US manufacturing boom unlocks ‘once-in-a-lifetime’ opportunity for contractors

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The push to bring manufacturing back to the United States is unlike anything Didi Caldwell has seen in her career.

Private companies have spent more than half a trillion dollars since 2021 to onshore facilities back to the U.S., according to the White House. As long as labor shortages don’t derail that momentum, that record amount of manufacturing construction activity isn’t expected to slow down anytime soon.

headshot of Didi Caldwell

Didi Caldwell

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“I haven’t seen in the last 25 years anything like this,” said Caldwell, president and CEO of Global Location Strategies, a Greenville, South Carolina-based business consulting and services firm for capital, labor, energy and water intensive manufacturers. “This is a once-in-a-lifetime or a once-in-a-century-type event that we’re experiencing.”

Even contractors beyond the megaproject scope stand to benefit, as historic spending spills over to other project types as well — such as warehouses, distribution centers and surrounding community infrastructure. That presents a lucrative opportunity for contractors not only involved in the megaprojects but also in the numerous ancillary projects required to support them.

Multibillion-dollar onshoring push

America’s onshoring effort accelerated after the COVID-19 pandemic hit in 2020. Millions of Americans suddenly working from home caused demand to soar for remote-friendly devices, including smartphones, laptops and other electronic products. The supply of chips powering those devices couldn’t keep up. That had a reverberating effect on other sectors, such as car manufacturers that could not source chips to build new vehicles.

[Click here to access Construction Dive’s tracker of the top projects focused on products such as semiconductors, EV battery plants, food, cars and consumer goods.]

But along with consumer uses, chips also have critical military applications and remain essential for national cybersecurity. Commerce Secretary Gina Raimondo labeled the chip shortage earlier this year a national security issue because it exposes the U.S.’s dependence on foreign chip importers.

Yet this recent recognition of the importance of domestic manufacturing capabilities goes much further back than the pandemic, said Caldwell.

While the Infrastructure Investment and Jobs Act, CHIPS and Science Act and Inflation Reduction Act have all bolstered domestic manufacturing construction activity, Caldwell points out the trend was already well underway when COVID-19 struck.

Onshoring effort accelerates after COVID-19 pandemic

Construction spending for manufacturing since 2002, seasonally adjusted dollars

“In my mind it was kind of like throwing gasoline on the fire,” said Caldwell regarding the Biden administration’s push to support manufacturing projects. “We were already seeing a huge uptick, especially in these capital-intensive projects.”

How energy played a role

Previous economic shocks had already exposed the vulnerability of global supply chains.

Disruptions due to events like the oil embargo in the 1970s, the 2009 typhoon season in Taiwan or the 2011 earthquake in Japan highlighted the risk of offshoring manufacturing operations for U.S. companies.

More importantly, the transformation of the U.S. energy sector, largely due to massive hydraulic fracking in the early 2000s, proved a pivotal development in sparking the ambition to eventually bring manufacturing back to the U.S. mainland.

“The thing that really changed, and this might be as impactful as anything, is that we went from a net energy importer to a net energy exporter,” said Caldwell. “I spent the first half of my career moving companies outside of the U.S., particularly energy-intensive companies. For the last 10 or 15 years, I’ve been moving them back in.”

Megaprojects spark further boom

But while public funding receives the lion’s share of attention for the new plants being built, it is also a major catalyst for additional private investments by third-party businesses that support or act as vendors to these facilities, said Robert Hess, practice leader and senior principal at Newmark, a New York City-based commercial real estate advisory firm. He points to megaprojects across the country such as TSMC’s $40 billion plant in Phoenix, Micron’s $100 billion investment near Syracuse, New York, or Texas Instruments’ $11 billion semiconductor plant in Lehi, Utah, as key drivers of further private investment.

Federal financial incentives boost funding for onshoring projects

Amount of tax credits for advanced manufacturing construction

For instance, TSMC’s plant in Phoenix sparked about 28 related project expansions to the region, said Chris Camacho, president and CEO of the Greater Phoenix Economic Council.

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