Eyepopping Factory Construction Boom in the US: Chip Makers on Forefront, but CHIPS Act Funds Not Even Released Yet

Supply-chain chaos, edgy US-China relations, and scary dependence on China triggered a rethink, now showing up as investments in manufacturing plants.

By Wolf Richter for WOLF STREET.

In December, companies plowed $18.4 billion into the construction of manufacturing plants in the US ($220 billion annualized), up by 64% from a year ago, up by 131% from two years ago, and up by 170% from December 2019, according to data from the Commerce Department. The boom in investment in manufacturing plants started in mid-2021.

For the whole year 2023, spending on factory construction spiked by 71% from 2022, and by 138% from 2021, to $196 billion. This is an eyepopping boom. It’s the result of the supply-chain and transportation chaos that companies ran into during the pandemic, the fragile and edgy relationship between the US and China, the scary dependence of US companies on production in China, and in terms of semiconductors, the dependence on production in Taiwan. It all triggered a corporate and government rethink.

And yet, the government subsidies for the semiconductor industry haven’t even made it out the door yet and haven’t shown up in this data here yet, as we’ll see in a moment. That will come later. And the boom wasn’t construction-cost inflation either in 2023 because that has largely settled down:

The US is the second largest manufacturing country by output, behind China and has a greater share of global production than the next three countries combined, Germany, Japan, and India. But it has fallen far behind China in manufacturing. And many US companies and entire sectors are brutally dependent on China, and they got a wake-up call during the shortages and supply-chain chaos of 2020-2021.

The $53 billion CHIPS Act: funds have not yet been disbursed – that’s still coming.

The CHIPS Act, passed in 2022, is a package of grants, loans, loan guarantees, and tax credits for semiconductor makers to entice them to onshore semiconductor production. Of the $53 billion, $39 billion are manufacturing grants that cover up to 15% of the total cost of the fab, up to $3 billion per fab.

About 80% of the cost of a fab is the equipment; construction costs are only a small part of the total. In terms of the data here, we’re just looking at spending on factory construction, not equipment.

But the process of approving the projects and disbursing the cash has been slow. Over 170 companies have applied, including giants such as Intel, Taiwan Semiconductor Manufacturing Co. (TSMC), Samsung, and Texas Instruments. But other than two small grants, no money has been disbursed yet, according to the WSJ.

“This is a merit-based process with tough commercial negotiations – CHIPS awards will be entirely dependent upon which projects will advance U.S. economic and national security,” a Commerce Department spokeswoman told the WSJ.

Industry executives familiar with the negotiations told the WSJ that announcements of large grants will be forthcoming over the next couple of months. The announcements would be preliminary, to be followed by due diligence and then final agreements. Funds will be disbursed in phases as the projects progress. But because of permitting issues and other delays, it could still be years before the plants will be completed.

Among the complications and delays are the CHIPS Act’s requirements on national security, potential shortages of skilled workers – given this sudden boom in activity – and the National Environmental Policy Act, which requires large federally funded projects to pass environmental review before grants are released, which can take years, according to the WSJ.

So these government funds are in the future, and haven’t yet seeped into this data here of factory construction spending.

But there has been a flood of corporate investment: Semiconductor makers already have large projects underway. Intel is building fabs in several states for a total investment of over $43 billion. TSMC has two fabs under construction near Phoenix, for a total investment of $40 billion. Samsung Electronics is investing $17 billion in a fab near Austin. Texas Instruments is investing $30 billion in a massive project near Sherman, TX. Etc.

These are total project costs, including equipment. Construction costs alone are only a small portion of it. But it does add up.

All this activity is happening before the government funds have been disbursed, and before those government funds have made it into the data here on factory construction.

Construction cost inflation was not behind the 2023 spike.

The Producer Price Index for construction of nonresidential buildings hit a peak in January 2023 and has since then declined by 1.4%, and is roughly flat year-over-year. So construction cost inflation was not a major factor in the 2023 spike of construction spending, though it was a factor in 2022.

Investing in manufacturing plants has a large-scale long-term impact on the economy.

Construction spending is the one-time activity to get the building and infrastructure in place. Then there’s the purchase and installation of the equipment. Modern plants are highly automated. And the equipment is more expensive than the building. And then there’s the actual production for many years, with its secondary and tertiary effects on the local and national economy.

Automation equipment and industrial robots cost roughly the same in the US as in China. US labor costs are far higher, but other costs are reduced by bringing manufacturing onshore: Transportation costs are lower, lead times are shorter, there is less geopolitical uncertainty, less risk of losing or having to surrender the IP via technology transfer, etc. So somewhere along the line during the pandemic, something seems to have clicked in the corporate mindset.

