE — Camera dei deputati — comparative Eurostat record.

Table 1.2 — Derived organisational indicators from the 2023 benchmark

Indicator	Germany	Italy	France
Persons employed per enterprise	≈40.6	≈11.1	≈12.3
Value added per enterprise	≈€3.85m	≈€0.91m	≈€1.09m
Value added per person employed	≈€94,900	≈€82,100	≈€89,300

Calculated from the rounded value-added, employment and enterprise totals in the cited parliamentary comparison. These are aggregate ratios, not estimates of the typical firm or hourly productivity.

The average enterprise is not the median enterprise. A relatively small number of large producers can substantially raise an economy-wide average. Nor does value added per person establish technical efficiency: sector mix, working hours, capital intensity and prices all matter.

Nevertheless, the organisational implication is consequential. Functions such as international certification, export finance, industrial software integration and specialist recruitment impose costs that do not decline proportionately with firm size. Italy must finance and coordinate these functions across a productive structure containing many small businesses.

The relevant response is not indiscriminate consolidation. A merger that increases administrative size without improving engineering, capital allocation or market access does little to strengthen the productive system. The more demanding objective is to create effective operating scale: sufficient resources and coordination to undertake functions that individual firms cannot sustain economically.

France illustrates why enterprise definitions matter

French national enterprise statistics provide a useful example of the danger of interpreting superficially similar categories as identical. Insee’s 2023 manufacturing table groups large enterprises and intermediate-sized enterprises together. This category generated €233.455 billion of the table’s €302.634 billion in value added and €496.900 billion of €529.281 billion in export turnover.

Calculated within that specific publication, the combined category accounted for approximately 77.1% of value added and 93.9% of export turnover. It must not be treated as equivalent to a harmonised category defined solely by a threshold of 250 persons employed. Caractéristiques de l’industrie manufacturière selon la taille des entreprises — Insee — 2023 data. Insee

The substantive lesson is that commercial concentration can be much greater than enterprise counts suggest. Numerous small producers may coexist with a limited group of organisations controlling most direct international sales. Italy’s industrial assessment must therefore distinguish ownership, production location, customer access and the organisation that captures the final commercial margin.

Recent national indicators do not describe a uniform European cycle

A separate comparison of recent national releases shows why industrial conditions cannot be inferred from historical rankings.

Table 1.3 — Recent national observations, with their statistical boundaries preserved

Economy	Verified observation	Reference period	Interpretation
France	Manufacturing production of €981bn at current prices	2025, provisional	Gross production, not value added
France	Manufacturing value added increased 0.6% in volume	2025 versus 2024	Modest aggregate real growth
France	Transport-equipment value added increased 9.1% in volume	2025 versus 2024	Strong sectoral contribution within a much weaker aggregate
United Kingdom	Manufacturers’ product sales of £452.0bn, down 1.8%	2025 versus 2024	Current-price product sales under ProdCom coverage
United Kingdom	Food represented 22.9% of manufacturers’ product sales	2025	A large industrial activity beyond the usual focus on aerospace and automotive

Sources: Indicateurs macroéconomiques de l’industrie manufacturière — Insee — July 2026; UK manufacturers’ sales by product: 2025 — Office for National Statistics — July 2026.

These figures are not a new cross-country size ranking. They demonstrate heterogeneity: strong performance in an important branch can coexist with weak conditions elsewhere, while nominal sales can move differently from real value added.

For Italy, competitive benchmarking should consequently operate at two levels. The national comparison identifies the resources available to the productive system. The sectoral comparison identifies the actual technologies, customers and investment decisions through which competition occurs.

Key judgments

Italy’s European standing is economically substantial, but ranking preservation is an insufficient industrial objective. The more consequential test is whether Italian firms retain control over productive knowledge, investment decisions and customer relationships.

What would change the assessment

The assessment would strengthen if comparable evidence showed improvements in real hourly productivity and investment capacity across a broad range of enterprises. Higher nominal value added alone would not establish that change.

Open official record

A single reconciled extraction of the latest common-year national accounts, structural business statistics and employment series remains necessary before replacing the established benchmark with a newer international ranking.

Chapter 2 — The Productive Architecture: Mechatronics, Machinery, Fashion, Food and Furniture

Italy’s manufacturing architecture is best understood as a set of connected production capabilities. Machinery, materials processing, design-intensive goods and food production support different sources of competitiveness, but they also purchase from and supply one another. Industrial policy becomes less effective when it treats these sectors as unrelated export categories.

Production equipment links Italian capabilities to investment elsewhere

A producer of manufacturing equipment participates in the investment decisions of its customers. Its commercial position depends on the economics of the process the equipment serves: production speed, reliability, quality, flexibility and operating cost.

This creates a strategic opportunity beyond the sale of a machine. Installation, maintenance, process adjustment and subsequent upgrades can sustain relationships throughout the equipment’s working life. However, that position requires continuing technical competence. If customers obtain the critical control software, process optimisation or service relationship elsewhere, the machinery supplier can retain production activity while losing part of the higher-value commercial function.

The importance of this distinction is visible in the different 2025 results of packaging machinery and machine tools. Their shared membership of the capital-goods economy did not produce a common commercial trajectory.

Table 2.1 — Capital-equipment sectors: different outcomes within Italian machinery

Indicator	Packaging machinery	Machine tools, robots and automation
Reference year	2025	2025
Reported turnover or production	€10.46bn turnover	€6.391bn production
Annual change in the reported aggregate	+4.0%	+1.0%
Exports	€8.19bn	€3.760bn
Export ratio	78.3% of turnover	58.8% of production
Annual export change	+2.5%	−12.0%
Additional observation	629 companies; 40,611 persons employed	Domestic deliveries increased 28.1%

Sources: I costruttori macchine packaging mantengono la crescita — UCIMA — July 2026; Assemblea UCIMU: dopo un 2025 complessivamente debole — UCIMU — July 2026. ucima.it

Turnover and production retain the definitions used by the respective associations. Their export ratios are not identical statistical measures.

The machine-tool result is particularly instructive. Production increased despite a substantial export decline because domestic deliveries recovered. Consequently, neither a stable production total nor a high export ratio should be read in isolation. The first can conceal a change in the source of demand; the second can rise during a collapse in domestic sales.

For policymakers, the appropriate question is whether the customer base is generating a sustainable investment cycle. Temporary demand concentrated around incentives can support current production without establishing a durable expansion in the sector’s international position.

Packaging demonstrates the value of connected specialisations

UCIMA reports that food and beverages absorbed 55.4% of packaging-machinery sales in 2025. Pharmaceuticals accounted for a further 17.6%. These relationships show how equipment capability connects with downstream industries whose requirements include hygiene, precision and dependable production. I costruttori macchine packaging mantengono la crescita — UCIMA — July 2026.

The analytical implication is that food manufacturing can support industrial capabilities extending well beyond the value of finished food exports. Equipment suppliers can accumulate experience across customers and transfer process improvements between applications. Whether that becomes a sustained advantage depends on their ability to preserve engineering competence and commercial access.

Mechatronics requires similar care in measurement. It combines mechanical engineering, electronics and control functions across multiple activities. It should not be added to machinery and electrical-equipment totals as though it were a separate, mutually exclusive statistical sector.

Table 2.2 — Functional architecture and the sources of retained value

Production system	Capability that can support differentiation	Where value can be retained	Principal vulnerability
Mechatronics	Integration of mechanical, electronic and control functions	System engineering, integration and technical support	Dependence on externally controlled components or software
Machinery	Application-specific equipment and process knowledge	Design, installation, service and upgrades	Customer investment weakness and loss of the service relationship
Fashion	Materials expertise, manufacturing quality and design execution	Specialist production, development and recognised provenance	Buyer concentration and loss of production skills
Food	Repeatable quality, safety and product consistency	Processing expertise, brands and distribution relationships	Input costs, access to markets and weak bargaining power
Furniture	Design, materials processing and customisation	Product development, contract execution and customer relationships	Exposure to construction, property and discretionary demand

Analytical mapping: these functions are mechanisms to examine, not measured estimates of sectoral profitability.

Fashion requires a distinction between brand strength and supplier health

The international visibility of fashion does not establish the financial condition of the firms that produce its materials and goods. A sector can contain globally successful brands alongside suppliers facing weak orders, working-capital pressure or limited bargaining power.

Evidence from weaving illustrates the need to examine the production layers beneath the finished product. Confindustria Moda’s economic note, published through Milano Unica, reports 2025 weaving turnover of €6.8 billion, down 3.1%, and exports of €3.7 billion, down 2.3%. In the first quarter of 2026, the weaving production index declined 1.3%, while fabric exports fell 3.4%. Sintesi Nota Economica, 43ª edizione di Milano Unica — Confindustria Moda — July 2026.

Table 2.3 — Weaving: production-layer evidence beneath the fashion aggregate

Measure	Reported result	Period
Turnover	€6.8bn	2025
Turnover change	−3.1%	2025 versus 2024
Exports	€3.7bn	2025
Export change	−2.3%	2025 versus 2024
Industrial production change	−1.3%	First quarter 2026, year on year
Fabric export change	−3.4%	First quarter 2026, year on year

Scope: weaving and the fabric measures specified by the association; these figures do not represent the entire fashion economy.

The strategic risk is cumulative. When a specialised supplier exits, its equipment may remain available, but its production knowledge, workforce coordination and customer-specific experience are harder to reconstruct. Preserving every incumbent is neither feasible nor desirable. Identifying capabilities whose loss would impair the wider production system is a more defensible objective.

The countervailing consideration is that supplier dependence can sometimes be reduced through diversification. A producer serving several brands or applications may have greater room to invest and negotiate than one dependent on a single buyer. Industrial organisation therefore matters alongside the quality of the product.

Food and furniture cannot be treated as technologically static industries

Food manufacturing creates demand for processing equipment, packaging, testing, refrigeration and logistics. Its competitiveness can depend on the consistency and coordination of these systems as much as on the final product’s identity.

An export policy centred only on promoting origin would miss those operating conditions. Market access has to be supported by repeatable production, compliance, reliable delivery and sufficient financial capacity to serve customers over time. The same applies to firms selling ingredients or intermediate products that are subsequently marketed under another organisation’s brand.

Furniture presents a different demand profile. FederlegnoArredo reports wood-furniture supply-chain turnover above €52.2 billion in 2025, an increase of 1.4%. Domestic sales approached €33 billion, while exports exceeded €19.3 billion and increased 0.4%. The association’s perimeter includes the broader wood-furniture chain and must not be equated with furniture manufacturing alone. Il 2025 della filiera chiude a +1,4% con 52,2 miliardi di fatturato — FederlegnoArredo — 2026.

