Delays Hit 40% of Biden’s Manufacturing Projects: What Went Wrong?
Chester County, South Carolina, once a symbol of American manufacturing decline, seemed poised for a remarkable turnaround when Albemarle Corp, the world’s largest lithium producer, announced plans to build a $1.3 billion lithium refinery. This investment was part of a broader strategy to revive local economies through the burgeoning electric vehicle market. For a community marked by vacant shops and abandoned textile mills, the project promised a new era of prosperity.
This optimism was fueled by two major legislative efforts under the Biden administration: the Inflation Reduction Act (IRA) and the Chips and Science Act, passed in August 2022. Together, these laws aimed to revitalize the country’s industrial heartlands with over $400 billion in tax credits, grants, and loans, particularly in clean tech and advanced manufacturing sectors. However, despite the ambitious scale and promise of these policies, the reality on the ground has been marked by delays and uncertainties.
As the second anniversary of the legislation approaches, nearly 40% of the manufacturing investments announced since their passage face delays or indefinite pauses. The question now is whether these setbacks represent temporary obstacles or signal deeper, more systemic challenges that could hinder America’s effort to reclaim its status as a global manufacturing leader.
The Inflation Reduction Act and Chips and Science Act: Catalysts for Change?
The Inflation Reduction Act and Chips and Science Act are the cornerstones of President Joe Biden’s industrial policy, designed to propel the U.S. back to the forefront of global manufacturing. The IRA focuses on clean energy and decarbonization, while the Chips Act aims to bolster the domestic semiconductor industry, a sector increasingly critical to national security and technological competitiveness.
Since their enactment, these policies have sparked a wave of manufacturing investments across the country. US Census data shows a surge in construction spending for manufacturing, reaching record highs. High-profile projects like Volkswagen-backed Scout Motors in South Carolina, which is on track to create 4,000 jobs by 2027, highlight the potential for these laws to foster significant economic growth.
Yet, the impact of the IRA and Chips Act extends beyond individual projects. The incentives embedded in these laws—ranging from tax credits for clean energy production to direct grants for semiconductor fabrication—are reshaping the competitive landscape, spurring a race among states to attract corporate investment. More than $225 billion in large-scale manufacturing commitments were made in the first year alone, underscoring the powerful lure of federal support.
However, achieving the ambitious goals of these laws is proving to be more complex than anticipated. Many companies face challenges accessing the promised funds, which are often contingent on reaching specific milestones or meeting regulatory requirements. In a landscape characterized by fierce global competition, economic volatility, and policy uncertainty, the path to a manufacturing renaissance remains uncertain.
The Reality of Delays and Setbacks
Despite the initial flurry of activity, many projects are now facing significant delays or have been paused indefinitely. A Financial Times investigation found that 40% of manufacturing investments worth over $227.9 billion are currently delayed. Among these is Albemarle Corp’s lithium refinery in Chester County, which was halted just ten months after its announcement due to a collapse in global lithium prices and slowing demand for electric vehicles. The proposed site remains a vacant lot, with no clear timeline for resuming construction.
This situation is not unique to Albemarle. Numerous other projects across the country have been delayed or shelved due to deteriorating market conditions, overproduction in China, and a lack of policy certainty in a politically volatile environment. For example, semiconductor manufacturer Microchip recently paused its $1.68 billion expansions in Colorado and Oregon, citing a “slowing macroeconomic environment” and rising inventory levels.
The setbacks raise critical questions about whether the Biden administration’s vision for a manufacturing renaissance can be delivered as promised. While some delays are common in any large-scale industrial effort, the sheer scale and number of postponed projects suggest deeper systemic issues. The delays have also sparked concerns about the feasibility of reshaping America’s economy to compete in industries that will dominate the 21st century.
Competing on a Global Stage: The China Factor and Other Challenges
A significant challenge facing American manufacturing is global competition, particularly from China, which has become a dominant force in clean tech and semiconductor manufacturing. China’s ability to produce goods more cheaply, coupled with its aggressive investment in green technologies, presents a formidable obstacle to U.S. efforts.
For example, several solar panel manufacturers in the U.S. have delayed or canceled plans due to a glut of Chinese-made panels driving prices to record lows. Enel, an Italian energy company, announced a $1 billion solar panel factory in Oklahoma, but the project has yet to secure financing or begin construction amid concerns about the project’s viability given the current market conditions.
Moreover, U.S. manufacturers face additional hurdles, including a tight labor market, financing difficulties, and complex regulatory requirements. A shortage of skilled workers is another critical issue, with estimates suggesting that the U.S. semiconductor sector alone could face a shortfall of up to 146,000 workers by 2029. This shortage is exacerbated by decades of underinvestment in vocational training and technical education.
The Biden administration’s approach, described as “government-enabled, private sector-led,” aims to navigate these challenges by leveraging federal incentives while allowing market forces to drive decision-making. However, critics argue that this model still leaves companies exposed to the uncertainties of a volatile economic environment.
What’s Next for US Manufacturing?
As the two-year mark for the IRA and Chips Act approaches, the future of U.S. manufacturing remains uncertain. While some projects are progressing on schedule, such as the Volkswagen-backed Scout Motors facility in South Carolina, many others are stuck in limbo. The upcoming presidential election adds another layer of uncertainty, with potential changes in policy direction threatening to stall or derail ongoing efforts.
Despite these challenges, there is still reason for cautious optimism. Approximately 47% of large-scale manufacturing projects announced in the first year of the IRA and Chips Act are on track or operational, demonstrating that progress is possible even amid adversity. The administration continues to point to macroeconomic indicators moving in the right direction and emphasizes the long-term benefits of reshoring critical industries.
However, as the delays mount and the political landscape evolves, the path forward for America’s industrial revival is anything but clear. The question now is whether the current setbacks are simply growing pains in an ambitious recalibration of industrial policy or signs of deeper issues that could jeopardize the overall success of Biden’s plan.
Sources:
https://www.ft.com/content/e445038d-cff0-4aec-b2cf-5cc7228ef46b