We also note: employment in manufacturing rose to a 15-year high:

In January, jobs in manufacturing rose to 13.0 million, the highest in 15 years, according to the jobs report on Friday:

And employment in construction rose to an all-time high:

In January, jobs in construction rose to 8.1 million, the highest ever, according to the jobs report on Friday:

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  83 comments for “Eyepopping Factory Construction Boom in the US: Chip Makers on Forefront, but CHIPS Act Funds Not Even Released Yet

  1. Xavier Caveat says:

    How much of our vaunted nearly trillion $ a year military uses chips?

    • Wolf Richter says:

      🤣 consumer products sold to hundreds of millions of consumers in the US, and billions of consumers globally — such as smartphones, cars, appliances, computers, toasters, watches, etc., — plus corporate equipment, robotics, automation equipment, office equipment, network gear, data centers, AI servers, etc., plus all the other stuff out there use a lot lot lot lot lot more chips than the small-scale manufacturing for defense equipment.

      But chips are essential for defense equipment, and it makes total sense for national security to make sure that there is onshore supply.

      • Xavier Caveat says:

        Keep an eye on the missile biz and see how quickly we can replace million $ ones taking down cheap Red Sea drones, that’s what i’m talking about.

      • AuHound says:

        I did work with two military contractors that required embedded process control hardware/software and was interviewed for two others so I have some expertise on this.

        One item to consider on military chips is reliability is paramount. It is hard to call customer support in a firefight.

        For instance, the old RCA1802 chip (the processor used in both Voyager spacecraft) had a power range of 3.5v to 25v so the power supply could vary all over the place. Most commercial chips today have a variance of +/- .2v which means a much more exact power supply, which is easy in a desktop but harder in a tank.

        Also, enough chips have to be purchased by the contractor to last (when I was active) 25 years after the last unit is shipped (this made for interesting monthly procurement meetings.

        This means almost always the chips in actively fielded military equipment are obsolete by civilian standards and manufactured by military or speciality companies such as Rockwell as Intel, AMD etc. only find it profitable to manufacture mass production (meaning latest & greatest) consumer chips.

        • AuHound says:

          Out of curiosity I googled 1802 chips (introduced in 1975 in the single chip version):

          “Its proven reliability means the 1802 is still made for some mission-critical applications, although new chips are pricey and hard to get: about $146 each for an order of 1,000 chips, with a five-month lead time.” OUCH!

        • Xavier Caveat says:

          So much for scaling up when you have a 5 month lead time on military chips in a hot war scenario.

    • Zest says:

      National security does not mean ONLY military use. It also doesn’t mean only governmental use. Though those things are definitely significant components.

      In the case of chips, I’d suggest that the greater portion of national security concern boils down to economic self-sufficiency across all sectors, ensuring our domestic industry has a robust and modern chip manufacturing industry, and reducing the ability for China specifically to use chips as an economic or diplomatic weapon against us.

      There may also be a component of reducing the ability for foreign nations to use supply chain attacks for cyber or intelligence purposes, especially when used in critical infrastructure or sensitive IT networks.

      • Jeff Lane says:

        The CHIPS funds will be given to the tech companies who do the best job of spying on the general public.

  2. Herpderp says:

    The writing is on the wall for Taiwan. Semiconductors are too critical to be centered in such a place.

    • Nick Kelly says:

      The head of TWSC was in the US a few months ago. He was not dismissive of the US funding but said something like ‘not a bad beginning’

      Interesting trivia re: fab plants. Holland is a key player in something called roughly ‘ultra violet lithography’ whereby the circuit is photographed onto the wafer. The US wanted Holland to stop selling to China but at a hundred million $ per order, the Dutch want the business.

      One TWSC corporate strategy: ‘we don’t compete with our customers’.
      They don’t make the stuff chips use: phones, comps etc.

      • punkte says:

        No, ASML, the dutch company you’re talking about has to follow US export restrictions because of patents. They aren’t exporting the latest and greatest to China.

        A great Youtube channel regarding chip technology its history and asian history is Asianometry. Highly recommend.

      • Bill says:

        Try each machine for 5nm or smaller is ~$350M. Most fabs need to order many to enable the wafer thru put required due to processing times. These machines take 3 747 planes to transport (each machine).

    • rick m says:

      Herpderp- Retired General and plain spoken author Qiao Liang would probably agree.

    • Harrold says:

      Let’s not forget what wolf pointed out — the chips act money hasn’t even been released yet. This is all in response to the pandemic. Almost every manufacturing company gave up a lot of sales because of the chip shortage. It’s the reason why weird things happened, like used cars costing almost as much as new.