Table 2.4 — Wood-furniture supply chain: domestic demand and international reach

Indicator	Reported value	Interpretation
Turnover	Above €52.2bn	Broad supply-chain perimeter
Annual turnover change	+1.4%	Nominal growth
Domestic sales	Almost €33bn	Major component of demand
Exports	Above €19.3bn	International commercial exposure
Annual export change	+0.4%	Broad stability in nominal terms
Enterprises	More than 62,000	Association-defined supply-chain coverage
Persons employed	More than 292,000	Same coverage boundary

The policy implication is to avoid a false hierarchy between technologically sophisticated capital goods and supposedly traditional consumer industries. The useful distinction is between firms able to improve products and processes and firms whose competitive position depends mainly on containing costs.

Key judgments

Italy’s manufacturing advantage is partly relational: equipment, materials and finished-goods capabilities can reinforce one another. Sectoral upgrading should preserve those productive relationships while encouraging firms to diversify customers and applications.

What would change the assessment

The assessment would weaken if apparently stable downstream sales coincided with persistent supplier exits, declining technical employment or the transfer of process-development functions abroad.

Open official record

More systematic evidence on supplier margins, customer concentration and the location of design and engineering functions would clarify how much value remains within Italian production networks.

Chapter 3 — Lombardy and the Geography of Industrial Capacity

Lombardy’s strategic importance derives from the composition of its productive system as well as its size. Its industrial capacity combines materials processing, machinery-related activities and diversified manufacturing branches. This creates substantial opportunities for coordination, but also exposes national performance to conditions within a concentrated production basin.

A verified manufacturing baseline replaces the undated regional estimate

The Bank of Italy’s June 2026 regional report provides the missing statistical foundation for the dossier’s regional assessment. Its Table a1.2 records €88.495 billion in Lombardy manufacturing value added in 2023, measured at basic prices and current values.

This establishes a dated basis for the original proposition that regional manufacturing value added exceeds €80 billion. The same table reports a 1.5% contraction in manufacturing value added in volume during 2023, demonstrating why a large nominal level should not be interpreted as evidence of real expansion. L’economia della Lombardia — Banca d’Italia — June 2026, Table a1.2.

Table 3.1 — Lombardy manufacturing value added by branch

Branch	Value added, 2023	Share of regional manufacturing
Food, beverages and tobacco	€7.141bn	8.1%
Textiles, clothing and leather-related products	€7.002bn	7.9%
Wood, paper and the publishing-related grouping used in the source	€4.240bn	4.8%
Coke, refining, chemicals and pharmaceuticals	€10.658bn	12.0%
Rubber, plastics and other non-metallic mineral products	€7.960bn	9.0%
Basic metals and fabricated metal products, excluding machinery	€19.350bn	21.9%
Computers, electronics, optics, electrical equipment and machinery	€21.568bn	24.4%
Transport equipment	€4.313bn	4.9%
Furniture, other manufacturing, machinery repair and installation	€6.262bn	7.1%
Total manufacturing	€88.495bn	100.0%

Source: Bank of Italy calculations using Istat regional accounts. Current-price levels; shares and totals may differ marginally because of rounding. The source’s broad branch groupings are preserved. bancaditalia.it

The two largest groupings—metals and the combined electronics, electrical-equipment and machinery branch—accounted for approximately 46.2% of regional manufacturing value added, calculated from the table. This concentration makes industrial upgrading closely connected to production engineering and materials transformation.

It also limits what can be inferred from the word “diversified.” Numerous sectors do not guarantee independent sources of demand. Firms in different branches may supply the same capital-investment cycle or depend on common infrastructure and energy conditions.

Industrial concentration creates both coordination benefits and correlated exposure

The economic benefit of concentration is the ability to coordinate specialised tasks. Proximity can reduce the cost of resolving technical problems, qualifying suppliers and moving from design to production. A dense supplier base can also offer alternatives when an individual contractor cannot deliver.

The resilience benefit disappears, however, when nominally alternative suppliers share the same underlying vulnerability. Two firms may use different production sites but depend on the same critical input, technical service provider or transport connection.

The relevant unit of analysis is therefore the functional production network. Administrative borders remain necessary for expenditure and accountability, but they are not a sufficient representation of how production actually operates.

Table 3.2 — Territorial concentration: benefits and vulnerabilities

Relationship	Potential benefit	Corresponding exposure	Evidence needed
Producers near specialist suppliers	Faster problem-solving and qualification	Shared dependence on local capacity	Supplier capabilities and substitutability
Manufacturing connected to advanced services	Easier access to engineering and commercial expertise	Competition for scarce specialists	Recruitment times and retention
Firms using common transport connections	Efficient freight consolidation	Correlated disruption	Route alternatives and recovery times
Repeated relationships with major buyers	Stable technical cooperation	Buyer concentration	Revenue dependence and contract terms
Shared industrial knowledge	Faster diffusion of process improvements	Loss of skills through workforce attrition	Training, succession and technical employment

Analytical assessment framework; no numerical risk scores are assigned.

The Bank of Italy’s regional assessment also warns against assuming that the return to manufacturing growth has eliminated investment uncertainty. Its surveyed firms anticipated weaker demand for 2026 and a reduction in investment plans; two-thirds considered geopolitical risk relevant to strategic expansion decisions. These are survey expectations reported in June, rather than realised full-year outcomes. L’economia della Lombardia — Banca d’Italia — June 2026, regional overview.

The implication is that a region can possess considerable productive capability while firms remain reluctant to commit capital. Policy must distinguish a shortage of finance from uncertainty about future demand. The same subsidy can have very different effects under those two conditions.

National resilience requires productive depth beyond Lombardy

Italy’s geography cannot be reduced to a dominant region and a residual economy. UCIMA’s sector evidence places 61.2% of packaging-machinery turnover in Emilia-Romagna in 2025. That concentration is a separate example of specialised productive depth and shows why a national assessment needs multiple territorial lenses. I costruttori macchine packaging mantengono la crescita — UCIMA — July 2026.

The national export geography reinforces that point while also exposing disparities.

Table 3.3 — Goods exports by Italian macro-area

Macro-area	Exports, 2025	Annual change
North-West	€239.061bn	+2.3%
North-East	€197.334bn	+2.0%
Centre	€131.547bn	+13.2%
South, excluding islands	€46.165bn	+3.2%
Islands	€17.910bn	−11.0%
Geographically unspecified	€11.137bn	—
Italy	€643.153bn	+3.3%

Source: Esportazioni delle regioni italiane — IV trimestre 2025 — Istat — March 2026. Figures are nominal goods exports, not regional value added.

Calculated from that release, the North-West and North-East together accounted for approximately 67.9% of national goods exports. This is evidence of commercial concentration; it does not mean that the remainder of the country lacks strategically important activities.

Nor should a high regional growth rate be interpreted as broad industrial convergence. A large shipment or a change in a concentrated product category can materially alter regional export performance.

The first half of 2026 demonstrates changing territorial momentum

The more recent Istat regional release records continued national export growth, but a different distribution of momentum.

Table 3.4 — Export growth in the first half of 2026

Macro-area	Change versus first half of 2025
Centre	+11.9%
Islands	+8.8%
North-West	+4.3%
South, excluding islands	+3.8%
North-East	+1.9%
Italy	+4.5%

Source: Le esportazioni delle Regioni italiane — II trimestre 2026 — Istat — September 2026.

Istat attributes 2.4 percentage points of the national first-half increase to higher exports of basic metals and fabricated metal products from Tuscany. That concentration cautions against treating the aggregate increase as evidence that demand strengthened evenly across manufacturing. Istat

A territorial strategy should consequently distinguish three objectives: strengthening existing productive systems, connecting firms to capabilities elsewhere and developing additional capacity where infrastructure and skills make production viable. Distributing identical grants across regions would not necessarily achieve any of them.

Key judgments

Lombardy provides national industrial depth, but resilience depends on the quality of its connections to other productive territories. Diversification becomes useful when alternative locations can meet technical and delivery requirements.

What would change the assessment

The assessment would strengthen if investment and supplier qualification expanded across several connected production basins. It would weaken if regional concentration increasingly coincided with common bottlenecks and declining substitution options.

Open official record

A reconciled national-regional accounts vintage is needed before calculating Lombardy’s exact current share of Italian manufacturing value added. The regional €88.495 billion figure should not be divided mechanically by the separate structural-business-statistics benchmark used in Chapter 1.

Chapter 4 — The Export Model: Domestic Value Creation and International Exposure

The sustainability of Italy’s manufacturing export model depends on the income and productive capabilities retained behind cross-border sales. Export growth matters, but its strategic significance changes according to imported content, product composition, customer concentration and the location of engineering and commercial functions.

Export success has several economically different meanings

A rise in exports can reflect higher quantities, higher prices, a shift towards more expensive products or changes in the organisation of trade. These mechanisms have different implications for employment, investment and competitiveness.

The distinction is visible in the first half of 2026. The Italian foreign ministry reported goods exports of €337.2 billion, with growth of 4.5% in value but 0.7% in volume. The figures support continued commercial expansion, but the difference means that nominal growth cannot be interpreted as an equivalent increase in physical sales. Dati export primo semestre 2026 confermano validità del Piano per l’export — Ministry of Foreign Affairs and International Cooperation — August 2026.

Table 4.1 — National export performance: separate the measures

Measure	Reported result	What it establishes
Goods exports	€337.2bn	Nominal value during January–June 2026
Growth in export value	+4.5%	Higher monetary receipts than a year earlier
Growth in export volume	+0.7%	Much smaller quantity-related expansion
Growth towards EU markets	+4.6%	Continued importance of the single market
Growth towards non-EU markets	+4.4%	Expansion outside the EU as well

Source: the ministry’s August 2026 statement. These are reported trade results; the statement’s attribution of success to policy is an institutional position, not an independently established causal finding.

The same distinction should govern the interpretation of export promotion. More supported transactions do not automatically establish additional exports that would otherwise not have occurred. A policy assessment needs to identify the constraint addressed and compare outcomes with a credible alternative.

European customers remain integral to the model

Italy’s manufacturing position within Europe is not simply a contest for market share. Other European economies are customers, suppliers and locations where Italian intermediate products can enter further production.

The 2025 destination structure makes this relationship concrete.

Table 4.2 — Selected destinations of Italian goods exports

Destination	Exports, 2025	Share of total goods exports
Germany	€72.20bn	11.2%
United States	€69.63bn	10.8%
France	€64.98bn	10.1%
United Kingdom	€26.99bn	4.2%
China	€14.32bn	2.2%
EU27 aggregate	€330.14bn	51.3%

Source: Cruscotto internazionalizzazione — IV trimestre 2025 — Assolombarda — March 2026, Table 1.3.

