Construction Spending for Factories Soars, after Decades in the Doldrums

[Tom Paine 1949]

This non-partisan article outlines the continuing surge in high-tech factory construction and explains why it is happening now …

by Wolf Richter • Sep 3, 2023

Driven by manufacturing plants for technologically advanced, high-value products. Automation is the great equalizer.

By Wolf Richter, Sept. 3, 2023

Spending on construction projects for manufacturing plants in the US started breaking out of its long doldrums in January 2021…. Monthly construction spending for factories began to spike and in July set a new record of nearly $17 billion [from 6 billion per month a year earlier] … according to the Census Bureau on Friday.

• Up by 186% over the 30 months from January 2021 through July 2023.
• Up by 148% over the 24 months from July 2021 through July 2023.

At the current pace, companies are investing nearly $17 billion per month in building manufacturing plants, or about $203 billion a year!

We’ve been hearing it in the news and in corporate reports: Semiconductor plants, EV plants – Tesla, legacy automakers, and startup companies are plowing many billions of dollars into ramping up manufacturing – component makers, makers of computer, electronic, and electrical equipment, etc. The latter bunch are big drivers behind the surge of factory construction.

All of them are technologically advanced industries with high-value outputs. Forget T-shirts and plastic toys.

And all of them use 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 covid tangled up the supply chains, suddenly there were massive shortages of the most needed products, including semiconductors. So that was a wakeup call.

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

The majority of cars and trucks sold in the US are assembled in a factory in the US. All major foreign brands have assembly plants in the US, including BMW and Mercedes. Hondas built in the US have among the highest US content. Tesla makes vehicles in the US including for export. And yet, component shortages, triggered by semiconductor shortages, caused the worst vehicle shortages ever. So time to reevaluate things…

Construction Spending for Factories Soars, after Decades in the Doldrums | Wolf Street

 

[Manonthestreet]

Just in time to sit empty when the depression hits

 

[DudleySmith]

Trillions in corporate welfare spending will do that, yes.

 

[Mac1958]

This non-partisan article outlines the continuing surge in high-tech factory construction and explains why it is happening now …

by Wolf Richter • Sep 3, 2023

Driven by manufacturing plants for technologically advanced, high-value products. Automation is the great equalizer.

By Wolf Richter, Sept. 3, 2023

Spending on construction projects for manufacturing plants in the US started breaking out of its long doldrums in January 2021…. Monthly construction spending for factories began to spike and in July set a new record of nearly $17 billion [from 6 billion a year earlier] … according to the Census Bureau on Friday.

• Up by 186% over the 30 months from January 2021 through July 2023.
• Up by 148% over the 24 months from July 2021 through July 2023.

At the current pace, companies are investing nearly $17 billion per month in building manufacturing plants, or about $203 billion a year!

View attachment 824610

We’ve been hearing it in the news and in corporate reports: Semiconductor plants, EV plants – Tesla, legacy automakers, and startup companies are plowing many billions of dollars into ramping up manufacturing – component makers, makers of computer, electronic, and electrical equipment, etc. The latter bunch are big drivers behind the surge of factory construction.

All of them are technologically advanced industries with high-value outputs. Forget T-shirts and plastic toys.

And all of them use 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 covid tangled up the supply chains, suddenly there were massive shortages of the most needed products, including semiconductors. So that was a wakeup call.

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

The majority of cars and trucks sold in the US are assembled in a factory in the US. All major foreign brands have assembly plants in the US, including BMW and Mercedes. Hondas built in the US have among the highest US content. Tesla makes vehicles in the US including for export. And yet, component shortages, triggered by semiconductor shortages, caused the worst vehicle shortages ever. So time to reevaluate things.

Construction Spending for Factories Soars, after Decades in the Doldrums | Wolf Street

Nice. A little surprising.

 

[DudleySmith]

Just in time to sit empty when the depression hits

 

[Donald H]

This non-partisan article outlines the continuing surge in high-tech factory construction and explains why it is happening now …

by Wolf Richter • Sep 3, 2023

Driven by manufacturing plants for technologically advanced, high-value products. Automation is the great equalizer.

By Wolf Richter, Sept. 3, 2023

Spending on construction projects for manufacturing plants in the US started breaking out of its long doldrums in January 2021…. Monthly construction spending for factories began to spike and in July set a new record of nearly $17 billion [from 6 billion a year earlier] … according to the Census Bureau on Friday.

• Up by 186% over the 30 months from January 2021 through July 2023.
• Up by 148% over the 24 months from July 2021 through July 2023.

At the current pace, companies are investing nearly $17 billion per month in building manufacturing plants, or about $203 billion a year!

View attachment 824610

We’ve been hearing it in the news and in corporate reports: Semiconductor plants, EV plants – Tesla, legacy automakers, and startup companies are plowing many billions of dollars into ramping up manufacturing – component makers, makers of computer, electronic, and electrical equipment, etc. The latter bunch are big drivers behind the surge of factory construction.

All of them are technologically advanced industries with high-value outputs. Forget T-shirts and plastic toys.

And all of them use 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 covid tangled up the supply chains, suddenly there were massive shortages of the most needed products, including semiconductors. So that was a wakeup call.