      Manufacturing went offshore for good reasons. The US doesn’t have the skilled labor at the lowest cost. Complaints about regulations/taxes, etc… There is no guarantee any of this will work. The next 20 years will be fun to watch.

      • David sl says:

        If we have a sensible immigration policy, we could easily onshore the necessary talent from the nations that we otherwise would be competing against China, Korea, Japan, Europe. There’s no reason for us not to be 100% competitive across the board on this. Just need to have some imagination.

        • Wolf Richter says:

          If there is demand for certain jobs, and the pay is high enough, and working conditions are decent, Americans will flock to that industry, and they will be willing to learn, get the right degrees, and train. Bringing this industry onshore takes years, it’s not overnight, and bringing up the workforce for it should be done in large part onshore too.

        • TheOneWhoKnows says:

          Doesn’t matter how many immigrate. We have minimum wage, lawyers, osha, EPA, and local authorities all with their hands out for money. The US can compete, but we’ll need severe import tariffs, which funds an even larger government.

        • toshin says:

          “Pay is high enough”, “working conditions are decent”, “get the right degrees”

          What makes this market different from car manufacturing, that will make it work where the latter didn’t? The barrier of entry in chip manufacturing is much higher and there is no labor union.

      • SH says:

        So called ‘skilled labor’ is becoming far less important with advances in mechanization, robotics and AI. That is a part of the reason it’s economical to manufacture in the US again.

        • toshin says:

          When will “mechanization” of manufacturing of advanced chips happen? Any source you can give on using robotics and AI in chips manufacturing? Or, is it just throwing around buzzwords mixed with some speculation?

      • VintageVnvet says:

        Please please please folks,,, understand that NOW, and THEN,,, ”Manufacturing went offshore for good reasons.”
        WERE and ARE ”good reasons” for the oligarchs and their puppet politicians,,, and NOT for USA working folks…
        Done with listing all the very clear examples, some of which I saw personally,,, but those very same examples still UP on ”responsible net.”

      • Greg Hamilton says:

        Manufacturing did not go offshore for good reasons. Far from it.

  3. Glen says:

    What form do subsidies take? Seems like so much of what goes into whiz bang technology like iPhones is mostly publically funded technology and then a company invents a few things and packages it and gets most of the benefit. The ‘last mile” companies seem to benefit the most out of all of this. That is of course where the surplus value is added and so this is seem in many examples outside of technology as well.

  4. DR_ECE_Prof_FinancialWizard says:

    I wonder if the spending also (in addition to all the facts you mentioned) got influenced by no more ZIRP (to indulge in financial engineering to juice up the stocks) — meaning they need to do real engineering now to survive (and we know how far Intel has fallen down; the second IC manufacturer owned by SA is also way behind; the new company WolfSpeed for special chips having problem in getting the traction).

    You mentioned about jobs. As a ECE&CS faculty, researcher, I know where we get them — foreign students, mainly from India and China. They are already in big number here that the wait time for immigrant visa is phenomenal (more than 10 years now) which means they are locked with the sponsor ===> less leverage for the employees that would translate into less bargaining power for them as well as our own citizens (yes, things have been good for now).

    I recall while at NSF, the politicians were upset that NSF pushed for Comp. science program expansion only to find our graduates were not getting jobs. At least in the last 15 years, the could flourish in real estate and stock speculation (one is dead; the other one still great).

    As a researcher, I always look into the future (and miss the present fun !).

  5. Roger Pedactor says:

    And Chinese outflows are nuts.

    This is fully now “invest in countries that have a military and aren’t fascist, communist, or a basketcase, oh wait there is only one.”

  6. Hubberts Curve says:

    A big part pf the construction cost in the big Intel fabs is not just the building itself, and the tools but the installation of the tools. A typical tool ( piece of chip fab equipment) will take a crew of 5 union pipe fitters 3 weeks to put in place and run all the various supply lines to ( gas, water, chemicals etc).
    A lot of the tools are first installed in the Intel Mothership factory in Oregon ( Ronler Acres). Then when they are up and running and the process is proven, and the yields are hit then the tools are un-installed and moved to Arizona, Ireland or perhaps the new plant in Ohio. This next year Intel is sheduled to uninstall and move 800 tools from Oregon ( millions$ each) and ship them off to the production fabs.
    The process of un-installing these tools is often more difficult than installing them because of the dangerous chemicals and gases left in the lines. Then when they are ready to go they must be loaded in special containers ( like fancy white shipping containers with climate control) and shipped to their new home where they must once more be installed by a crew of union pipe fitters.
    The cost of moving just a few of these tools (which is performed by outside contractors ,not Intel employees) can add up to a lot of money in a hurry.

