Some 40 per cent of the biggest US manufacturing investments announced in the first year of Joe Biden’s flagship industrial and climate policies have been delayed or paused, according to a Financial Times investigation.
The US president’s Inflation Reduction Act and Chips and Science Act offered more than $400bn in tax credits, loans and grants to spark development of a US cleantech and semiconductor supply chain.
However, of the projects worth more than $100mn, a total of $84bn have been delayed for between two months and several years, or paused indefinitely, the FT found.
The total value of the 114 large projects tracked by the FT was $227.9bn.
Companies said deteriorating market conditions, slowing demand, and lack of policy certainty in a high-stakes election year have caused them to change their plans.
The delays raise questions around Biden’s bet that an industrial transformation can deliver jobs and economic returns to the US, which has offshored its manufacturing for decades.
They could also complicate efforts by Vice-President Kamala Harris to use the administration’s record on manufacturing to attract blue-collar voters in November’s presidential election.
Alex Jacquez, special assistant to the president for economic development and industrial strategy, insisted the Biden administration has had “unmitigated new success” in boosting construction and manufacturing.
“Of course, we want to see these projects get up and moving as fast as possible. We continue to work to clear barriers related to permitting, to financing, where they exist,” Jacquez said.
The FT conducted more than 100 interviews with companies and state and local authorities to determine the status of projects, in addition to reviewing corporate press releases and filings.
Among the largest projects on hold are Enel’s $1bn solar panel factory in Oklahoma, LG Energy Solution’s $2.3bn battery storage facility in Arizona and Albemarle’s $1.3bn lithium refinery in South Carolina.
While many delays have been made public, others have not been announced. Forty minutes away from Albemarle’s inactive site is a facility where semiconductor manufacturer Pallidus said last year it would relocate its headquarters from New York and open manufacturing operations, investing $443mn and creating more than 400 jobs. Operations were expected to start in the third quarter of 2023, but the building sits unused.
“You’re holding your breath and seeing what transpires,” said Ted Henry, city manager of Bel Aire, Kansas, where Integra Technologies announced a $1.8bn semiconductor factory last year but has not moved forward with the project due to uncertainty over government funding.
If successful, the facility would be a “regional victory” for the small town of 8,000, Henry added.
Biden approved the Inflation Reduction Act and the Chips Act in August 2022 to revitalise the country’s Rustbelt and take on China in manufacturing the technologies required to digitise and decarbonise the US economy.
In the first year of the programme, more than $220bn in cleantech and semiconductor manufacturing investments were announced, with companies relocating projects from other countries to take advantage of the new subsidies.
But a tough macroeconomic backdrop, combined with overproduction in China, slowing demand for electric vehicles and policy uncertainty has chilled further progress.
While the IRA’s tax credits extend until 2032 and the Chips Act awards generous funds to selected applicants, companies often cannot receive funding until they achieve certain production milestones.
“Everybody’s running into higher-than-expected costs just because of labour and supply chain,” said Craig MacFarland, mayor of Casa Grande, Arizona.
An hour away from Casa Grande, Taiwan Semiconductor Manufacturing Company has delayed the start of production at its second fab — part of its $40bn project — by two years.
Its suppliers in the area have also reconfigured projects, with Chang Chung Group delaying its $300mn factory by two years and KPCT Advanced Chemicals putting its $200mn factory on hold.
China dominates the production of clean technologies, manufacturing more than three-quarters of the world’s solar panels and batteries, and is a leading producer of semiconductors.
Several solar panel manufacturers, including Maxeon, Heliene, and Meyer Burger, have delayed their US factories in the past year following a collapse in global pricing driven by overproduction in Beijing.
Slowing US demand for electric vehicles has also set back manufacturing plans. Samkee, a Korean auto parts maker, delayed adding its electric vehicle lines in Alabama by one to two years.
Meanwhile, Lear Corporation in December 2022 committed more than $100mn to produce electric vehicle parts, with a new factory expected to be operational near Detroit early this year, but the company is no longer moving forward with the expansion.
“There will be attrition. Not every single one of these facilities is going to come online,” said John Hensley, vice-president of markets and policy analysis at American Clean Power, an industry group. “That’s just a healthy part of the competitive landscape.”
Some of the delays are policy driven. Slow government rollout of Chips Act funding for semiconductor projects and lack of clarity on IRA rules have left a number of projects at a standstill.
Nel Hydrogen, an electrolyser manufacturer, has paused its $400mn factory project in Michigan due to uncertainty over tax credit rules for hydrogen. Anovion, a battery parts manufacturer in Georgia, delayed its $800mn factory by more than a year due to lack of clarity over the IRA’s electric vehicle regulations.
A potential Donald Trump victory in November’s presidential election has added to the uncertainty. While the bulk of IRA-related manufacturing investments have flowed to Republican-controlled districts, the law received no votes from party members in Congress. At campaign rallies the former president has vowed to “terminate” the IRA if elected.
VSK Energy, a solar manufacturer, scrapped its plans announced last year to invest $250mn and create 900 jobs in Brighton, Colorado and is looking for sites in a Republican-leaning state in the Midwest to safeguard its project from a potential Trump administration, according to an executive at the company. Its plan to invest $1.25bn in a factory for solar panel parts has also been delayed.
“Just in case, you probably want to be in a red state so that someone from the same party is going to fight for you and your rights,” the executive said.
Additional reporting by Oliver Roeder
Climate Capital
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