Construction of Manufacturing Facilities Is Booming Since Passage of CHIPS Act

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The CHIPS Act has spurred $898 billion in private investment for U.S. manufacturing, including TSMC’s $65 billion Arizona complex, but concerns remain over water usage, high interest rates, and construction delays.

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Construction of Manufacturing Facilities Is Booming Since Passage of CHIPS Act

Two years ago, President Biden signed the landmark $52 billion CHIPS and Science Act to revive and grow the nation’s manufacturing sector. The investment was aimed at expanding the number of facilities that manufacture semiconductor chips and strengthening the design and research of the technology, particularly as the U.S. looks to cut down reliance on foreign manufacturing, particularly in China.

Semiconductors have become an increasingly crucial piece of technology that is a component in many Americans’ everyday items. Since the passage of the bill, a number of major semiconductor projects have gotten underway across the country. According to the White House, the push for more American manufacturing has led to more than $898 billion in private investment, from biotechnology facilities and chip fabrication plants to EV battery factories and clean energy projects. 

Arizona is one of the states that has become a hotspot for chip factories. These kinds of facilities are highly specialized and have extremely complex designs and systems, which is what makes them so expensive to build. The biggest project in the U.S. at the moment is in Phoenix, where Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest chip maker, is building a $65 billion semiconductor fabrication complex. The development is being funded with more than $11 billion in subsidies and loans through the CHIPS Act.

Some of the latest manufacturing developments to be announced are a $1.4 billion facility in Rocky Mount, North Carolina, by Natron Energy, a $680 million project in Chesapeake, Virginia, by the cable manufacturing company LS GreenLink, and in Taylor, Texas, a $575 million semiconductor plant being developed by South Korean electronic chemical maker Soulbrain TX. EV manufacturing is an important part of the CHIPS Act as well, and one of the largest projects rising in that sector is Japanese auto manufacturer Toyota’s $13.9 billion EV plant in Liberty, North Carolina.

Major players in commercial real estate are getting in on the big manufacturing push, too. The same month the CHIPS Act was signed into law, Brookfield Asset Management announced a partnership with chip maker Intel through its affiliate Brookfield Infrastructure Partners to invest $15 billion in Intel’s under-construction semiconductor plant in Chandler, Arizona. And nearby at TSMC’s $65 billion complex in Phoenix, an affiliate of Mack Real Estate Group and McCourt Partners purchased more than 2,300 acres of land directly surrounding the complex. The real estate developer is looking to build a $7 billion tech village at the site, with plans calling for housing, hotels, restaurants, and office buildings across 28 million square feet of new space.

While progress is certainly being made to grow the country’s manufacturing sector, concerns have been raised about what kind of impact all the new developments will have on surrounding communities. In Arizona, a state that has been plagued by droughts, environmental groups have questioned whether there is enough water for the semiconductor facilities, which rely on water to cool systems and generate electricity, among other things. 

Ongoing high interest rates could also slow potential real estate development deals from moving forward near manufacturing megaprojects, and at some of the largest developments, including TSMC’s facilities in Arizona, construction delays have set back completion dates. Still, spending in the manufacturing sector has boomed, and more projects are being announced across the country. And given the expected upcoming interest rate cuts and a significant increase in manufacturing construction spending over the last 12 months, the country’s big manufacturing push will continue to gain momentum.

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