    • NYguy says:

      This seems odd to me. Is part of it proof of concept? If so, why not after the first successful run do they not deploy to the destination sites and then just reimplement the process. Maybe I’m reading your post wrong but I get the impression they do the assembly, test and validation in Oregon, break down, ship and reassemble at destination and then lather rinse repeat in oregon for each destination. Maybe there’s IP involved they don’t want leaving the Oregon facility?

      • Hubberts Curve says:

        These tools are not ready to produce their step in the chip making process right out of the box, nor do the manufacturers of the tools have the skills or employees to fully bring these tools in to production. The last step in the process has to be done by Intel’s engineers and scientists. Each of these tools has at least one PHD analyzing it, monitoring it and tweaking it to meet the exact specs required.
        I know a PHD mechanical engineer who does nothing but monitor the vibration characteristics of a single tool ( on a nano scale) and make tweaks when the parameters get out of bounds or the chip will be ruined.
        After the first migration of machines that have been set up in Oregon moves to Arizona it might be possible to then send the same machines direct from the vendors to Ohio. But it is likely that by that time they will want to move on to the next generation of chips which will take different tools and different process’s which will have to be “proven” all over again.
        The level of detail that it takes to make chips at 10nm and below is extreme, expensive and like, landing on the moon, has nothing to do with efficiency. That is also why chip fabs are so expensive and construction costs are so high.

        • NYguy says:

          Ok thanks for the info. Definitely take for granted what goes into making things that are ubiquitous in our daily lives.

  7. Dave W says:

    “Employment in manufacturing” data is useful fir short term comparisons, but flawed longer term because of how things are categorized.
    Long ago, manufacturing companies employed their own cleaners, and all kinds of support staff – who we’re categorized as manufacturing
    Today, those are all outsourced to specialist providers, and categorized as service workers.
    In many cases, the exact sane people doing the exact same job get recategorized based on corporate structure.
    As HR, accounting, marketing services, IT, etc are outsourced, the sane thing continues to happen.

    Treat this data with caution !

    • Wolf Richter says:

      The surveys go to a street address with a business, and the NIACS code of that business determines the industry classification, and every cleaner, driver, manager, accountant, assembly line worker, robotics engineer on the payroll at that plan is a job in “manufacturing.”

      Manufacturing has the NIACS codes 31… to 33… So I just looked this up for you: For example, Cane Sugar Manufacturing = 311314 and Semiconductor Machinery Manufacturing = 333242. So if the survey goes to the business at X address, and the NAICS code of that facility is 333242, then everyone who is on the payroll at that facility works in “Semiconductor Machinery Manufacturing”

      So if the cleaning team is provided by a contractor and doesn’t show up in the survey of the manufacturing plant, it would make manufacturing employment EVEN STRONGER (because they’re working at a manufacturing plant but don’t show up under manufacturing jobs).

  8. Publius says:

    Wolf, you’ve mentioned that the cost of robots is about the same in the US and China. Do you have data on that? If China makes their own, wouldn’t it be cheaper due to lower labor costs?

    • Wolf Richter says:

      Robots and automation equipment in general are global products. When it comes to robotics, China isn’t the leader at all, it’s quite a bit behind. It buys much of the most sophisticated equipment from Japan, Germany, South Korea, etc. To make headway in robotics, a Chinese company bought the big German robot maker KUKA in 2016. KUKA has two dozen subsidiaries in the US and other countries. Robots are everywhere. It’s a competitive market. One of the things Germany and Japan are good at selling to China is automation equipment and robots. Japan is the superpower of robotics and has been for many years. South Korea is strong in robotics, Taiwan is too. China just doesn’t measure up. A US company is going to pay the German or Japanese robot maker a similar price for the equipment as a Chinese company has to pay to buy the same equipment.

      • Publius says:

        Thanks, good to know!

      • Greg Hamilton says:

        As Wolf points out Boston Dynamics was acquired by Hyundai, a Korean company which makes them the leader in the field. I’m sure our friends in Washington have seen Robocop and aware of ED-209s abilities.

        • Wolf Richter says:

          Are you confusing mechanical dogs* with industrial robots?

          “As Wolf points out…”🤣 Wolf pointed out no such thing, though it did happen. Wolf pointed out that KUKA, the giant German industrial robot maker, was acquired by Chinese firm Midea.

          * which is what Boston Dynamics makes.

      • Lynn says:

        That is so interesting.

