The United States is experiencing a massive increase in the construction of manufacturing facilities. Some of the drivers include the Infrastructure Investment and Jobs Act (IIJA), the Inflation Reduction Act (IRA), and the CHIPS and Science Act (CHIPS), which became law in 2022.
Before these Acts became law, only a small portion of construction projects involved manufacturing facilities. Now, they’re the leading type of project.
This most likely came about due to the supply chain upheaval from the pandemic and concerns about the dependence on China suppliers and the shortages of semiconductor chips. In other words, the supply chain disruption of 2020 to 2021 sent a loud message to the U.S. government and corporations that something needed to change.
The Effects of CHIPS on Manufacturing and Construction
The CHIPS Act invests almost $53 billion in U.S. semiconductor manufacturing facilities, research and development, and workforce. Additionally, it added a 25% tax credit for capital investment in such projects. The goal is to help America continue to be a leader in innovation and technological development.
According to a statement from the White House, the semiconductor chip originated in the U.S. Yet only 10% of its global supply is manufactured in America. Moreover, research and development have been trending down. The purpose of the CHIPS and Science Act is to change these trends. The government hopes that it will make the U.S. competitive, bolster the supply chain, and provide access to technologies.
One year after CHIPS became law, companies indicated they were investing more than $166 billion in the manufacturing of semiconductors and electronics. Many colleges have created or expanded programs to support the endeavor by building a pipeline of workers who would have access to well-paying jobs in the semiconductor industry.
It’s working because Handshake reports student applications for jobs with semiconductor companies went up by almost 80%. This is huge as the number is only 19% for other industries. Business Insider indicates this has led to 800,000 jobs related to manufacturing. However, this big investment in manufacturing is coming at a cost.
The U.S. Bureau of Labor Statistics conducted the Job Openings and Labor Turnover Survey (JOLTS). According to the survey, there were more than 600,000 open manufacturing jobs and 450,000 construction jobs in December 2023. Moreover, the market can’t find qualified workers, which means the U.S. could have 2 million job openings by 2030.
The National Science Foundation and the Departments of Commerce have developed grants to support the work of CHIPS to develop open and interoperable networks. The U.S. Department of Commerce established a funding program under CHIPS. The purpose is to fund projects related to the construction, expansion, and modernization of manufacturing facilities producing semiconductors.
The U.S. Department of Treasury announced a proposed rule to strengthen the supply chain with its guidance on a 25% investment tax credit for companies invested in semiconductor manufacturing and producing equipment to support the effort. The Department of Treasury reinforces this with a proposed rule for companies to obtain the full amount of the tax credit directly from the Internal Revenue Service (IRS).
How IIJA and IRA Affect Construction Spending
The President signed the Infrastructure Investment and Jobs Act (IIJA) into law in late 2021. By April 2023, nonresidential construction spending ballooned to 15% according to the Department of Treasury report on manufacturing facility construction. The chart in the story shows a sharp increase in both private and public funding in nonresidential construction in 2023.
The IIJA allowed the federal government to send new funding to state and local governments for infrastructure projects. These relate to broadband, bridges, public transit, roads, and water. Like the CHIPS Act, IIJA aims to boost the economy.
What’s interesting about the Inflation Reduction Act (IRA) is that it’s a climate bill that contains tax benefits. The main goal of the IRA is to drive the implementation of business practices that counter climate change. The tax credits apply to solar panels, clean energy and transportation, and energy-efficient processes. The IRA Act is also an effort to counteract inflation.
What Companies Must Do to Support Manufacturing Facilities Construction
To thrive amidst the boom in manufacturing facility construction, manufacturing facilities and construction companies should consider applying these strategies.
Invest in advanced technologies
Adopting advanced construction technologies is crucial for construction companies to stay competitive in the manufacturing-driven construction landscape. Building Information Modeling (BIM) stands out as a transformative tool that enables virtual construction modeling, facilitating better coordination among project stakeholders and reducing errors during construction.
Prefabrication and modular construction techniques offer opportunities for controlled manufacturing environments, leading to higher quality and faster project completion.
Incorporating robotics into construction processes enhances productivity and safety by automating repetitive tasks, reducing labor costs, and mitigating the risk of workplace accidents. Additionally, technologies like 3D printing are revolutionizing construction by enabling the rapid production of complex structures with minimal material waste.
Integrating security and safety technologies like video surveillance, remote monitoring, and access control systems helps protect the project’s assets and maximize safety for workers. With trained monitoring operators and artificial intelligence (AI) watching the construction of the manufacturing facility, they can help spot potential problems including safety hazards and intruders approaching the property.
Streamline supply chains
Preventing another supply chain crisis requires establishing efficient processes to ensure the timely delivery of materials and components in manufacturing construction projects. Construction companies can achieve this by forging strategic partnerships with reliable suppliers and manufacturers. Through collaborative agreements and long-term contracts, companies can secure a stable supply of high-quality materials at competitive prices, reducing the risk of project delays and cost overruns.