Germany, France and the United States together represented approximately 32.2% of the total, calculated from the source’s unrounded values. This is meaningful concentration, but destination shares alone do not reveal the ultimate consumer or investor supporting demand.

A component delivered to Germany may become part of equipment exported elsewhere. Conversely, a sale to a trading or distribution centre may not represent final demand there. Strategic exposure therefore requires tracing production relationships beyond the first recorded border crossing.

Sectoral composition determines what aggregate exports conceal

A further distinction concerns the products generating export revenue. The Assolombarda dashboard records machinery exports of approximately €99.50 billion in 2025, pharmaceuticals of €69.24 billion, metals of €68.96 billion, food of €62.43 billion and fashion of €60.83 billion, under its published sector groupings.

Table 4.3 — Selected components of Italian manufacturing exports

Published grouping	Exports, 2025	Share of manufacturing exports
Machinery	€99.50bn	16.3%
Pharmaceuticals	€69.24bn	11.3%
Metals	€68.96bn	11.3%
Food	€62.43bn	10.2%
Fashion	€60.83bn	9.9%

Source: Cruscotto internazionalizzazione — IV trimestre 2025 — Assolombarda — March 2026, Table 1.2. Sector labels preserve the publication’s aggregation. assolombarda.it

This composition matters because the transmission of external shocks differs. Machinery depends heavily on investment decisions; some consumer goods depend on household expenditure and distribution; pharmaceuticals involve different production and commercial arrangements. A positive aggregate can therefore coexist with deterioration in branches that sustain important supplier networks.

The correct analytical response is disaggregation. It is not to dismiss aggregate exports, but to identify whether their growth is broad, concentrated, price-driven or accompanied by declining domestic production in other activities.

Domestic value added provides a more demanding assessment of external dependence

The OECD’s Trade in Value Added framework traces domestic and foreign contributions through international production. Its Italy country note explains that the 2025 edition covers 81 economies and 50 activities over 1995–2022. These data provide a structural account, rather than a contemporaneous measurement of 2026 exposure. Trade in Value Added — Country notes: Italy — OECD — 2026.

Table 4.4 — Four different relationships behind export dependence

Relationship	Economic meaning	Strategic question
Domestic value added in gross exports	Domestic income embodied in cross-border sales	How much value is retained at home?
Foreign value added in gross exports	Imported inputs incorporated in exports	Which external supplies support export production?
Domestic value added in another economy’s exports	Italian contributions embedded in further foreign production	Where is Italy indirectly exposed to third-country demand?
Domestic value added in foreign final demand	Italian income ultimately absorbed abroad	Which foreign consumers and investors underpin domestic activity?

Imported content should not automatically be classified as a weakness. An imported input can support a competitive domestic production stage. The security question concerns concentration, substitutability and disruption costs, rather than the mere presence of foreign value.

The opposite inference is equally unsafe. A rising domestic share of exports does not necessarily demonstrate successful reshoring. It can also reflect price changes, product composition or a greater contribution from domestically supplied services.

OECD experimental estimates published in April 2026 found little evidence of widespread reshoring in 2023–2024. Across 41 economies, the export-weighted domestic-value-added share rose only modestly, from about 77% in 2022 to 77.6% in 2024. These are experimental estimates, not direct observations of plant relocation. Global value chain repositioning — OECD — April 2026. OECD

For Italy, the practical objective is to retain productive functions that generate learning and income while maintaining access to competitive inputs. Pursuing a higher domestic-content ratio without considering cost and capability can weaken the very exports it is intended to secure.

The export model needs a productive domestic economy

Domestic demand plays a role beyond absorbing goods that cannot be sold abroad. It can provide a setting for equipment installation, technical feedback and supplier development. The machine-tool evidence in Chapter 2 demonstrates that domestic and foreign demand can move in opposite directions.

This does not justify permanent support for purchases irrespective of commercial value. It supports a narrower proposition: investment policy should be assessed partly by whether it improves the productive capabilities of the purchasing firms and generates learning that equipment suppliers can use in other markets.

The same logic applies to services. Engineering, testing, logistics and maintenance can contribute to the competitiveness of a manufactured export even when their value is recorded outside manufacturing. A falling manufacturing share does not by itself identify which production functions have moved abroad and which have been reorganised domestically.

Consequently, preserving the export model requires attention to the complete income-generating system around production, while keeping the statistical boundaries clear.

Table 4.5 — Evidence required to judge the sustainability of the export model

Decision question	Preferred evidence	Interpretation that should be avoided
Is external performance improving?	Export value, volume and product composition	Treating nominal growth as quantity growth
Is domestic income increasing?	Domestic value added embodied in exports	Treating gross export receipts as domestic income
Are suppliers becoming stronger?	Margins, investment, payment conditions and customer diversification	Inferring supplier health from lead-firm sales
Is technological capability retained?	Location of engineering, process development and technical employment	Inferring capability from the location of final assembly
Is exposure becoming more manageable?	Supplier concentration, substitution lead times and recovery performance	Equating fewer imports with greater resilience
Is policy additional?	Evidence that support changes investment or market access	Counting supported transactions as demonstrated impact

Key judgments

Italy’s export model remains viable where firms retain differentiated productive capabilities and sufficient bargaining power to finance their renewal. Its sustainability cannot be established by export totals alone.

The most consequential risk is that commercial receipts remain strong while the domestic production system loses skills, suppliers or control over higher-value functions. The corresponding opportunity is to combine international openness with deeper domestic capabilities and qualified European partnerships.

What would change the assessment

The assessment would strengthen if export expansion coincided with higher real domestic value added, continued supplier investment and a broader distribution of technical capabilities. It would weaken if nominal sales increasingly depended on narrow product contributions while productive depth deteriorated.

Open official record

The decisive evidence still required is a consistent connection between enterprise trade, ownership, domestic value added and the location of engineering functions. Without that connection, gross export growth cannot conclusively establish either industrial upgrading or strategic autonomy.

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Pillar II — Technological Transformation and Competitive Constraints

Italy’s industrial position over the next decade will depend on its ability to turn technological investment into lower production costs, more reliable delivery, better products and stronger control over customer relationships. Purchasing software, installing robots and launching AI projects are intermediate steps. The strategic outcome is a manufacturing system that can sustain productivity growth while adapting to expensive energy, scarce technical labour and increasingly capable international competitors.

The assessment below distinguishes observed results from survey responses, investment plans and illustrative calculations. Evidence is considered up to 22 October 2026; the reference year is specified wherever it materially affects interpretation.

Chapter 5 — From AI Projects to Factory Productivity

Italy’s central technological challenge is the conversion of AI activity into repeatable industrial performance. The number of firms experimenting with AI can rise rapidly while aggregate productivity improves slowly. Administrative applications can spread without altering production processes, and successful demonstrations can remain confined to individual plants.

The decisive question is therefore how deeply AI enters the production system—and whether the complementary investments required for reliable operation are actually made.

Adoption statistics measure different stages of transformation

The territorial survey discussed earlier provides evidence of growing interest and project activity. It does not establish a corresponding national increase in factory deployment or productivity. Comparisons require consistent definitions of geography, firm size, technology and operational use.

The European baseline illustrates the distinction.

Table 5.1 — AI adoption and selected applications in the EU, 2025

Indicator	Share	Statistical denominator
Enterprises using at least one AI technology	19.95%	Eligible enterprises with at least 10 persons employed
Small enterprises using AI	17.00%	Eligible enterprises with 10–49 persons employed
Medium enterprises using AI	30.36%	Eligible enterprises with 50–249 persons employed
Large enterprises using AI	55.03%	Eligible enterprises with at least 250 persons employed
Enterprises using AI for autonomous physical movement	1.39%	All eligible enterprises
AI users applying AI to logistics	6.08%	Enterprises already using AI

Source: Eurostat, Use of artificial intelligence in enterprises. The survey covers selected economic activities, rather than manufacturing alone. The final two rows have different denominators and must not be compared as equivalent adoption rates. Eurostat

These results show why broad AI adoption cannot serve as a direct measure of industrial transformation. A company using a language model to prepare commercial correspondence qualifies as an adopter, but that application does not demonstrate improvements in machining accuracy, maintenance scheduling or energy consumption.

Evidence reviewed in the OECD’s December 2025 study of AI adoption by SMEs reinforces this distinction: in a cited representative survey, only 29% of SME generative-AI users applied it to core activities. This is broader international evidence, not an estimate for Italian manufacturing.

The economic value depends on the production bottleneck

The most valuable application is not necessarily the most technically sophisticated. An intervention creates industrial value when it relaxes a binding constraint.

Predictive maintenance has limited economic value on equipment with spare capacity and inexpensive downtime. It can be highly valuable on a bottleneck machine whose failure interrupts an entire production line. Automated inspection can reduce costs, but a system that rejects acceptable products may increase waste even when its headline accuracy appears impressive.

Table 5.2 — Connecting industrial AI applications to measurable economic outcomes

Application	Essential complementary investment	Relevant operating measure	Economic test	Principal failure mode
Visual quality inspection	Consistent imaging, labelled defects, controlled lighting and integration with rejection equipment	Escaped defects and false rejection rates	Lower total cost of inspection, scrap, rework and customer claims	Apparent accuracy conceals costly errors on rare defects
Predictive maintenance	Sensor reliability, maintenance records and an actionable intervention process	Unplanned downtime and maintenance interventions	Avoided disruption exceeds monitoring and intervention costs	Alerts generate unnecessary maintenance
Production scheduling	Accurate routings, machine availability, inventories and delivery commitments	Lead time, schedule adherence and work in progress	More saleable throughput or lower working capital	Optimisation uses inaccurate constraints
Process optimisation	Reliable process measurements, engineering models and bounded operating limits	Yield, energy per conforming unit and process stability	Savings persist without compromising specifications	Model performance deteriorates as materials or operating conditions change
Technical knowledge assistance	Controlled documentation, version management and access permissions	Search time, resolution time and verified answer quality	Faster engineering and service work with acceptable review costs	Plausible but incorrect technical instructions

This framework changes investment priorities. A factory with unreliable inventory records may obtain greater value from improving data capture than from purchasing a more advanced optimisation model. A maintenance department that cannot respond to alerts will not capture the expected benefit of predictive analytics.

Italy’s strength in specialised production can support valuable applications because process knowledge is commercially important. Yet that knowledge is often distributed across experienced workers, machine settings, supplier relationships and undocumented practices. Making it usable by digital systems requires considerable organisational work.

Productivity gains require a complete operating model

A successful pilot must survive changing product mixes, different shifts, equipment deterioration and fluctuating input quality. It also needs a permanent owner.

Responsibility cannot remain divided indefinitely between an external technology supplier and a production manager who lacks the time or authority to maintain the system. The operating model must specify who checks data quality, approves changes, investigates failures and decides when to suspend automated recommendations.