    • Hubberts Curve says:

      An interesting dynamic is that countries with low labor costs have less of an incentive to develop and deploy robotics. Back in the 90’s when most of the serious robot companies cut their teeth, ( Fanuc, Panasonic, ABB, Kuka) the cost of industrial labor in Europe and Japan was much higher than in the U.
      S. Thus German or Japanese companies had more incentive to buy robots and their companies had incentives to build them, while our our only fledging robot company ( Unimat) died on the vine.
      Back in the late 90’s and early 2000’s when I was purchasing sheet metal production equipment nearly every factory I visited in Germany or Japan had automation on their press brakes or punch presses. But the equipment they sold here in the US rarely had automation. I did the calculations and at the time I could get sub $15 per hour employees to operate these machines and that was cheaper than the capital cost, added maintenance cost and extra cost of a specialist to set up and program this equipment. This is changing here rapidly but the ship has sailed on us having a robot industry.
      China is still at the chicken and egg stage where it is cheaper to have an employee to feed a $100,000 press brake than it is to pay the extra $250,000 for a Japanese Robotic system to do the same job.

      • John H says:

        Hubberts Curve-

        Thanks for edifying info in your last 3 comments!

        Regarding the incentives for using robots in manufacturing: does the HR/legal liability cost of injured workers (e.g. old-fashioned punch press mishaps) avoided via removal of human limbs from vicinity of multi-ton hydraulic presses play much of a roll in the decision to convert to robotics?

        I suspect that workplace injuries and workers compensation laws play into the decision?

        • JD says:

          There are light curtains and other safety mechanisms that are much simpler and cheaper than turning your press fully robotic.

        • Hubberts Curve says:

          Workplace safety does not fit in to the decision much ( other than back strain and repetitive motion injuries) because both press brakes and punch presses ( I was speaking of cnc flat sheet punches, not the kind where you put in a small blank and step on a peddle) have been well protected against injury by light curtains and light beam guarded safety zones since the early 1990’s.
          In some cases the robots themselves can be more of a safety hazard than the machines, if not properly guarded. To see a modern robot on a press brake in operation you can look for one of the videos on you tube where they tour the plant where they make the stainless panels for the Tesla Cybertruck . They use a German ( built in Austria) Press Brake with a German robot, all safely behind a big plexiglass wall.
          In this case the robots really pay for themselves because it is making the same parts of the same material 24 hours a day, and the large panels would require 2 humans to handle.

        • John H. says:

          JD and HC-

          That all makes sense. Thanks,

        • Bill says:

          Humans on these cleans rooms are contaminants that greatly lower yields. Make up, cigarette/cigar/pipe/pot smokers, etc have lots of particles (contaminants) they either shed or breathe out of their bodies.

          In addition, humans make errors that impact yields (over/under exposure, over/under etching, etc). Humans drop wafers, wafer boats,etc that not only hurt yields from breakage but cause more particles (contaminants) in fab.

          This is NOT about $/hr human wages for robotics inside a fabrication site.

  9. joe2 says:

    About time. Perhaps starting an overhaul of the educational system is also warranted to on-shore qualified workers.

    • Softtail Rider says:

      joe2 from where I sit education seems regressed to somewhere in the late 1700s to 1800s as it costs parents money. It also reminds me of growing up with some parents telling their children education isn’t worth the trouble. You should be bringing in money for the family.

      I watched tree granddaughters, all A students, gather college degrees and find good jobs. Maybe in many people regressing another group will gain much wealth and knowledge.

  10. Harrold says:

    ASML sold China something like 100 of those UV lithography devices before sanctions kicked in. You know they’ll be assigning teams of engineers to dismantle and duplicate every part. Monopolies on tech are hard to maintain for long.

    • Hubberts Curve says:

      It will take them a while to duplicate the ASML machines. Though ASML is Dutch ( a spinoff of Phillips) their secret sauce is their partnership with Carl Zeiss Company. Right now even the two world class optics companies in Japan ( Canon, Nikon) can not make the quality of lens and mirrors required for ASML’s machines. The process’s, skillset and specialty machines that Zeiss has for optics will take the Chinese a while to duplicate.
      The real earthquake in the industry would be if the Chinese were allowed to purchase Zeiss like they did Kuka.

      • Nick says:

        The secret sauce is putting everything together! The amount of tunnign and software is incredible ( I work at that company). The idea that people have about those Factories are insane! If they think it´s jsut buy all the hardware and they are ready to go… The secret of Taiwan is there people know how! And that, is lacking in Europe and USA.