Implementing digital solutions for supply chain management enables real-time tracking of inventory, procurement, and delivery, increasing transparency and coordination. Moreover, companies can leverage Just-in-Time (JIT) inventory management practices to minimize inventory holding costs while maintaining adequate stock levels to support manufacturing operations.
Grow specialized expertise
Building specialized expertise in manufacturing processes allows construction companies to effectively integrate manufactured components into manufacturing facility projects. This involves hiring professionals with backgrounds in manufacturing engineering, industrial design, or production management who can provide valuable insights into optimizing manufacturing processes and improving product quality.
Additionally, investing in continuous training and development programs for existing staff keeps them informed of the latest manufacturing technologies and best practices. By creating a culture of innovation and knowledge sharing, companies can empower their teams to find creative solutions to manufacturing challenges which can help drive continuous improvement and a competitive advantage in the market.
Adapt project management practices
Traditional project management methodologies may not align with the dynamic nature of manufacturing construction projects. Adopting agile project management practices lets construction companies respond effectively to changes and uncertainties inherent in manufacturing processes. Agile methodologies, such as Scrum or Kanban, emphasize iterative development, frequent communication, and flexibility in project planning and execution.
By breaking down projects into smaller, manageable tasks and prioritizing collaboration among cross-functional teams, construction companies can accelerate manufacturing facility project delivery while maintaining high-quality standards. Additionally, employing robust project management software enables real-time tracking of project progress, resource allocation, and risk management. This helps facilitate informed decision-making and ensure project success.
Focus on sustainability
Sustainability plays an important role in construction projects. Manufacturing construction offers opportunities to enhance sustainability practices. Besides, IRA focuses on climate-friendly practices, which means manufacturing facility projects need to optimize resource utilization, minimize waste, and enhance the sustainability of construction projects.
By incorporating environmentally friendly materials, adopting energy-efficient manufacturing processes, and implementing waste reduction strategies, construction companies can reduce the environmental impact of their projects. Additionally, obtaining certifications such as Leadership in Energy and Environmental Design (LEED) or pursuing green building initiatives shows a commitment to sustainability and can differentiate companies in the market.
Furthermore, engaging stakeholders and communities in sustainable development practices promotes a positive reputation and strengthens relationships with clients and regulatory authorities, positioning construction companies as leaders in sustainable construction.
Address workforce skills
As manufacturing construction evolves, the skill sets required of the workforce also evolve. Construction companies must authorize an investment in training and upskilling programs to equip their workers with the skills to excel in manufacturing-driven environments. This may consist of providing technical training on advanced manufacturing technologies and processes, as well as soft skills training in areas such as communication, teamwork, and problem-solving.
Another option is to offer apprenticeship programs and career development opportunities. These allow employees to progress in their careers and builds loyalty and retention within the organization. By investing in their workforce, construction companies can retain their workers and have the talent and expertise to thrive in the competitive manufacturing construction market.
Stay agile and adaptive
Technological advancements, market trends, and regulatory changes shape industry dynamics. Therefore, construction companies must remain agile and adaptive to navigate these changes successfully. This includes staying on top of emerging technologies and industry trends, actively monitoring market conditions and competitive landscapes, and proactively adjusting business strategies and operations to capitalize on opportunities and mitigate risks.
In promoting a culture of innovation, flexibility, and continuous learning within the organization, construction companies can position themselves as agile market leaders.
Differentiate through innovation
In a competitive market, innovation is a key driver of success. Construction companies must stand out by developing and implementing innovative solutions, products, or services that meet the current needs and preferences of clients.
Examples of doing this could be adopting emerging technologies, such as augmented reality (AR) or virtual reality (VR), to enhance project visualization and client engagement, or exploring alternative materials and construction methods to improve efficiency and sustainability. Consider collaborating with research institutions, industry partners, and startups to gain access to cutting-edge technologies and ideas.
Taking Advantage of the Construction Manufacturing Facilities Boom
The United States is witnessing a remarkable surge in manufacturing construction, largely propelled by recent legislative acts such as the Infrastructure Investment and Jobs Act (IIJA), Inflation Reduction Act (IRA), and the CHIPS and Science Act (CHIPS). Formerly a minor segment, manufacturing facilities-type projects now lead the construction sector, driven by concerns over pandemic-induced supply chain disruptions and reliance on overseas suppliers, particularly in China.
In response to these shifts, manufacturing and construction companies must adopt strategic approaches to thrive. By applying these strategies, companies can navigate manufacturing construction and seize growth opportunities.
Companies adopting security and safety technology will largely benefit as they can have a safer and more efficient construction security solution. To dive into the topic, check out the construction security and safety best practices guide. Do you have questions? Contact us.
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