Table 5.3 — Evidence required before expanding an industrial AI deployment

Deployment stage	Evidence required	Management decision
Historical testing	Performance against a credible baseline, including unusual cases	Whether the application merits operational testing
Shadow operation	Reliable results using live data without controlling production	Whether performance survives actual factory conditions
Supervised use	Operators can understand, challenge and correct recommendations	Whether the application can support routine work
Bounded production use	Defined operating limits, monitoring and a workable fallback	Whether controlled operational responsibility is justified
Replication	Benefits persist across machines, shifts or plants after adaptation costs	Whether wider deployment produces a satisfactory return

The financial calculation must include integration, cybersecurity, training, software subscriptions, computing, maintenance and production disruption during installation.

Released labour hours become an economic gain when workers are productively redeployed, overtime falls or additional demand can be served. Additional technical capacity creates revenue only if customers buy the output. These conditions explain why an apparently successful demonstration can produce little improvement in cash generation.

Factory AI also changes operational risk

Manufacturing systems affect physical processes. A recommendation that is tolerable in a marketing application may be unacceptable when it influences machine operation, product safety or temperature control.

The NIST Guide to Operational Technology Security, SP 800-82 Revision 3 explicitly treats the distinctive performance, reliability and safety requirements of operational technology. Its relevance is practical: factory connectivity must be designed around the consequences of failure.

For Italian suppliers, this creates an additional competitive test. Customers will increasingly assess whether digitally enabled equipment can be supported, updated and operated securely throughout its useful life. An attractive machine specification may lose value if remote access, software maintenance or data ownership remains unclear.

Key judgments. Italy can obtain substantial gains from narrowly defined industrial applications, especially where process expertise is strong. Broad adoption statistics provide insufficient evidence of those gains. The most consequential investments may concern data quality, integration and operating responsibility.

What would change this assessment. Comparable plant-level evidence showing sustained improvements in value added per hour, conforming output, downtime and delivery performance would justify a stronger productivity conclusion than project counts alone.

Open official record. National statistics do not yet provide a comprehensive causal estimate of the productivity contribution of industrial AI in Italy.

Chapter 6 — Enterprise Size, Skills, Capital and Industrial Organisation

Enterprise size affects technological adoption because it changes the resources available to absorb fixed costs and coordinate specialised work. The relevant constraint is broader than access to finance: firms must combine engineering, management, data, procurement and workforce capabilities.

A small manufacturer can purchase sophisticated equipment. Maintaining an integrated transformation programme is a different organisational task.

Skills shortages concern implementation capacity

The Italian adoption gap is substantial. A first-party Assolombarda synthesis of official statistics reports AI use in 2025 at 15.7% among enterprises with 10–249 employees, compared with 53.1% among large enterprises: a calculated difference of 37.4 percentage points.

The same source identifies several obstacles among firms that considered AI but did not adopt it.

Table 6.1 — Reported barriers among Italian enterprises considering but not using AI, 2025

Reported obstacle	Share
Lack of relevant skills	58.6%
Uncertainty about legal consequences	47.3%
Unavailable or insufficient-quality data	45.2%
Privacy concerns	43.2%
Cost	43.0%
Ethical concerns	25.7%

Source: Assolombarda, Utilizzo dell’intelligenza artificiale nelle imprese. These are conditional, multiple-response results; they do not describe all Italian firms and do not sum to 100%.

The ordering matters. A cheaper technology does not automatically resolve missing expertise or inadequate data. A subsidised project may remain unused if the firm cannot define the production problem, assess suppliers or maintain the application after installation.

The labour-market constraint also extends beyond AI specialists. Unioncamere’s Excelsior assessment for 2025 classified 47% of planned recruitment entries as difficult to fill. This measures recruitment intentions across the covered economy; it is neither a manufacturing vacancy rate nor evidence that all those positions remained unfilled.

For industrial transformation, shortages of maintenance technicians, automation engineers, production supervisors and experienced operators can be as consequential as shortages of data scientists. The binding problem is often the absence of people who can translate between the production process and the technology supplier.

Stronger balance sheets do not guarantee stronger projects

Italian manufacturing has strengthened its financial structure over time.

Table 6.2 — Selected indicators of Italian manufacturing finance

Indicator	Earlier observation	Later observation	Interpretation
Own capital as a share of total balance-sheet funding	34.5%, 2007	48.9%, 2023	Greater reliance on equity funding
Bank loans as a share of total funding	19.5%, 2007	12.3%, 2023	Reduced aggregate bank dependence
Bank-loan stock relative to nominal manufacturing value added	100%, 2011	56%, 2024	Lower indebtedness relative to sectoral value creation

Source: Confindustria, Manifattura in trasformazione, 2025. These aggregate ratios do not describe the financial position of every enterprise.

The EIB Investment Survey 2025: Italy overview adds a complementary perspective.

Table 6.3 — Investment and financing conditions in the EIB survey

Indicator	Italy	EU
Firms investing above the survey threshold	80%	86%
Finance-constrained firms	5.5%	6.1%
Investment allocated to intangible assets	39%	35%

The investment threshold is more than €500 per employee. The survey covers several sectors and firms with at least five employees; results are weighted by value added. They are not directly comparable with enterprise-count-weighted AI statistics. eib.org

Together, these findings weaken the proposition that insufficient lending alone explains technological underinvestment. Finance remains important, particularly for individual small firms, but investment also depends on project readiness, expected demand and organisational capacity.

Digital investment presents a financing challenge because much of its value lies in software, training, integration and organisational change. These expenditures offer less conventional collateral than machinery. They also require continuing expenditure after the initial installation.

A programme financing equipment while leaving implementation, staff time and working capital unfunded may therefore produce incomplete transformation.

Technical education must be assessed through both scale and outcomes

Italy’s ITS Academy system provides a useful test of whether technical-training capacity is expanding effectively.

The latest INDIRE national monitoring report, published in 2026, reports larger cohorts and more graduates, alongside a lower employment rate for the latest monitored cohort.

Table 6.4 — ITS Academy outcomes by course-completion year

Indicator	Courses completed in 2023	Courses completed in 2024
Courses monitored	450	506
Enrolled students	11,835	13,195
Graduates	8,588	9,991
Completion rate	72.6%	75.7%
Graduates employed within 12 months	7,212	7,964
Employment rate among graduates	84.0%	79.7%
Employed graduates in work aligned with their training	92.9%	92.8%

Source: INDIRE, Monitoraggio nazionale ITS Academy 2026 — Risultati chiave.

Graduates increased by approximately 16.3%, and employed graduates by 10.4%, while the employment rate declined by 4.3 percentage points. These calculations describe different cohorts; they do not establish that programme quality deteriorated.

The industrial implication is that expansion should be assessed through completion, placement, occupational relevance and employer demand together. Training places have limited value if programmes expand faster than suitable placements, teaching capacity or recruitment opportunities.

For firms, participation also requires investment. Employers need staff able to supervise placements, define relevant projects and offer credible progression after recruitment.

Industrial organisation can provide capabilities that individual SMEs lack

Firm growth is one response to fixed technological costs, but several organisational arrangements can provide shared capacity. Their effectiveness depends on responsibility, incentives and control of commercially sensitive information.

Table 6.5 — Organisational options for technological upgrading

Arrangement	Capability it can provide	Conditions for effectiveness	Main limitation
Permanent internal integration team	Continuous ownership of data, systems and process improvement	Sufficient project volume and management authority	High fixed cost for a small enterprise
Shared technical centre or consortium	Specialist testing, integration and training	Stable funding and clear confidentiality rules	Advice may remain disconnected from daily production
Lead-customer supplier programme	Common quality, traceability and scheduling standards	Fair allocation of costs and usable interfaces	Dependence on one customer’s systems
Merger or acquisition	Broader management, engineering and financial resources	Genuine operational integration	Ownership changes may leave processes fragmented
Long-term technology partnership	Access to specialised external expertise	Portability, documentation and service continuity	Supplier dependence and recurring costs

These arrangements should be assessed against the capabilities they create. A consortium that produces demonstrations but cannot support maintenance offers limited industrial value. A merger that increases revenue without integrating production information may leave the original coordination problem unresolved.

Key judgments. Italy’s technological gap reflects uneven implementation capacity as well as financial constraints. Technical education is expanding, but its outcomes require close monitoring. Shared capabilities and stronger internal management can help smaller firms absorb technologies whose fixed costs exceed their individual resources.

What would change this assessment. Evidence that smaller manufacturers sustain deployments after external support ends—and that graduates enter relevant, durable technical careers—would indicate stronger absorption capacity.

Open official record. Aggregate financial resilience does not establish whether technologically weaker firms can finance and execute complete transformation projects.

Chapter 7 — Energy, Logistics and the Economics of Production

Italy’s production economics depend on the combined cost and reliability of energy, transport, inventories and industrial operations. A competitive factory can lose its advantage through expensive electricity, delayed components or excessive working capital.

The relevant comparison is the cost of delivering a conforming product on time. Isolated comparisons of wages, electricity tariffs or freight rates capture only part of that calculation.

Electricity comparisons require consistent consumption bands

Industrial electricity prices vary with consumption, contract structure, taxes, exemptions and purchasing arrangements. A country average is not the tariff paid by every manufacturer.

The European Commission’s 2026 country report for Italy reports the following benchmark for the first half of 2025.

Table 7.1 — Electricity cost exposure in consumption band ID, first half of 2025

Measure	Italy	EU benchmark
Electricity price	€203/MWh	€164/MWh
Italian price difference	+€39/MWh	—
Calculated Italian premium	+23.8%	—
Illustrative annual cost at 10,000 MWh	€2.03 million	€1.64 million
Illustrative annual difference	€390,000	—

Band ID covers annual consumption of 2,000–19,999 MWh. Prices exclude VAT and recoverable charges. The final two rows are arithmetic illustrations using the published benchmark and a hypothetical consumption volume; they are not observed company bills or forecasts.

A €390,000 difference can materially affect a supplier’s investment capacity, but its significance depends on sales, margins and energy intensity. The same electricity premium has very different consequences for a heat-intensive process and a high-value assembly operation.

More recent figures also show the danger of mixing statistical categories.

Table 7.2 — Selected non-household electricity prices in band IC, second half of 2025

Geography	Price
EU	€183.7/MWh
Germany	€226.4/MWh
Sweden	€97.0/MWh
Finland	€74.8/MWh

Source: Eurostat, non-household electricity prices, published 8 May 2026. Band IC covers annual consumption from 500 to below 2,000 MWh.

These figures demonstrate substantial differences within Europe. They cannot be combined with Table 7.1 to rank Italy against Germany: both the consumption band and reference period differ.