  11. Harvey Mushman says:

    This is very positive and exciting news to me!
    Makes me think that our unemployment numbers will remain low for the foreseeable future. Maybe the Fed will have to continue with its fight on inflation. Maybe interest rates will remain at a higher level for longer.
    Best of all, it seems our government is serious about keeping or regaining out technical edge.

  12. JeffD says:

    From Semiconductor Digest:
    “An individual fab can use tens of millions of gallons of water per day. To put this into perspective, average water usage in the U.S. is about 82 gallons (310 liters) per person per day, making 10 million gallons equivalent to the daily household water consumption of a small city (population 122,000).”

    Last time I checked, Arizona is in a severe water deficit that is snowballing each year. Why build a fab when the local government will soon mandate its closure?

    • American Dream says:

      Because they’re short sighted and likely had near term financial incentives to build there.

      Intel has been big in Phoenix or in Chandler anyways for a long time so there’s that example also

      Generally I after with you though… Anybody building anything in Arizona is silly. It just gets hotter and hotter and there is less and less water but can’t be surprised…. Take the money now and then it’ll be the next generations problem

    • BH says:

      Per an employee that works at Intel, they’re able to reclaim about 90% of the water they use at a fab. But still, I think it will be a longer term problem in Arizona. I’ve no insight into TSMC’s efficiencies but I’ve driven past that fab they’re building on the 303 and it’s huge. It also seems like its completion is being kicked down the road and could be 2028 until it’s completed now.

      Since it sounds like very little of the CHIPs money has actually been distributed (who knows when TSMC will get their slice of the pie) I wonder if the construction could get abandoned part way through, because as Wolf points out the actual building construction is small potatoes compared to that of the machinery.

      There’s geopolitical factors to consider with China and all and the current administration seems kinda wishy washy on their stance with Taiwan.

  13. OutWest says:

    Mo chips, mo problems…most people are being fleeced.

  14. NYguy says:

    While I’ve read peoples experience with reshoring and how it’s doing well I’m wondering how much of the push to remove China from the loop is domestic and how much is in India, Mexico and elsewhere. As others above have said, a chip plant in Arizona seems like a questionable decision. And as you said Wolf, virtually none of the chips act money has been spent. Why not? Not adding up to me.

    • Kenny Logouts says:

      The whole magnificent seven/AI trade, the chip stimulus, the fiscal stimulus, and FRB tightening/QT just don’t add up either.

      The whole USA economy booming feels like it’s based upon reshoring chips and AI.

      Strip those out and it’s looking a bit grim?

      • Wolf Richter says:

        For some people, the economy always looks “grim,” no matter what it actually is. It looks “grim” to them because they want it to look grim. This is a $27 trillion economy, Trillion with a T. So the $52 billion CHIPS act (spread over many years) and the $200 billion in overall factory construction spending in 2023 are just tiny factors. The biggest driver behind this economy are the consumers that are spending like drunken sailors – because they’ve gotten the biggest pay raises and COLAs in decades, and because they’re working in record numbers, and because they’re earning 5% on their savings, T-bills, and MM funds, and because mom-and-pop landlords (there are 15 million of them) got the biggest rent increases in decades, as we have documented here for I don’t know, 18 months?

        • Mike says:

          I am always grimming

          Given that, there’s this:
          – rise in pay day loans
          – increase in credit card debt
          – burden of refinancing low % debt with much higher debt
          – sharp uptick in google searches for “give car back” and “can’t pay credit card”
          – clearly compromised data (constantly being revised lower, e.g., employment #’s)
          – CRE crash ( some building 90% discount)
          – unrealized bank losses ($750B, hidden by BTFP)

          While skies are currently clear, storm clearly visible on the horizon…

        • Motorcycle John says:

          So True. The perm-a-bears sound eerily like the “20 rate cuts” in 2024 cheerleaders’. One thing I learn with every post you make is I know little and if I listen to the financial media I would know even less. Thank you Wolf.

        • Motorcycle John says:

          BTW when was the last time you have seen a Bloomberg or Market Watch story telling you to SELL anything? It is always Buy this sector or Buy that sector. The closest they come to SELL is a story on some stock or sector experiencing a ” head wind” then they go on to say ” This may be the time to back up the truck”

        • NYguy says:

          So no explanation as to why the money allocated for the chips act hasn’t been spent? When the bill was passed it was hailed as a big deal but now that the money is languishing, we are told it’s no big deal because it’s not much money, gotcha. I guess this is more bidenomics logic. Same thing for all the cities overrun by homeless, drugs, crime and illegals and record low savings for some demographics with buy now pay later increasing but muh 5% tbills so it’s all good.

        • Wolf Richter says:


          The explanation is in the article, all you have to do is read it.

