Just north of Phoenix, the future of American industrial policy is hitting a harsh reality. Two massive fabrication plants, symbols of the Taiwan Semiconductor Manufacturing Company's (TSMC) landmark commitment of a $165 billion investment in the United States, are behind schedule. Unfortunately, firms like TSMC building advanced manufacturing in the United States have to deal with more permitting issues and complicated regulatory costs than elsewhere in Asia, raising operating expenses even after federal subsidies. This is more than a semiconductor story; it is a warning sign of a deeper national paralysis.
Over the past several years, the United States government, Pentagon, and companies have committed hundreds of billions of dollars to rebuild domestic manufacturing. While Washington is igniting industry and manufacturing, it lacks the policy and tools to actually wire the new factories to the grid or train the workers to run them. American reindustrialization is constrained by structural weaknesses in three physical pillars: energy capacity, industrial supply chains, and technical workforce depth. Until those constraints are addressed, industrial ambition will keep outrunning industrial realities, putting the future of American economic and military power in jeopardy.
The first physical barrier to reindustrialization is the American electrical grid. America's industrial revival is colliding with an energy system that was not built for a new era of advanced manufacturing, hyperscale computing, and electrified industry. The disconnect between ambition and infrastructure is clearest where new production facilities and data centers meet an aging power grid and slow-moving permitting regimes.
The power demands of modern industry are now major energy demands that could not have been forecasted a decade ago. For instance, a single ChatGPT query uses about 0.3-0.4 watt-hours of electricity. Data centers that host these types of AI-enabled programs translate into consuming 4.4% of U.S. power, but they will likely consume up to 12% of total electricity by 2028. These surging power requirements crash against a grid where 70% of transmission lines are nearing the end of their service life, with huge wait times for gas turbines, and a five year queue for new power generation.
This American industrial paralysis is bleak considering the speed and scale of China. While the U.S. struggles to permit new generations of tech, Beijing is building energy foundations at a wartime tempo. In 2024 alone, China installed nearly nine times the electric generating capacity of the United States. The disparity is most alarming in nuclear energy: China is currently leading the world with over 30 reactors under construction, whereas the U.S. has no new construction projects planned, other than restarting retired nuclear power plants.
If energy is the foundation of reindustrialization, industrial depth is its skeleton. The United States lacks the manufacturing capacity required to produce the high-grade components that advanced industries depend on. For example, advanced nuclear reactors, such as Small Modular Reactors, are touted as a critical source of firm power, but their deployment is crippled by a hollowed-out domestic supply chain. The NuScale Power flagship project failed in 2023 due to costs soaring to $9.3 billion, and also due to a lack of industrial capacity.
China, meanwhile, weaponizes its industrial policy to exploit this very weakness. Through its signature military-civil fusion strategy, Beijing ensures that when a domestic lab innovates, a domestic factory also is ready to scale it. China is refining about 70% of the world's nickel, 73% of its cobalt, 60% of battery-grade lithium, and 100% of the spherical graphite needed for advanced batteries. China has also embargoed 25 of the top 60 critical minerals for America's economy according to the U.S. Geologic Survey.
Even abundant energy and resilient supply chains cannot compensate for a shrinking technical workforce. Reindustrialization depends on electricians, machinists, welders, semiconductor technicians, and advanced manufacturing specialists. From 1998 to 2021, America lost over 5 million manufacturing jobs. Industry estimates suggest "the United States faces a shortfall of 3.8 million STEM and technical workers" by 2033. China, on the other hand, produces 50% more STEM PhDs annually than the United States.
The deeper flaw in current industrial policy is not insufficient spending. It is misaligned spending. Since 2020, the United States has committed hundreds of billions of dollars through measures such as the CHIPS and Science Act and the Inflation Reduction Act to subsidize capital expenditure (CAPEX). But CAPEX is only the opening act. Operational expenditure (OPEX) — which includes electricity, labor, materials, maintenance, and financing — determines whether those facilities survive in global markets.
Grid modernization and energy permitting reform must be treated as national security priorities. Industrial policy must go beyond one-time grants; mechanisms are needed to stabilize production economics. Workforce development must be treated as an OPEX issue as much as an education issue.
American reindustrialization must be more than ribbon cutting ceremonies and short-term subsidies. It is achieved when factories run at full capacity for decades at competitive cost. The resilience of the U.S. economy and the durability of its defense industrial base depend on sustained, scalable output. In a protracted conflict, industrial depth determines staying power.
The views expressed in this article are solely those of the authors and do not represent the official views or policies of the U.S. Government or any of its agencies.