Quick Bites | US high-tech factory construction boom

Spending on construction projects for manufacturing plants in the US started breaking out in January 2021. That month, about $6 billion was invested in building factories, same as in January 2015. But then monthly construction spending for factories began to spike and in July set a new record of nearly $17 billion.

Source: Wolf Street 


The surge comes in a supportive policy environment for manufacturing construction: the Infrastructure Investment and Jobs Act (IIJA), Inflation Reduction Act (IRA), and CHIPS Act each provided direct funding and tax incentives for public and private manufacturing construction. These are amongst the most significant achievements of the Biden Administration.

The boom is principally driven by construction for computer, electronic, and electrical manufacturing – a relatively small share of manufacturing construction over the past few decades, but now a dominant component.

To put the trend in an international context, this surge appears to be a uniquely American phenomenon and has not been mirrored in other advanced economies.

The US figures are staggering: up 186% over the 30 months from January 2021 through July 2023, and up 148% over the 24 months from July 2021 to July 2023. At the current pace, companies are investing nearly $17 billion per month in building manufacturing plants, or about $200 billion a year.

Most of the new factory construction has been focused on high-technology industries with high-value outputs: semiconductor plants, EV plants (Tesla, legacy automakers, and startup companies are ploughing billions of dollars into ramping up manufacturing), component makers, makers of computer, electronic, and electrical equipment.

All of them are high-tech and are highly automated factories. Industrial robots cost the same in the US as in China. They’re the great equalizer when it comes to costs.

There is still a huge amount of manufacturing in the US. By output, the US is the second largest manufacturing country behind China, and larger than Germany, Japan, and South Korea combined.

The problem is that the US has fallen far behind China and that many industries are dependent on imports from China and other countries. When the pandemic disrupted supply chains, suddenly there were massive shortages of the most needed products, including semiconductors. So that was a wake-up call.

In addition, as trade relations between the US and China have soured, companies are seeing new risks in being dependent on China.



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