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

The majority of cars and trucks sold in the US are assembled in a factory in the US. All major foreign brands have assembly plants in the US, including BMW and Mercedes. Hondas built in the US have among the highest US content. Tesla makes vehicles in the US including for export. And yet, component shortages, triggered by semiconductor shortages, caused the worst vehicle shortages ever. So time to reevaluate things.

Construction Spending for Factories Soars, after Decades in the Doldrums | Wolf Street

Can America compete with China Tom?

What has substantially changed the most since America gave up trying to compete?

I think you've brought to light the huge effort being made to compete once again with China!

Will America's confidence ease foreign relations and hold back America's attempts to goad China into a war over Taiwan?

 

[Tom Paine 1949]

As encouraging as all this is, it will take time before new factory production translates into established new permanent high tech industries, with local permanent jobs and smoothly operating supplier chains, all of which must be profitable.

As the article indicates, much of this new high-tech factory building started even before passage of the “Chips Act” and has little to do with such legislated incentives. On the other hand the results of government encouraged investment from legislation passed by the Administration in D.C. has still not been felt to any considerable extent, so there is reason to expect this pattern of reshoring high tech industry in the U.S. will continue at least in the immediate future.

 

[toobfreak]

Construction Spending for Factories Soars​

And I imagine all of them are being developed by Blackrock and the Chinese.

 

[lennypartiv]

Can America compete with China Tom?

Wages in China have gone up. Plus the investment rules were never that great. And now China is about to be hit with population decreases.

BTW this is not all good news for American workers. As the OP said, these are highly automated factories.

 

[DudleySmith]

And I imagine all of them are being developed by Blackrock and the Chinese.

They're throwing trillions at an already glutted market, building EV's fewer and fewer can afford to buy here.

 

[Donald H]

Wages in China have gone up. Plus the investment rules were never that great. And now China is about to be hit with population decreases.

BTW this is not all good news for American workers. As the OP said, these are highly automated factories.

Some good ideas!

I don't think that highly automated factories has to be a negative for American workers if the result is faced full on and not avoided. That's going to call for some new and socially constructive measures.

In fact, something similar to China's approach to socially responsible capitalism.

Would that be Trump's intent? It seems to be as much so as it would be Biden's.

 

[Tom Paine 1949]

Can America compete with China Tom?

What has substantially changed the most since America gave up trying to compete?

I think you've brought to light the huge effort being made to compete once again with China!

Will America's confidence ease foreign relations and hold back America's attempts to goad China into a war over Taiwan?

China’s competition and the deterioration of Sino-American relations are important incentives for private industry as well as the security-conscious Biden Administration to hurry along this process of re-shoring hi tech industry de-risking logistic chains.

That certainly doesn’t mean war with China (or Russia) need be pursued for economic reasons! I think China’s present economic problems have made the West and its allies in Asia more confident of our own capacities, as has Russia’s failures in its Ukrainian invasion and the Administration’s ability so far to maintain NATO unity and discourage China from providing military aid to Moscow.

As the article points out, high-tech robotic factory equipment costs the same in China as it does in the U.S.A. I would add that XiJinping’s regressive centralizing of party control everywhere, his attacks on individual freedoms, private industry and entrepreneurial creativity, even his purges against corruption, all have contributed to China’s recent economic problems. I suspect they will prove to be lasting, and are added to other problems created by foreign policy pressures.

So yes, I think the Western alliance, if it doesn’t commit suicide (by breaking apart under the pressures produced by this Cold War transition period, or by electing incompetent authoritarian leaders like Trump) has a good chance of emerging stronger in the future). But we need farsighted leaders, and some luck too, to get through all this & hold onto our remaining freedoms.

 

[Moonglow]

And I imagine all of them are being developed by Blackrock and the Chinese.

The Chinese are going broke they gave it all to the Bidens.

 

[leftwinger]

Wages in China have gone up. Plus the investment rules were never that great. And now China is about to be hit with population decreases.

BTW this is not all good news for American workers. As the OP said, these are highly automated factories.

Automation Equipment has to be imagined, designed, built, assembled, ordered, installed, programmed, moitored, maintained, marketed, sold etc. good jobs. Not just screwing a hinge into a doorframe fir 53 yrs at GM and retiring.

things advance. Do you want to back to horses for commute?

 

[Tom Paine 1949]

More on the subject of the continuing remarkable boom in U.S. factory construction. Note the graphs show no improvement under the Trump administration.

Of course this boom is not only or even mainly the result of incentives like the “Chips Act” (passed against Republican opposition), but more the work of U.S. industry itself reacting to the sanctions against Chinese high tech companies and to the worsening of relations between the Biden and Xi Administrations.

The Eyepopping Factory Construction Boom in the US | Wolf Street

 

[Tom Paine 1949]

P.S. On a more pedestrian level, even exports from China of ordinary products to mass retailers like Walmart are way down, reportedly from 60+% to 40+ percent in most categories, as imports from India ramp up to replace them. Also imports from countries like Vietnam have increased, but in Vietnam infrastructure inadequacy and the outbreak there of the biggest corruption scandal in SouthEast Asian history has given pause to investors.

Vietnam reels from historic €11.4 billion corruption scandal – DW – 12/01/2023

The largest corruption scandal in Southeast Asia's history has shaken Vietnam's anti-graft drive. Experts have warned that the country's economic stability may be at stake.

www.dw.com