The Resurgence of Onshoring in Modern Manufacturing

Zoe Carter
June 25, 2024|

By ZOE CARTER

The electronic component industry in the United States is witnessing an unprecedented surge, with companies injecting a substantial $18.4 billion into the construction of manufacturing plants in May 2024 alone.

This represents a remarkable 64 percent increase from the previous year, a robust 131 percent surge from two years ago, and an astounding 170 percent rise from three years ago, as per data from the U.S. Commerce Dept. This surge is attributed to disruptions in the electronic component supply chain and transportation during the pandemic, coupled with the intricate relationship between the U.S. and China.

The electronic component manufacturing boom commenced in mid-2021, gaining momentum as companies aimed to address vulnerabilities exposed during the pandemic. The U.S., currently the second-largest producer of electronic components globally, has experienced a significant uptick in production, surpassing manufacturing powerhouses like Germany, Japan and India combined.

A pivotal factor contributing to this surge is the CHIPS Act, enacted in 2022, which provides grants, loans, loan guarantees and tax credits to semiconductor makers, fostering the onshoring of electronic component production. Despite more than 170 companies, including industry giants such as Intel, Taiwan Semiconductor Manufacturing Co. (TSMC), Samsung and Texas Instruments applying for these grants, only two small grants have been disbursed, prompting concerns about the sluggish approval and disbursement process.

The CHIPS Act grants, awarded based on merit, hinge on the projects’ potential to advance U.S. economic and national security interests. Larger grant announcements are expected later this year, pending due diligence and final agreements, but disbursement may take years due to permitting issues, environmental reviews and other delays inherent in the electronic component industry.

Despite these challenges, onshoring electronic component production offers numerous advantages, including decreased transportation costs, shorter lead times, reduced geopolitical uncertainty and lower risks associated with intellectual property transfer. The move has already positively impacted the economy, with electronic component manufacturing jobs reaching 13 million in January 2024, the highest in 15 years, and construction roles hitting a record 8.1 million.

Prominent projects in the electronic component industry include Intel’s $43 billion investment in fabrication facilities across several states, TSMC’s $40 billion investment in two fabs near Phoenix, Samsung Electronics’ $17 billion investment in a fabrication facility near Austin and Texas Instruments’ $30 billion investment in a massive project near Sherman, Texas.

However, challenges persist, with TSMC delaying initial manufacturing at its Arizona factory to 2025 due to a lack of local expertise. Additionally, uncertainties about technology choices and federal funding have led to delays, impacting Intel, Microchip and others adjusting their production schedules.

As the U.S. strives to reduce global dependence on electronic component production, delays in the distribution of CHIPS Act benefits may impede the country’s competitiveness. Rival nations are offering their own incentives to attract electronic component manufacturers, intensifying the race to secure investments in cutting-edge technologies. Swift government action is imperative to capitalize on the ongoing boom in the electronic component industry.

Zoe Carter is sales and marketing manager for MRSL Group.

About the Author: Zoe Carter

Zoe Carter

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