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In a nutshell: Many of the largest projects announced under the Biden Administration's Inflation Reduction Act and the CHIPS and Science Act have run into issues. According to a new report by the Financial Times, at least $84 billion worth of projects announced under these laws have either been postponed or paused indefinitely.
The CHIPS Act was signed into law by President Joe Biden in 2022 to reduce dependence on China and bolster the domestic EV, renewable energy, and semiconductor industries. The Act aimed to attract significant investments to establish manufacturing facilities in the US and offered more than $400 billion in tax credits, loans, and grants to facilitate the development of a US semiconductor supply chain.
After the IRA and CHIPS Act came into effect, companies announced investment plans worth hundreds of billions, suggesting that the stimulus was working as intended. However, an investigation by the Financial Times has now revealed that many of the announced projects have failed to take off.
The publication claims to have tracked 114 large projects, each worth more than $100 million. The total value of the tracked projects is an impressive $227.9 billion, of which $84 billion, or 40 percent of the total proposed outlay, is now in limbo.
One of the major projects delayed by at least two years is TSMC's proposed $40 billion semiconductor fab near Casa Grande, Arizona. The Taiwanese company's suppliers have also put their investments, worth over $500 million, on hold for up to two years. According to Casa Grande Mayor Craig McFarland, companies are reevaluating their investments due to "higher-than-expected costs," primarily from labor and supply chain challenges.
Several other companies, including solar panel manufacturers Maxeon, Heliene, and Meyer Burger, have also postponed their US factories after prices fell over the past year due to overproduction in China. Some, like auto component manufacturers Samkee and Lear Corporation, are delaying their investments by at least a year. Others, such as electrolyzer manufacturer Nel Hydrogen and battery parts manufacturer Anovion, have delayed their multi-million dollar projects due to a lack of policy certainty in an election year.
Some companies delaying their projects expressed concern over a possible Trump presidency and its implications for IRA and CHIPS funding. The former president has pledged to end the IRA if elected, and the act did not receive any support from Republicans in Congress.
Solar manufacturer VSK Energy scrapped plans to establish a facility in Colorado and is now considering sites in red states to safeguard its project in case Trump is re-elected. According to an unnamed executive from the company, "You probably want to be in a red state so that someone from the same party will fight for you and your rights."
Image credit: FT