        • JimL says:


          Hey better sources of info. The one’s you are using are taking advantage of you. Why use sources that make you look silly?

  15. matt says:

    In last section. “In January, jobs in manufacturing rose to 8.1 million”
    I think it should be construction instead of manufacturing.

  16. Bs ini says:

    This is fantastic for USA and long term economic growth . Thrilled to see USA government invest funds that return some high skilled jobs for decades and looking forward to the release of funds as these projects mature . Some will drop out of course while others will mature .

    • The Real Tony says:

      It’s about time as quality control in China is still as bad as ever. If its made in China its certain to break in no time.

      • Glen says:

        China, like most countries with highly developed industrialization can make products at all different price points which generally relate to quality and how long it will last. While the US is generally considered high quality it is often hard to find similar products. I know from both my parents and my experience as well as other data that the Chevy Cruze it was assembled in Ohio but of course components are from many places. That said, it would be up to the manufacturer to ensure quality standards are met but it is a trade off. I think when it comes to chip factories however that is in another category.

  17. Blockhead says:

    With this boost to the economy, in terms of employment and wage growth, does this mean that recession will not occur in 2024?

  18. Motorcycle John says:

    Great news for the US!

    Here in the Reno-Tahoe area 2008 was brutal. We were at the top or in the top 5 of Foreclosure, Unemployment, Divorce, Crime, and any other negative statistic you can think of.

    At that time we had two things driving our economy. Gaming and construction. Californians were selling their homes at ridiculous prices and buying here for half the cost and banking the difference.

    Now our economy is now driven by warehousing and huge amounts of manufacturing. Can you say Tesla. Add to Tesla Panasonic and Microsoft.

    In the next downturn Reno-Tahoe should fare much better!

    • Einhal says:

      There won’t be another downturn. Between the brilliance of Bidenomics, as implemented by the eminent Janet Yellen, and Powell’s ingenious monetary policy (printing at any sign of trouble), how could there be? We’ll all be rich!

  19. Thomas Curtis says:

    Thanks Wolf!

    Any information on the disbursement of the Infrastructure Bill and construction jobs in general?

  20. typecheck says:

    Let’s hope these investment will pan out.
    After all, on sharing means higher cost.
    At the same time, IT companies are quietly firing local workers and replacing them with foreign workers to lower cost.

  21. WB says:

    So there is some more stimulus yet to be unleashed? That’s definitely inflationary.

    Higher for longer!

  22. John says:

    The market is front running everything, the Fed, AI. They will sell soon to make up those losses on those bonds.

  23. SpencerG says:

    Peter Zeihan makes an interesting point in his case as to why China won’t invade Taiwan… watching the Western reaction to the Russian invasion of Ukraine revealed something to the Chinese that they have no way of getting their minds around… namely the corporate willingness to simply walk away from decades of investment in Russia. In China there is no real concept of “private action” since ALL corporations are subordinate to state interests.

    As Zeihan says, the idea that HALLIBURTON abandoned its investment in Russia on MORAL GROUNDS??? “Does Not Compute!”

    China’s goal in seizing Taiwan has to be to do it quick and present the world with a fait accompli. But that doesn’t really work if it takes years to prepare for the invasion and Western corporate leaders spend those same years redirecting manufacturing elsewhere so they don’t have to abandon their investments in China altogether.

    As Wolf says, there are other factors in play here… the loss of Intellectual Property to China is getting to a critical level on a competitive basis… transportation costs and lead times are a problem that can be solved quickly by moving production to Mexico or America, etc. But Chinese saber rattling has Western corporate leaders making moves to ensure that they have a chair to sit in when the music stops.

  24. JimL says:

    Just to clarify some things about the CHIPS Act.

    You are correct, the money has not been spent yet, BUT (big but), just the promise that money is coming has spurred companies to spend money they wouldn’t normally have spent in the U.S.

    Building a semiconductor fabrication plant is a huge undertaking. It takes multiple years of construction, filling it with equipment, testing all of that equipment, starting runs, tweaking yields, before the plant shows even dollar one of profit.

    It has been said that building a cutting edge semiconductor fab is the equivalent of the Apollo missions, in terms of complexity and investment. That is probably slightly hyperbolic, but not much.

    So companies that make tmchuos are literally looking years into the future. They need to make bets where they might not know the result of for at least a decade.

    Thise bets are much easier to make when there is a fairly secure promise of government help.

    Put another way, even though a vast majority of the money from the CHIPS Act has yet to be distributed, the fact that it will be distributed in the future has made a huge difference in where companies are building their fans.