Efficiency and electrification have different economic requirements

Energy efficiency can reduce exposure without changing the underlying energy source. Electrification changes the production process and therefore requires a broader calculation.

The Commission’s Italy report identifies a high electricity-to-industrial-gas price ratio, around 3.7, compared with approximately 3 for the EU. This is a comparison of purchased energy prices. It is not a comparison of useful heat costs.

An electrification project must account for conversion efficiency, temperature requirements, operating hours, grid access and production continuity. A heat pump, an electric furnace and a resistance heater cannot be assessed through the same generic payback assumption.

Digitalisation can support energy performance through monitoring, scheduling and process control. It also creates additional dependencies on electricity, connectivity and reliable control systems. Manufacturers therefore need to evaluate energy and digital investment together.

Infrastructure announcements are not delivered industrial capacity

Grid and railway investment can improve competitiveness, but their industrial effects depend on commissioning and usable service.

Table 7.3 — Infrastructure commitments and expenditure: what the figures establish

Indicator	Reported figure	Status	Evidence still needed
Terna development-plan investment	More than €23 billion, 2025–2034	Planned investment	Projects commissioned and constraints relieved
Additional interzonal transfer capacity targeted by 2030	About 7 GW	Planning target	Actual available capacity and operating performance
RFI investment in 2025	€11.7 billion	Reported annual expenditure	Effects on capacity, reliability and journey times
FS Group technical investment in 2025	About €18.3 billion	Group-wide annual expenditure	Asset delivery and service outcomes

Sources: Terna, electricity-network development plan and FS Italiane, 2025 financial results, published April 2026. RFI expenditure is included within the FS Group total and must not be added to it.

For a manufacturer, the relevant grid outcome is usable connection capacity and dependable supply. The relevant freight outcome is a service compatible with production schedules, terminal access and customer delivery commitments.

Infrastructure construction can also impose temporary disruption before benefits emerge. Investment evaluation should therefore distinguish expenditure, physical completion, operational availability and economic benefit.

Logistics performance includes information and working capital

Physical transport capacity is only one part of supply-chain performance. Firms also need visibility over inventory, orders and supplier risks.

Table 7.4 — Logistics indicators from the EIB Investment Survey 2025

Indicator	Italy	EU	Analytical implication
Firms reporting logistics disruptions	35%	43%	Lower reported exposure in this survey
Use of digital inventory tracking among reported responses to trade obstacles	5%	18%	Limited use of one information-based adjustment
Diversification of import sourcing	11%	19%	Less reported use of an alternative-sourcing response

Source: EIB Investment Survey 2025: Italy overview. The response measures use the relevant trade/importer survey bases; they are not universal adoption rates for Italian manufacturing.

The interpretation is mixed. Lower reported disruption does not establish stronger preparedness. It can reflect differences in exposure, sourcing patterns or the timing of shocks.

Inventory provides an example of the trade-off. Additional stock can protect production, but it ties up capital and creates storage, deterioration and obsolescence costs. Improved information may allow the same resilience with less inventory—provided suppliers and production systems share sufficiently accurate data.

Table 7.5 — Measures for assessing the delivered cost of production

Cost or risk	Useful measure	Why a narrow comparison can mislead
Energy	Energy cost per conforming unit	A lower tariff can coexist with inefficient consumption
Quality	Scrap, rework and warranty cost per unit sold	Cheap output can generate expensive downstream failures
Transport	Freight and handling cost per delivery fulfilled	Low freight rates may accompany unreliable service
Inventory	Stock days and capital tied up	Buffer stock protects output but absorbs financing
Delivery reliability	On-time, in-full delivery and recovery costs	Average transit time conceals disruptive variability
Production continuity	Lost contribution from interruptions	Accounting expenditure can understate the cost of stopped production

Key judgments. Italy’s energy disadvantage is economically significant but uneven across activities. Infrastructure investment can improve production conditions only when it becomes usable capacity. Logistics competitiveness requires better information and inventory management alongside physical connections.

What would change this assessment. A sustained narrowing of comparable electricity-price differences, commissioned grid capacity and measured improvements in freight reliability would strengthen the outlook.

Open official record. Expenditure totals and planning targets do not yet provide a complete measure of the reduction in industrial energy or logistics constraints.

Chapter 8 — Competitive Dynamics: Germany, France, the United Kingdom and Non-European Rivals

Italy competes against several industrial systems with different advantages. Germany offers scale and engineering depth; France combines major industrial groups with targeted public investment; the United Kingdom is developing adoption support and selective electricity-cost relief. China and the United States are expanding automation from very different economic positions.

Italy’s opportunity is to raise the productivity and technological content of its specialisations. Its exposure increases when competitors reproduce those capabilities with greater scale, faster delivery or stronger service platforms.

Germany: a demanding benchmark with its own diffusion problems

Comparable AI statistics indicate that Italy trails Germany.

Table 8.1 — Enterprises using AI, selected European economies, 2025

Geography	Share
Germany	Approximately 26.0%
EU	19.95%
France	Approximately 18.1%
Italy	16.4%

Sources: Eurostat’s enterprise AI statistics and Assolombarda’s comparison using official data. These cover eligible enterprises across selected sectors, not manufacturing alone.

The comparison establishes an adoption gap, not an equivalent productivity gap.

German industry also faces difficulties spreading digital investment across smaller firms. The KfW Digitalisation Report 2025, published in April 2026, reports that 30% of Mittelstand enterprises completed digitalisation projects during 2022–2024, compared with 35% in the preceding observation window. Reported digitalisation expenditure fell from €31.9 billion in 2023 to €23.8 billion in 2024.

These are broader digitalisation measures with a different enterprise population from Eurostat’s AI survey.

The implication for Italy is twofold. Germany remains a strong benchmark, but its industrial transition is neither uniform nor automatic. Italian suppliers can gain position where they solve specific production problems more effectively. They remain vulnerable where dependence on German customers transmits weak investment demand through existing supply chains.

Automation is advancing globally while European installations weaken

The latest robotics evidence makes the external competitive pressure clearer.

Table 8.2 — Annual industrial-robot installations, 2025

Market	Installations	Change from 2024
China	Approximately 354,000	+20%
United States	Approximately 38,500	+12%
Japan	36,219	−19%
South Korea	Approximately 30,000	−1%
Germany	Approximately 24,800	−8%
India	Approximately 10,500	+15%
Italy	Approximately 7,800	−11%
France	Approximately 4,500	−8%

Sources: IFR, World Robotics 2026 global release and IFR’s EU-27 release, published September 2026. Figures are annual installation flows, not operational stocks, robot density or AI adoption. Rounded values follow the source releases. International Federation of Robotics

Italy remained the EU’s second-largest installation market. However, its decline occurred while global installations exceeded 600,000 and grew by 11%. China accounted for 59% of global deployments.

The strategic pressure comes from the cumulative improvement in competitors’ production systems. Automation can support consistency, responsiveness and labour productivity. It can also help manufacturers move into more demanding product categories.

Installation counts alone cannot establish the quality of that transition. They do show why Italy cannot assume that established engineering advantages will remain protected by competitors’ lower technical capabilities.

France: stronger productive capacity, with productivity effects still unproven

France provides a useful comparison in the evaluation of industrial policy.

An October 2026 study by the Direction générale des Entreprises examines early France 2030 beneficiary cohorts using matched comparisons and a difference-in-differences approach.

Table 8.3 — Estimated effects of France 2030 support two years after commitment

Outcome	Estimated effect
Total employment	+9%
R&D employment	+11%
Productive fixed assets	+11%
Turnover	No statistically significant effect established
Value added	No statistically significant effect established

Source: DGE, France 2030 : des effets positifs sur l’emploi et le capital productif des entreprises. Results concern the evaluated early cohorts and depend on the study’s identification assumptions; they do not establish effects for every beneficiary or the entire programme. entreprises.gouv.fr

The distinction is important for Italian policymakers. Public support can expand employment, research and productive assets before measurable value creation appears. These are meaningful intermediate outcomes, but they should not be presented as demonstrated productivity gains.

The competitive challenge is therefore dynamic. French-supported capacity may become more consequential as projects mature. Italy should assess whether its own investment system supports the full passage from research and demonstration to commercially sustainable production.

United Kingdom: adoption support and selective cost relief

The British comparison is particularly useful for the organisation of technology diffusion.

The Made Smarter Adoption evaluation published in July 2026 covers a programme combining expert advice, digital roadmaps, leadership development and grants for manufacturing SMEs in England. Its design recognises that purchasing equipment and building management capability are connected tasks.

The advanced-manufacturing AI adoption plan published in June 2026 proposes structured progression from assessment to pilots and wider deployment. It is an independent AI Champion’s report; its proposals should not be treated as evidence that every recommended intervention has been funded or implemented.

Energy policy adds another competitive variable. The British Industrial Competitiveness Scheme provides for electricity-cost relief of up to £40/MWh from 2027 for qualifying businesses. Eligibility is targeted, and the application window runs from 1 October to 30 November 2026. As of this assessment’s cutoff, the window is open; the relief is not yet a realised 2026 cost reduction.

For Italy, these initiatives matter because they address two constraints simultaneously: the capability to adopt technology and the economics of operating production.

China and the United States: different sources of competitive pressure

China’s automation scale increases the pressure on Italian manufacturers to demonstrate continuing technical differentiation. This does not imply that every Chinese producer competes successfully in every Italian niche. It does mean that differentiation must be renewed through performance, reliability, application knowledge and service.

The United States presents a different combination of market opportunity and competitive pressure. Its growing robot installations indicate continued investment in domestic production capability. Italian equipment suppliers may benefit from that demand, while also facing customers that expect local support, rapid maintenance and integration with established digital systems.

For both markets, export success increasingly depends on the ability to support the product after delivery. Software updates, diagnostics, spare parts, technical assistance and process optimisation can influence customer retention and lifetime profitability.

This creates a strategic choice for smaller Italian suppliers: build these capabilities internally, cooperate with partners or accept a more dependent position within another company’s service architecture.

The comparative test is sustained productivity and control of value

The long-run evidence gives urgency to this assessment. Confindustria’s 2025 manufacturing report reports growth in real manufacturing value added per hour of approximately 26% in Italy between 1995 and 2024, compared with around 80% in Germany and France.

These are growth comparisons, not productivity-level rankings. They nevertheless show that preserving industrial scale has not delivered comparable long-term productivity improvement.

