CHIPS Act, Reshoring, and the Manufacturing Construction Boom

Introduction

TSMC announced in March 2025 that it would increase its US investment to $165 billion (adding $100 billion to its existing $65 billion commitment), building upon three advanced fabrication plants in Phoenix, Arizona scheduled for progressively advanced node technologies (5nm, 3nm, and 2nm). TSMC is just one company in an industry that has announced over $630 billion in private sector investments across 140 projects in 28 states since 2020, creating 500,000 jobs. The CHIPS and Science Act, which provided $50 billion in federal incentives ($39 billion for manufacturing incentives, $11 billion for R&D), catalyzed this investment wave by making US semiconductor manufacturing economically competitive with Asian alternatives for the first time in decades.

For industrials bankers, the CHIPS Act is not about semiconductors per se (chip companies are covered by TMT groups). It is about the massive industrial supply chain demand that semiconductor facility construction creates. Each new fab is a $10-40 billion construction project that requires heavy equipment, electrical infrastructure, HVAC and clean room systems, process piping and filtration, and years of ongoing facility maintenance and services.

A semiconductor fab is the most capital-intensive construction project in manufacturing, and the supply chain demand extends across nearly every industrials sub-sector.

Electrical equipment and power infrastructure. Each advanced fab consumes 100-200 megawatts of continuous power, requiring massive electrical distribution systems (transformers, switchgear, UPS systems) from companies like Eaton and Schneider Electric. The concentration of fab construction in Arizona, Texas, and Ohio is straining regional electrical grid capacity, driving additional utility infrastructure investment that benefits grid equipment manufacturers and E&C firms.

HVAC, clean room, and process equipment. Semiconductor fabs require ultra-clean manufacturing environments with precisely controlled temperature, humidity, and particulate levels. The HVAC and clean room systems for a single fab can cost $500 million to $1 billion, creating demand for companies like Carrier, Trane Technologies, and specialty clean room equipment manufacturers.

Construction equipment and materials. The physical construction of fab buildings (which are among the largest enclosed structures in manufacturing) drives demand for heavy equipment, aggregates and concrete, structural steel, and construction labor. The multi-year construction timeline for each fab (typically 2-4 years from groundbreaking to production) creates sustained, predictable demand.

Industrial automation and facility services. Once operational, fabs require sophisticated automation systems, environmental monitoring, water treatment (semiconductor manufacturing uses enormous quantities of ultra-pure water), and ongoing maintenance services. This creates long-term recurring demand that extends well beyond the initial construction phase.