At a glance

Over the last three years, the US Congress has successfully passed three acts aiming to upgrade US infrastructure and boost domestic manufacturing of critical resources: the CHIPS and Science Act, the Infrastructure Investment and Jobs Act, and the Inflation Reduction Act. Together, these pieces of legislation set the nation up to embark on one of the most significant government investment spending plans we have seen in years.

In 2021, the government appointed its first-ever director for the newly created Made in America Office within the Office of Management and Budget. Reshoring efforts are further supported by a renewed desire to build resilient supply chains and reduce reliance on global partnerships, after both the pandemic and the war in Ukraine served as reminders that global supply chains carry severe geopolitical risks.

While US manufacturing sentiment measures have been weak recently, we are seeing increases in factory construction, which grew over 35% in 2022, reaching a multi-decade high as a percentage of GDP. Bringing back manufacturing to US shores has limitations, but some areas of investment need are likely to remain in focus following the passage of the three acts, namely infrastructure, energy security, technological leadership, and critical minerals. These efforts should be positive for several companies that we have identified, and more broadly for our longer-term investment themes “Automation and robotics” and “Energy efficiency.”

To set expectations, we do not anticipate a large step-change in US manufacturing overall. Past attempts at reshoring US manufacturing have failed in favor of global trade and competitive advantages. Any potential resurgence of American manufacturing will take years and face labor constraints, alongside other challenges such as the often-lengthy process of regulatory review. We also expect plans for supply chain resiliency to focus more on diversification rather than an outright move back to the United States, as we have seen in chipmakers’ plans to build new production facilities both in the country and abroad. Still, new US factory announcements have made it clear that the new government initiatives are making an impact on companies’ capital spending plans.

Legislation and strategic focus areas

What does this mean for investors?