Table 8.4 — Competitive implications for Italian manufacturing

Comparator	Principal pressure or capability	Opportunity for Italian firms	Condition for capturing value
Germany	Engineering depth and extensive industrial supply chains	Specialist equipment, components and process integration	Reduced dependence on individual customers and reliable technical execution
France	Targeted support for research, productive assets and industrialisation	Participation in demanding industrial programmes	Qualification, scale-up capability and sustained R&D
United Kingdom	SME adoption support and prospective targeted electricity relief	Equipment, integration and industrial services	Strong local support and credible delivery economics
China	Large-scale automation and increasing industrial capability	Applications requiring distinctive process knowledge	Continuous technical improvement and demonstrable customer value
United States	Investment in automation and domestic production	Advanced equipment and lifecycle services	Local responsiveness, integration capability and service continuity

Analytical synthesis; the table does not assign numerical competitiveness scores.

The central risk is that Italy modernises individual machines while competitors modernise entire production and service systems. Equipment upgrades can improve local performance yet leave weaknesses in scheduling, supplier coordination, maintenance and customer support untouched.

The strongest opportunity is the opposite: connect Italy’s specialised engineering knowledge to a more integrated operating model. That would allow firms to compete through measurable production outcomes and capture a larger share of value throughout the equipment or product lifecycle.

Key judgments. Italy retains substantial industrial capabilities, but global automation and uneven European policy support are raising the competitive threshold. Germany’s difficulties create openings without removing its advantages. French capacity-building and British adoption initiatives deserve close evaluation. Non-European rivals make continuous upgrading essential.

What would change this assessment. Sustained Italian gains in manufacturing productivity, successful replication of digital deployments across smaller firms, stronger lifecycle-service revenues and improved delivered production costs would indicate that technological investment is changing competitive performance.

Open official record. Current evidence establishes investment activity, adoption differences and selected programme outcomes more convincingly than it establishes a durable reversal of Italy’s long-term productivity gap.

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Pillar III — European Economic Security and Industrial Choices

Italy’s manufacturing position has a European security dimension that cannot be captured by national rankings alone. Its importance lies partly in the production systems it enables elsewhere: equipment that allows other firms to manufacture, materials that support infrastructure, components that sustain industrial operations, and specialised capabilities that would be expensive or slow to replace.

The strategic question is whether these capabilities will remain commercially viable, technologically controlled and available during disruption. This requires distinguishing productive capacity from effective supply security, and domestic production from control over the technologies and inputs on which production depends.

The following assessment uses evidence available by 22 October 2026. Pathways to 2036 are conditional analytical scenarios, not forecasts.

Chapter 9 — Italy’s Contribution to European Supply-Chain Resilience

Italy contributes to European resilience when its manufacturers preserve capabilities that other European industries need, provide credible alternatives to concentrated suppliers, or shorten the time required to restore disrupted production. The security value of a factory therefore depends on its position within a production network, its substitutability and its operational availability.

A small specialised supplier can be more consequential to a particular supply chain than a much larger producer of readily interchangeable goods. Conversely, a substantial domestic industry can remain exposed if essential upstream inputs come from a narrow supplier base.

Resilience must be assessed at the level of industrial functions

Three functions deserve particular attention.

The first is the ability to maintain production: supplying replacement components, industrial equipment, technical services and materials that keep existing plants operating.

The second is the ability to expand or adapt production: designing machinery, qualifying alternative inputs and modifying processes when demand or supply conditions change.

The third is the ability to recover after disruption: restoring equipment, replacing a failed supplier and bringing alternative capacity into qualified operation.

These functions are related, but they require different capabilities. A firm that maintains existing equipment may lack the engineering resources to redesign it. A technically capable alternative supplier may require lengthy customer qualification before it can deliver.

Table 9.1 — Italian industrial capabilities and their potential European resilience contribution

Industrial capability	European function supported	Circumstance in which it becomes strategically important	Evidence required to establish resilience
Specialised production machinery	Creation and adaptation of manufacturing capacity	Existing equipment suppliers become unavailable or production requirements change	Engineering capacity, delivery times and commissioning support
Precision components and industrial assemblies	Continuity of downstream production	A critical component interrupts a larger production system	Qualified alternatives, available tooling and reproducible specifications
Steel and metallurgical processing	Infrastructure, machinery and industrial maintenance	Disruption affects particular grades, forms or processing capabilities	Product-specific capacity and access to suitable feedstock
Pharmaceutical manufacturing	Continuity of medicine supply	Shortages affect essential products or production sites	Product authorisations, input availability and qualified production lines
Power semiconductors	Electrification and industrial power conversion	Supply constraints affect particular devices or applications	Qualified output, yields, packaging and customer acceptance
Recycling and material recovery	Availability of secondary industrial inputs	Primary supply becomes expensive or restricted	Recoverable volumes, material quality and processing capacity

Analytical mapping. The presence of an industry does not establish that spare or substitutable capacity is available.

This approach avoids treating every manufacturing activity as equally strategic. It also avoids the opposite error of restricting economic security to a short list of highly visible technologies.

Steel illustrates both contribution and exposure

Italy’s steel industry provides a measurable example of substantial European capacity combined with a distinctive production structure.

Table 9.2 — Selected steel-production indicators, 2025

Geography	Crude steel production	Electric-process share
Italy	20.7 million tonnes	90.1%
Germany	34.1 million tonnes	30.6%
France	9.9 million tonnes	36.4%
EU-27	126.0 million tonnes	45.8%

Source: World Steel Association, World Steel in Figures 2026. Some process figures are estimates. Italy accounted for approximately 16.4% of EU crude steel production, calculated from the reported totals.

The high electric-process share gives electricity availability and suitable metallic feedstock particular strategic significance. It also means that European steel security cannot be assessed solely through aggregate tonnage.

Steel grades, dimensions, metallurgical properties and customer qualification determine whether one producer can replace another. Additional capacity in one product family may offer little immediate protection against a shortage in another.

The policy implication is specific: resilience assessments should identify vulnerable products and processing stages before selecting facilities for support. Preserving an indispensable metallurgical capability can have a different economic justification from subsidising undifferentiated output.

Circularity creates a material advantage, with important limits

Italy’s secondary-material economy offers another contribution to European resilience.

Table 9.3 — Circular material use rate, 2024

Geography	Recycled materials as a share of overall material use
Netherlands	32.7%
Belgium	22.7%
Italy	21.6%
EU	12.2%

Source: Eurostat, Over 12% of materials in the EU come from recycling. Italy’s rate was 9.4 percentage points above the EU average. Eurostat

This is an economy-wide material-flow indicator. It does not establish that Italy recycles a corresponding share of lithium, rare earths or other strategic materials.

The distinction matters because bulk-material recovery and high-purity strategic-material recovery involve different technologies, collection systems and economics. Recycling becomes a security asset when recovered material meets industrial specifications, can be delivered reliably and displaces a vulnerable input.

For Italy, the opportunity is to connect established material-recovery capabilities with higher-value separation, refining and industrial qualification. Collection volumes alone are an insufficient measure of that transition.

Pharmaceuticals: productive scale does not guarantee medicine availability

Farmindustria’s July 2026 indicators report approximately €74 billion of pharmaceutical production and €69 billion of exports in 2025. These figures establish a substantial manufacturing platform; they are gross production and export values, not manufacturing value added.

Its security contribution must nevertheless be assessed medicine by medicine. Domestic production of finished pharmaceuticals does not establish domestic availability of every active ingredient, intermediate, sterile input or packaging component.

Supply continuity also depends on regulatory authorisation, line configuration, production scheduling and commercial incentives. A facility capable of manufacturing one product cannot necessarily switch rapidly to another essential medicine.

European coordination should therefore connect demand information, shortage monitoring and qualified manufacturing capacity. The objective is reliable availability of specified medicines, rather than a generic increase in pharmaceutical exports.

Semiconductor investment demonstrates the importance of specialisation

The Commission’s May 2024 approval of support for STMicroelectronics’ Catania project concerned approximately €2 billion of Italian aid supporting a €5 billion investment in integrated silicon-carbide production using 200 mm wafers.

These are approved investment parameters, not evidence that the full intended capacity is already operational.

The project concerns power devices relevant to electrification and industrial applications. It does not substitute for every semiconductor category. Its European security value will depend on qualified output, technical performance, customer adoption and the availability of supporting inputs and equipment.

This illustrates a broader principle: Europe can strengthen security through complementary specialisations distributed across member states. Each country does not need to reproduce every stage of every technology.

Commercial viability is a condition of durable resilience

A facility that survives only through repeated emergency assistance may provide uncertain long-term security. Equally, a commercially viable capability can disappear if a temporary disruption overwhelms a supplier whose replacement would take years.

Public intervention should distinguish these situations.

Table 9.4 — Matching supply-chain vulnerabilities to appropriate responses

Vulnerability	Most relevant response	Main implementation risk
Short, temporary interruption	Inventories, contingency contracts and logistics alternatives	Stocks become obsolete or unavailable when needed
Long qualification time	Pre-qualified alternative suppliers and maintained tooling	Alternative capacity exists only on paper
Concentrated upstream supply	Diversified sourcing, processing and substitution research	Different suppliers depend on the same upstream source
Loss of a specialised capability	Conditional investment or restructuring support	Assistance preserves a firm without preserving the capability
Insufficient commercially viable demand	Coordinated procurement or credible offtake arrangements	Buyers make commitments without sustainable financing
Common infrastructure exposure	Geographic and operational redundancy	Nominally separate sites share the same failure point

Key judgment. Italy strengthens European resilience through specific, usable capabilities embedded in cross-border production networks. Its contribution is greatest where replacement is difficult and where commercial demand can sustain the capability between crises.

What would change this assessment. Product-level evidence of qualified alternative capacity, shorter recovery times and reduced upstream concentration would demonstrate an improvement beyond aggregate production growth.

Open official record. Sectoral statistics do not provide a comprehensive public map of Italian industrial bottlenecks, spare capacity and substitution times across European supply chains.

Chapter 10 — Strategic Dependencies, Industrial Data and Technological Control

Technological control concerns the ability to operate, maintain, modify and replace essential systems under changing commercial or geopolitical conditions. Ownership of a factory provides only partial control if production depends on inaccessible software, restricted materials or services that cannot be replaced within an acceptable period.

Italy’s exposure therefore extends across physical inputs, equipment, industrial software, cloud infrastructure, data rights and technical knowledge.

Dependencies accumulate across several layers

The relevant question is not simply whether a supplier is European. It is what happens if that supplier becomes unavailable, changes its terms or loses access to an upstream technology.

