Nearly 40% of the largest U.S. manufacturing investments announced during the first year of President Joe Biden’s major industrial and climate policies have faced delays or have been paused, according to a Financial Times investigation.
Biden's Inflation Reduction Act (IRA) and the CHIPS and Science Act collectively offered over $400 billion in tax credits, loans, and grants to foster a U.S. cleantech and semiconductor supply chain. Despite this, of the projects exceeding $100 million in value, about $84 billion worth have been delayed by periods ranging from two months to several years, with some projects paused indefinitely, the FT found.
Companies cited worsening market conditions, declining demand, and uncertainty surrounding policies during a crucial election year as reasons for changing their plans. These setbacks cast doubt on Biden’s strategy that an industrial transformation could create jobs and economic benefits in the U.S., which has offshored much of its manufacturing for decades.
The delays also complicate efforts by Vice President Kamala Harris to leverage the administration's manufacturing record to win over blue-collar voters in the upcoming presidential election.
Alex Jacquez, a special assistant to the president for economic development and industrial strategy, maintained that the Biden administration has achieved “unmitigated new success” in boosting construction and manufacturing. Jacquez noted, “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 and financing, where they exist.”
The FT's investigation, which included over 100 interviews with companies and state and local authorities, and a review of corporate press releases and filings, highlighted some of the largest stalled projects. These include Enel’s $1 billion solar panel factory in Oklahoma, LG Energy Solution’s $2.3 billion battery storage facility in Arizona, and Albemarle’s $1.3 billion lithium refinery in South Carolina.
While some delays have been publicized, others have not. For instance, a semiconductor manufacturing facility by Pallidus in Kansas, expected to begin operations in the third quarter of 2023, remains unused due to funding uncertainties.
Biden signed the Inflation Reduction Act and the CHIPS Act in August 2022 to rejuvenate the Rust Belt and challenge China in manufacturing the technologies crucial for the digital and green transition of the U.S. economy. In the program's first year, over $220 billion in cleantech and semiconductor manufacturing investments were announced, with companies relocating projects to the U.S. to take advantage of new subsidies.
However, challenging macroeconomic conditions, overproduction in China, slowing demand for electric vehicles, and policy uncertainty have hindered further progress. While the IRA’s tax credits extend until 2032 and the CHIPS Act offers generous funding, companies often face delays in accessing funds until they meet specific production milestones.
The challenges have been exacerbated by higher-than-expected costs related to labor and supply chains, with significant delays in several projects, such as Taiwan Semiconductor
Manufacturing Company’s $40 billion project in Arizona and others.
China continues to dominate clean technology production, producing over three-quarters of the world’s solar panels and batteries, and is a leading semiconductor producer. This dominance, combined with slowing U.S. demand for electric vehicles, has also impacted U.S. manufacturing plans.
Some delays are driven by policy issues, such as the slow rollout of CHIPS Act funding for semiconductor projects and uncertainty surrounding IRA rules. For example, Nel Hydrogen paused its $400 million factory project in Michigan due to unclear hydrogen tax credit rules, while Anovion delayed its $800 million battery parts factory in Georgia over IRA’s electric vehicle regulations.
Adding to the uncertainty is the potential for a Donald Trump victory in the upcoming presidential election. Trump has pledged to "terminate" the IRA if elected, causing companies like VSK Energy to reconsider their investment plans, including relocating projects to Republican-leaning states to safeguard against policy changes.