    I haven’t paid close attention in a while on how much Intel has spent in Ohio to date, but I know for an absolute fact that if it wasn’t for the CHIPS Act, Intel would not have built in Ohio. They would have looked at other countries or someone who would have been willing to take on part of the risk of such a huge undertaking as building a cutting edge fab. Any money Intel has spent in Ohio to date can totally be attributed to the CHIPS Act even though the money has yet to be distributed.

  25. JimL says:

    Some thoughts regarding the reshoring of manufacturing from China to the U.S.

    I think it was a perfect storm.

    I don’t know how much you know about Evolutionary Theory, but some of it applies here. Concerning evolution, the strongest (biggest, fastest, most efficient, etc.) wins. Over time, genetic changes that provide a benefit will propagate due to the advantages they confer.

    In genereral this is great, as an advanced species comes to dominate. All good. However, in a closed system, this can be very deadly.

    Imagine a closed evolutionary system such as a remote island that has very little influence from the rest of the world. In such a closed system, certain organisms will evolve certain ways because they are beneficial to that environment. Given enough time, the ecosystem will evolve to become very efficient for that environment. That is great when looked at it in a closed system (remote island), but it is probably very detrimental given a greater world with a much more diverse threat environment.

    All of a sudden, the outside world penetrates the closed environment and highly efficient systems fail because they cannot cope with threats that are foreign to them.

    That is China over the last 30 or so years.

    The last 30 years have been unnaturally stable compared to the previous 200 years. Sure, there were some bumps and bruises, but they were minor. There were no world wars, no major conflicts that required most countries of the world to change their way of life.

    For example, in the 1950’s there were plenty of low cost countries manufacturing companies could have moved to in order to reduce costs. However the world was such an unstable place that any company that even just slightly reliant on reliability wouldn’t even think of leaving the U.S. maybe they might go to Mexico, Canada or Europe, but even that was a stretch. Unstability ensured manufacturing stayed local.

    In the 1990’s the Soviet Union collapsed and since then they world have remained fairly stable. Yes, there have been small hiccups, but if you were the CEO of a manufacturing company, the last 30 or so years have been extremely stable so you could pretty much choose almost anywhere to manufacture your stuff China was a low cost producer who was able to meet the knowledge and other minimum requirements so it boomed. Everyone and their cousin moved to China.

    The world was so stable that it became like a closed system. People began to assume that even though their manufacturing plant was many thousands of miles ( and oceans) away, deliveries could be made within days. In such a world, manufacturing became highly specialized. Manufacturing costs mattered more than anything. Being able to produce at the cheapest price was everything.

    It took an outside shock to the system to make it where manufacturing costs were not king. Reliability, timeliness, and other factors might matter more in a more unstable world.

    Also, it should be noted that over the last few years, the cost advantage of manufacturing in China has slowly eroded. It still is cheaper to manufacture stuff in China rather than the U.S., but when you throw in transportation costs, world unstabilty, and other factors, those advantages quickly erode.

    As world instability increases, companies will increasingly find reasons to manufacture stuff at home or at least move some of it to other countries such as Mexico.

    • SpencerG says:

      I agree with you that it was a perfect storm that has led to the re-shoring/near-shoring movement. But let’s not forget China’s role in this injection of instability.

      Twenty years ago at the Naval War College the syllabus included a video of Henry Kissinger rebutting the idea that globalization could be a threat to the United States by saying that “China has a choice to make… it can be rich by selling us their stuff… or it can be powerful by opposing us militarily… but it cannot be BOTH.” China has made its choice… instead of using its increasing wealth to improve the lot of its people it has used that money to build a military that is designed to defeat America’s and create a hegemony in Asia. It did NOT have to be like this.

      Moreover, like the initial Soviet coverup of the Chernobyl nuclear accident under the supposedly liberal rule of Mikhail Gorbachev, China’s silence about the COVID virus has proven that its leaders have absolutely zero interest in adapting to an “International Rules-based Order” as we were told they would back when we let them into the WTO in 1999.

      In this article, Wolf is talking about chip makers specifically… but PLENTY of other corporate leaders are coming to the same conclusion about China. Low value manufacturing may stay there for a while… but high value manufacturing is heading for the exits.

  26. Jack says:

    Is there not a temporal lag in procurement between last year’s price quotes (PPI) and this years spending (Census Bureau)? Your declaration that inflation has nothing to do with it seems to merit further elaboration to convince a non-expert like me.

    • Wolf Richter says:

      Construction spending is measured when purchases get invoiced and paid, not when plans are made or when procurement contracts are signed.

      Here is the monthly construction spending data, and you can see:

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