Table 10.1 — Layers of industrial dependence

Layer	Potential constraint	Practical test of control
Raw materials and chemicals	Concentrated extraction, refining or licensing	Can an alternative input be obtained and qualified?
Components	Product-specific availability and redesign requirements	Can production continue with a substitute component?
Machinery and controls	Proprietary interfaces, specialist servicing and unavailable spares	Can the equipment be maintained without exclusive supplier intervention?
Engineering software	Proprietary formats, licence dependencies and limited interoperability	Can designs and process knowledge be transferred to another system?
Cloud and computing	Service concentration and migration complexity	Can essential workloads be restored elsewhere?
Industrial data	Unclear access, reuse and transfer rights	Can the manufacturer retrieve usable data and retain necessary history?
Operational knowledge	Dependence on individuals or external contractors	Can another qualified team reproduce and support the process?

A European production site may therefore depend on several non-European systems simultaneously. Conversely, an international supplier can contribute to resilience when it provides transparent interfaces, reliable support and credible alternatives.

The appropriate objective is to reduce dependencies whose disruption would have unacceptable consequences.

Material concentration remains an immediate constraint

The IEA’s Global Critical Minerals Outlook 2026 reports that, excluding rare earths, the average share of the leading refining country for the relevant minerals rose from 70% in 2023 to 72% in 2025. It also finds that the number of mineral tariff codes covered by Chinese export controls had tripled since 2023.

Rare-earth refining followed a different pattern, with some diversification. These distinctions matter: concentration does not move uniformly across materials.

The exposure of an Italian manufacturer depends on the precise material, processing stage and product specification. Purchasing through a European distributor does not necessarily diversify the underlying source. Two suppliers can rely on the same refinery or processing technology.

Europe’s policy benchmarks provide direction, but they are not evidence of achieved autonomy.

Table 10.2 — Critical Raw Materials Act benchmarks for 2030

Supply-chain dimension	EU benchmark
Extraction capacity	At least 10% of annual EU consumption
Processing capacity	At least 40%
Recycling capacity	At least 25%
Dependence on one third country	No more than 65% at the relevant processing stage

Source: Council of the EU, explanation of the Critical Raw Materials Act. These are Union-level benchmarks concerning strategic raw materials; they are not national self-sufficiency requirements or quotas imposed on each Italian enterprise.

Italy’s implementation choices should connect processing and recycling projects to actual industrial demand. A facility without qualified customers, dependable feedstock or competitive operating costs may add nominal capacity without securing supply.

Data access affects bargaining power and future industrial value

Industrial data can reveal equipment performance, maintenance needs, production patterns and opportunities for process improvement. Control over its use influences which participant can develop services and retain the customer relationship.

The EU Data Act, applicable since 12 September 2025, establishes rules concerning access to connected-product data, data sharing and switching between data-processing services. For manufacturing, it creates opportunities to use equipment data and develop competing maintenance or optimisation services.

It does not imply unrestricted access to every form of intellectual property or proprietary know-how. The practical value of access also depends on usable formats, documentation, timeliness and the ability to interpret the information.

An Italian machine producer can benefit by building services around its equipment. It must also adapt to customers’ access rights and a potentially more competitive aftermarket. Commercial advantage will increasingly depend on service quality and technical competence rather than exclusive possession of operating data.

Portability must be demonstrated in practice

A 2025 European Parliament briefing on software and cyber dependencies identifies approximately 70% of the EU cloud-infrastructure market with AWS, Microsoft Azure and Google Cloud. This is an estimate for the market covered by the briefing, not a measure of Italian manufacturing workloads.

Concentration becomes an operational vulnerability when firms cannot move essential services or continue operating during interruption.

The Bundesnetzagentur’s explanation of Data Act switching rules confirms that provider switching charges are to disappear from 12 January 2027. That does not eliminate the customer’s engineering, testing, training or application-redesign costs.

Table 10.3 — Evidence of effective digital control

Area	Evidence a manufacturer should obtain	Why a contractual promise is insufficient
Data retrieval	Tested export of data, metadata and necessary documentation	An export may omit context required for reuse
Application migration	Successful operation of a representative workload elsewhere	Proprietary services may require substantial redesign
Continuity	Demonstrated restoration within the firm’s acceptable interruption period	Backups may depend on the same credentials or provider
Access control	Clear authority over users, privileges and administrative access	Formal ownership can coexist with external operational control
Supplier exit	Documented transition duties, formats and support arrangements	Assistance can be costly or unavailable during a dispute
Service maintenance	Availability of documentation, updates and qualified personnel	Production may depend on unsupported software

These are proposed operational tests, not claims that every firm is legally required to perform each one.

Data location, corporate ownership, legal exposure and operational control are separate questions. Locating data in Europe does not by itself establish that a manufacturer can retrieve, interpret or migrate it.

Product cybersecurity becomes a lifecycle capability

The Cyber Resilience Act reporting requirements began applying on 11 September 2026. For manufacturers within scope, actively exploited vulnerabilities and severe security incidents require an early warning within 24 hours and a fuller notification within 72 hours of awareness.

The Commission’s implementation overview places the main obligations at 11 December 2027. Applicability must be assessed against the product and the regulation’s scope. Shaping Europe’s digital future

For industrial suppliers, the organisational consequence is substantial. Connected products require maintained knowledge of software components, vulnerability-handling processes and support responsibilities. Smaller producers may need shared technical services to meet these requirements economically.

This can become a competitive capability. A supplier that can demonstrate secure maintenance and dependable updates offers customers greater confidence in the equipment’s useful life.

Key judgment. Italy’s technological sovereignty should be assessed through practical rights and capabilities: access, maintenance, modification, continuity and substitution. Domestic production without those capabilities can leave strategic dependence largely intact.

What would change this assessment. Tested migrations, qualified material substitutes, interoperable engineering information and credible lifecycle support would provide stronger evidence of control.

Open official record. Public statistics do not quantify how much Italian manufacturing depends on software or digital services that cannot be replaced within commercially acceptable interruption periods.

Chapter 11 — Pathways to 2036: Industrial Upgrading, Uneven Diffusion and Capacity Erosion

The most plausible dividing line through 2036 is the breadth of industrial upgrading. Italy can retain internationally successful firms while experiencing weak aggregate performance if technological and organisational improvements remain concentrated.

Three pathways provide a structured way to assess this uncertainty. They describe mechanisms and observable outcomes; no probabilities are assigned.

Pathway A: industrial upgrading spreads across supplier networks

In this pathway, leading manufacturers transmit stronger technical requirements and usable capabilities through their supply chains. Smaller firms gain access to integration support, qualified personnel and financing suited to complete transformation projects.

The improvement extends beyond individual factories. Product information, orders, quality records and service data become easier to exchange. Suppliers can qualify for more demanding customers, and equipment producers capture recurring revenue from maintenance and optimisation.

European integration reinforces the process when firms can sell specialised services and participate in larger industrial programmes without disproportionate administrative costs.

By 2036, success would be visible in a broader group of productive exporters and suppliers, stronger domestic engineering capacity and fewer critical capabilities dependent on a single fragile enterprise.

Pathway B: successful firms advance while diffusion remains uneven

In this pathway, leading firms and well-positioned medium-sized enterprises improve substantially. Others adopt isolated tools without reorganising production or strengthening management.

Aggregate industrial performance becomes more dependent on a relatively narrow group of enterprises. Supplier differences widen, making it harder for leading companies to integrate weaker partners. Some suppliers lose access to demanding contracts because they cannot satisfy traceability, cybersecurity or engineering requirements.

Exports can remain strong even as the supporting industrial network becomes thinner. National totals may therefore conceal a deterioration in the breadth of production capabilities.

This is the central analytical risk: Italy preserves prominent industrial successes while failing to reproduce the organisational conditions that sustain them across a wider enterprise base.

Pathway C: capacity erodes through cumulative underinvestment

Capacity erosion need not begin with dramatic factory closures. It can emerge through a sequence of commercially understandable decisions: postponing replacement equipment, reducing engineering recruitment, abandoning a difficult qualification programme or shifting a new product mandate abroad.

The consequences accumulate. A supplier loses experienced staff; customers qualify alternatives; replacement demand weakens; the remaining business becomes less able to finance renewal.

Once tooling, teams, certifications and customer relationships disperse, restarting production can require much more than purchasing machinery. The productive capability has to be reconstructed.

A manufacturing ranking may remain stable for a period because larger firms continue exporting, prices rise or competitors also weaken. Relative ranking is therefore a poor early-warning indicator of capability loss.

Table 11.1 — Three conditional pathways to 2036

Dimension	Broad industrial upgrading	Uneven diffusion	Capacity erosion
Technology	Repeatable integration across supplier networks	Strong deployments concentrated in leading firms	Replacement and integration repeatedly postponed
Enterprise structure	More firms acquire permanent engineering and management capacity	Growing distance between leaders and weaker suppliers	Exit, contraction and loss of specialised teams
European role	More qualified alternatives and stronger cross-border participation	Continued importance concentrated in selected nodes	Greater dependence on external suppliers
Value capture	Higher-value products and recurring industrial services	Gains accrue to a limited group	Price competition and weaker customer control
Territorial outcome	More locations develop usable industrial specialisations	Investment reinforces existing advantages	Vulnerable production areas lose capabilities
Main warning signal	Benefits fail to spread beyond initial participants	Supplier participation narrows despite leading-firm growth	New product mandates and qualifications disappear

Author’s scenario framework; these are not official forecasts.

Productivity and labour input jointly determine industrial scale

Long-term assessments should distinguish productivity growth from changes in the amount of labour used.

Real value added equals real value added per hour multiplied by total hours worked. A productivity improvement can therefore coexist with stagnant production if industrial labour input falls sufficiently.

Table 11.2 — Illustrative manufacturing value-added sensitivity, 2026–2036

Index: 2026 = 100.

Assumed annual growth in real value added per hour	2036 value-added index with unchanged total hours	2036 index with total hours 10% below 2026
0%	100.0	90.0
1%	110.5	99.4
2%	121.9	109.7
3%	134.4	121.0

Arithmetic illustration, not a forecast or an estimate of Italy’s future labour supply. Productivity growth is compounded over ten years; the second column assumes constant hours and the third applies a 10% reduction in total hours.

The table exposes two policy implications. First, modest annual differences accumulate into substantial differences in industrial capacity. Second, employment, hours, productivity and value added must be interpreted together.

Automation that compensates for labour scarcity may preserve output without raising employment. Conversely, employment growth in relatively low-productivity activities can support household income without resolving the long-term industrial productivity problem.

The transition will be shaped by demand as well as technology

Even technically successful investment can fail commercially if demand is insufficient or customers adopt competing architectures.

The Net-Zero Industry Act sets a benchmark for EU manufacturing capacity to meet at least 40% of annual deployment needs by 2030. It also introduces non-price considerations in relevant procurement and renewable-energy auctions.

This provides a potential demand framework, not guaranteed orders for Italian manufacturers.

Italian firms must identify where their equipment, components and services fit the technologies actually being deployed. Production capacity built around an outdated specification or an uncompetitive cost structure can become stranded despite public support.

