The 2021-2023 period marked a boom in U.S. manufacturing investment. In these three years alone, manufacturing construction grew by 174%, and more than 50 new factory investments over $1 billion were announced. Public reporting has attributed recent growth to federal subsidies for new investments in computer chip and electric vehicle manufacturing, as well as to the restructuring of supply chains after the COVID-19 pandemic. Studies of the manufacturing surge have largely overlooked the role of Foreign Direct Investment (FDI) as a significant share of U.S. manufacturing growth. Approximately 40% of the new billion-dollar factory projects are from foreign-owned companies, and two of the largest new FDI projects in U.S. history were announced during this three-year period: the semiconductor fab investments from TSMC in Arizona and Samsung in Texas.
The rise of FDI matters because “transplant factories,” or foreign-owned factories operating in the United States, typically perform differently than their American-owned peers. Past FDI projects have been associated with direct and indirect benefits for the U.S. economy. The direct benefits stem from the foreign investment itself. Studies of FDI in the United States, United Kingdom, and elsewhere have shown that foreign-owned factories are typically more productive, invest more in technology, and pay higher wages than their domestic counterparts.
Case studies of foreign-owned “billion-dollar factories” show that past FDI projects have affected regional economies in three distinct ways. Foreign investments have made an impact by augmenting regional workforce development, supplier relations, and innovation networks. In some cases, FDI projects have “raised the bar” for their domestic manufacturing peers, leading to substantially different workforce development and supplier relations for manufacturers operating in the region. In other cases, FDI projects have had a more incremental effect without noticeably changing regional manufacturing environments.