Did the CHIPS Act Trigger the Manufacturing Construction Boom?
14 hours ago
- #Industrial Policy
- #Economic Analysis
- #Semiconductor Manufacturing
- The CHIPS Act contributed to a significant increase in U.S. manufacturing construction spending, with evidence suggesting policy expectations influenced firm behavior even before enactment.
- Analyzing planning and construction start data reveals firms likely treated planning as an 'option premium' to position themselves for potential CHIPS subsidies, leading to a surge in activity aligned with legislative milestones.
- Construction spending growth is heavily concentrated in the Computer/Electronic/Electrical subsector and in specific census divisions like Mountain and West South Central, where major CHIPS-awarded projects are located, indicating a policy-driven boom.
- Quantitative estimates suggest CHIPS may account for up to 35% of the cumulative increase in manufacturing construction spending since 2019, though other factors like the Inflation Reduction Act and market forces also played roles.
- The counterfactual without CHIPS would likely have resulted in a more modest, less geographically and sectorally concentrated construction boom, underscoring the act's role in catalyzing large-scale private investment.