The same consideration applies to industrial AI and software. A firm may improve internal efficiency but lose bargaining power if another participant controls the customer interface, system architecture or essential operating data.

Early-warning indicators should reveal capability changes

Table 11.3 — Indicators for distinguishing the pathways before 2036

Indicator	Evidence consistent with upgrading	Evidence of uneven diffusion or erosion
Real value added per hour	Improvement across a widening set of industries and firms	Gains concentrated in a small group
Supplier qualification	More firms enter demanding production programmes	Qualification losses and fewer credible alternatives
Technical employment	Stable teams, progression and replenishment of experience	Persistent departures and unfilled specialist roles
New product mandates	More development and production responsibilities located in Italy	Existing production remains but new mandates move elsewhere
Industrial services	Growing maintenance, diagnostics and optimisation capability	Dependence on external platforms for customer access
Investment completion	Projects reach qualified commercial operation	Repeated delays between expenditure and usable capacity
Continuity capability	Tested alternatives and shorter recovery times	Hidden common suppliers and increasing replacement times

These indicators require administrative and firm-level evidence. They should be interpreted together, since no single metric establishes the direction of the industrial system.

Key judgment. Uneven diffusion is the most important risk to monitor because it can coexist with successful exporters and substantial investment. Capacity erosion becomes more difficult to reverse once technical teams and customer qualifications are lost.

What would change this assessment. A widening distribution of productivity gains, more qualified suppliers and greater retention of new product mandates would support the upgrading pathway.

Open official record. Available evidence does not support a defensible point forecast for Italy’s manufacturing ranking, employment or value added in 2036.

Chapter 12 — Policy Options, Implementation Conditions and Final Net Assessment

The policy objective should be to preserve and expand commercially sustainable industrial capabilities whose value extends beyond individual firms. This requires more selective instruments, stronger implementation and clearer evidence of results.

The central trade-off is between supporting adjustment and preserving structures that cannot remain competitive. Economic security does not remove that trade-off; it requires policymakers to state precisely which capability they are buying, why it matters and how long support is justified.

Prioritisation should begin with a defined public problem

Three intervention rationales merit separate treatment.

A coordination failure arises when firms cannot individually finance or organise shared capabilities, such as testing facilities, qualification systems or specialist training.

A knowledge spillover arises when investment generates benefits that the investing firm cannot fully capture, weakening its incentive to invest.

A security externality arises when commercially rational sourcing or closure decisions create wider disruption risks that individual firms do not bear.

These rationales call for different instruments. A financing guarantee cannot resolve a missing technical standard. A training subsidy cannot secure a critical material whose processing is concentrated elsewhere.

Table 12.1 — Selecting instruments according to the underlying problem

Public problem	Appropriate instrument	Condition for support	Reason to redesign or discontinue
Shared implementation capacity is missing	Technical centres and integration services	Demonstrated firm demand and continuing operational support	Facilities generate demonstrations without sustained use
Commercially promising investment faces exceptional financing risk	Guarantees or co-investment	Credible demand, private risk participation and transparent liabilities	Support mainly replaces finance already available
Essential capability is vulnerable to closure	Conditional restructuring or capacity support	Product-specific security case and viable operating plan	The capability remains uncompetitive without continuing transfers
Alternative suppliers cannot obtain qualification	Shared testing and qualification support	Recognised standards and customer participation	Qualification fails to produce usable alternatives
Low-carbon production faces uncertain demand	Competitive procurement or offtake arrangements	Verifiable performance and credible buyer commitments	Support locks in obsolete or excessively costly production
Workers face technological displacement	Retraining and transition support	Relevant vacancies, recognised skills and placement evidence	Training is disconnected from employment demand

Proposed policy framework.

Establish accountable industrial governance

The Commission’s 2026 recommendations for Italy identify the continuing need for an implementable industrial strategy and effective governance.

The practical requirement is a clear allocation of responsibility across industrial policy, finance, energy, education, regions and European programmes.

A strengthened coordinating function should maintain a limited portfolio of industrial objectives, each with a responsible authority, delivery milestones and a defined evaluation method. Technical agencies and sectoral bodies would retain implementation roles; coordination should resolve dependencies between them.

Table 12.2 — Proposed allocation of implementation responsibilities

Function	Principal responsibility	Necessary coordination
Industrial priorities and capability mapping	MIMIT, with relevant sectoral authorities	Firms, regions and European institutions
Fiscal commitments and financial risk	MEF	Implementing agencies and financing institutions
Energy and connection constraints	MASE and relevant network authorities/operators	Industrial investors, regulators and territorial bodies
Technical education and workforce development	MIM, MUR and regions	Employers, ITS Academies and universities
Cybersecurity and digital continuity	Relevant competent authorities, including ACN within its remit	Manufacturers and technology providers
Programme evaluation	An adequately independent evaluation function	Statistical authorities and implementing bodies

Proposed responsibilities, not a claim that a new institutional structure has already been established.

Coordination will be ineffective without access to reliable evidence. Beneficiaries should provide proportionate operational data needed to evaluate results, with commercially sensitive information protected.

Combine broad improvements with selective capability support

Broad measures should make productive investment easier across the economy: predictable administration, functioning infrastructure, technical skills, access to finance and effective competition.

Selective measures should address clearly identified capabilities whose benefits cannot be secured through those general improvements alone.

The Clean Industrial Deal State Aid Framework applies from 25 June 2025 to 31 December 2030. It provides routes for support concerning clean energy, electricity costs for energy-intensive users, industrial decarbonisation, clean-technology manufacturing and investment risk reduction.

It is a framework for compatible national support, not an automatic European funding allocation.

This distinction is particularly consequential for Italy. More permissive aid rules can accelerate investment, but they can also intensify competition between national budgets. Italy benefits from common European financing and cross-border projects where industrial spillovers extend beyond its territory.

Support should therefore be judged partly by its European contribution: whether it diversifies supply, preserves a difficult-to-replace capability or enables production elsewhere in the single market.

Finance complete projects and retain private incentives

Investment programmes should recognise the expenditure needed to reach commercial operation: integration, qualification, workforce preparation and commissioning, as well as equipment.

However, expanding eligible expenditure should not eliminate discipline. Firms should retain meaningful financial exposure and demonstrate a credible route to commercially sustainable operation.

Payments can be linked to verifiable stages, with suitable treatment of genuine technical uncertainty. Research projects require a different approach from routine equipment installation; failure to achieve a research result is not equivalent to failing to deliver an agreed asset.

The key is to define success and acceptable risk before committing public money.

Build demand without closing the single market

Resilience criteria can help purchasers recognise supply security, lifecycle support and delivery reliability. Poorly designed criteria can instead restrict competition and raise costs without reducing vulnerability.

Procurement should specify the operational outcome required. Relevant considerations can include qualified alternatives, maintenance availability, recoverability, environmental performance and continuity arrangements, subject to the applicable legal framework.

Country-of-origin labels alone offer an incomplete assessment. A nominally European product can contain a concentrated upstream dependency, while a diversified international supply arrangement can provide credible continuity.

Public buyers also need commercial and technical competence. Complex procurement cannot reliably deliver industrial strategy if authorities lack the staff to assess performance, negotiate risk allocation and monitor contracts.

Sequence implementation around capability delivery

The first phase should establish a credible baseline and resolve urgent bottlenecks. Later phases should expand measures that demonstrate results and discontinue those that do not.

Table 12.3 — Proposed implementation sequence, 2026–2036

Period	Main task	Concrete deliverable	Evaluation focus
2026–2027	Define priorities and identify vulnerable capabilities	Product-specific capability register and programme baselines	Whether the identified risks justify intervention
2027–2029	Build implementation and qualification capacity	Operating technical services, qualified alternatives and completed initial projects	Actual use, commercial uptake and delivery
2029–2031	Evaluate and expand effective measures	Independent programme assessments and revised funding allocations	Additional investment, productivity and reduced vulnerability
2031–2033	Address persistent gaps	Targeted redesign or withdrawal of ineffective support	Remaining constraints and opportunity cost
2033–2036	Renew the capability portfolio	Updated priorities reflecting technology and demand	Commercial sustainability and European contribution

Recommended sequence, not an existing government timetable.

The 2030 horizon of several European instruments makes continuity planning essential. Firms should be able to distinguish the duration of public support from the longer commercial life of an investment.

Measure outcomes beyond expenditure and participation

A programme can meet spending targets while producing little industrial value. Equally, benefits may emerge gradually after installation and qualification.

Evaluation should follow that sequence without treating every intermediate step as final success.

Table 12.4 — A proposed industrial-policy results framework

Objective	Intermediate evidence	Outcome evidence
Raise productivity	Systems installed and workers prepared	Sustained improvement in real value added per hour
Strengthen resilience	Alternatives identified and tested	Usable substitution and shorter recovery times
Expand industrial capacity	Construction and equipment completed	Qualified commercial output and viable utilisation
Improve technical skills	Courses completed and qualifications obtained	Relevant placement, retention and progression
Increase technological control	Data access and transition arrangements established	Successful restoration, migration or supplier substitution
Reduce material vulnerability	Collection and processing capacity established	Industrial-quality secondary materials delivered to users
Support industrial upgrading	Firms enter development or qualification programmes	New product mandates and durable customer relationships

Where feasible, evaluations should compare beneficiaries with credible non-beneficiary groups. Results should distinguish the effects of support from changes in demand, prices and the wider business cycle.

Distribution also matters. A programme that improves a few leading firms may be valuable, but it should not be described as broad diffusion unless benefits demonstrably reach a wider enterprise population.

Final net assessment

Italy remains a major source of European industrial capability. Its strategic contribution is especially strong where specialised engineering, materials processing, production equipment and qualified manufacturing support activities that cannot be replaced quickly.

Its vulnerability lies in the incomplete connection between those strengths. Valuable factories can depend on concentrated upstream materials, externally controlled digital systems and a narrow base of technical personnel. Successful exporters can coexist with weakening supplier networks. Large investment commitments can coexist with delays in reaching qualified production.

The most consequential policy choice is whether to organise upgrading around complete industrial capabilities. That means linking equipment to engineering, investment to qualification, data access to usable control, and public support to commercially sustainable output.

For Europe, preserving Italian manufacturing is an investment in the diversity and depth of the single market’s productive system. For Italy, European integration provides the demand, partnerships and scale required to sustain capabilities that the domestic market alone cannot support.

The final assessment is conditionally favourable: Italy possesses a substantial foundation for industrial upgrading, but its position through 2036 will depend on whether implementation spreads beyond leading firms and whether European resilience becomes a measurable operating capability. The decisive evidence will be productive performance, qualified alternatives, retained technical knowledge and the ability to keep manufacturing under stress.

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