Alex Leung
Head of Infrastructure Research & Strategy

Reshoring accelerates the economic and population growth across previously overlooked areas. Large tech companies simply will not commit billions of dollars to build a new plant, without certainty around energy supply, transportation networks, utility services, and high-speed internet. These tailwinds support infrastructure investments across all sectors.

Alex Leung, Head of Infrastructure Research & Strategy

World Trade Organization expects world trade volumes to increase

Earlier this year, we highlighted “deglobalization” as an important megatrend that will support private infrastructure investments. However, some skeptics are pushing back on this argument, since trade volumes are growing in 2023 and is expected to further accelerate in 2024 according to World Trade Organization latest estimates in October 2023.

Volume of world merchandise trade, 4Q15- 4Q24e (USD billion)

Volume of world merchandise trade, 4Q15- 4Q24e (USD billion). Trade volumes are rising. Is deglobalization real?

However, 2023 world trade volumes are expected to only grow by 0.8%, compared to the earlier estimates of 1.7% in April 2023, and original estimates of 3.4% forecasted in April 2022. The WTO also said that the share of intermediate goods in world trade is trending lower, suggesting further fragmentation of the supply chain.

Macro data in the US indicating onshoring of manufacturing capacity

Deglobalization used to carry a negative connotation within the business community, but this is no longer the case. Onshoring of manufacturing capacity and increased focus on energy security will require significant investments. Many of the new facilities are also located in previously overlooked rural areas, thus opening up new markets for infrastructure investors.

The macro data is beginning to reflect this trend. US construction spending for manufacturing reached a record high of over USD 100 billion in 2022, after being stagnant for six years. In the first nine months of 2023, manufacturing investments have already reached USD 140 billion, a 70% YoY increase and accounting for 18% of total construction.

US construction spending in manufacturing and share of total non-res spending (USD billion)

US construction spending in manufacturing and share of total non-res spending (USD billion)

Government policies have a big role to play here. The US Inflation Reduction Act (IRA) and the Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act have incentivized the build out of the domestic clean energy and semiconductor plants.

Many large corporates across the technology and industrial sectors have already announced multi-billion-dollar manufacturing facilities in the US in the last two years. The list below is by no means comprehensive, as the US government is tracking almost USD 500 billion of private sector manufacturing investments.

New US manufacturing projects announced since 2021

Company

Company

Location

Location

Investment (USD billion)

Investment (USD billion)

Company

TSMC

Location

Phoenix, AZ

Investment (USD billion)

40.0

Company

Texas Instruments

Location

Sherman, TX

Investment (USD billion)

30.0

Company

Intel

Location

Chandler, AZ

Investment (USD billion)

20.0

Company

IBM

Location

Hudson Valley, NY

Investment (USD billion)

20.0

Company

Micron

Location

Clay, NY

Investment (USD billion)

20.0

Company

Intel

Location

Licking County, OH

Investment (USD billion)

20.0

Company

Samsung

Location

Taylor, TX

Investment (USD billion)

17.0

Company

Micron

Location

Boise, ID

Investment (USD billion)

15.0

Company

Texas Instruments

Location

Lehi, UT

Investment (USD billion)

11.0

Company

Hyundai Motors, LG

Location

Pembroke, GA

Investment (USD billion)

7.6

Company

Stellantis, Samsung

Location

Kokomo, IN

Investment (USD billion)

6.3

Company

Nacero

Location

Penwell, TX

Investment (USD billion)

6.0

Company

HIF Global

Location

Matargorda, TX

Investment (USD billion)

6.0

Company

Ford, SK Innovation

Location

Glendale, KY

Investment (USD billion)

5.8

Company

LG Energy

Location

Queen Creek, AZ

Investment (USD billion)

5.6

Company

Ford, SK Innovation

Location

Stanton, TN

Investment (USD billion)

5.6

Company

Rivian

Location

Madison, GA

Investment (USD billion)

5.0

Company

Hyundai Motors, SK

Location

Bartow County, GA

Investment (USD billion)

5.0

Company

Wolfspeed

Location

Pittsboro, NC

Investment (USD billion)

5.0

Company

Pier Wind

Location

Long Beach, CA

Investment (USD billion)

4.7

Company

Air Products

Location

Ascension Parish, LA

Investment (USD billion)

4.5

Company

Applied Materials

Location

Sunnyvale, CA

Investment (USD billion)

4.0

Company

Panasonic Energy

Location

De Soto, KS

Investment (USD billion)

4.0

Company

GM

Location

Orion Township, MI

Investment (USD billion)

4.0

Company

VinFast

Location

Chatham, NC

Investment (USD billion)

4.0

Source: White House, Press Releases, UBS Asset Management, Real Estate & Private Markets (REPM), November 2023.

This is not just a US phenomenon. Europe is tracking over USD 200 billion of electric vehicle and battery manufacturing investments, and over USD 100 billion of semiconductor investments. Maros Sefcovic, who is leading the efforts behind the EU green deal, recently said that the EU will take on a more assertive approach in promoting “made in Europe” green industries , as a response to the pro-manufacturing policies set out by the US IRA.

One issue that is often associated with reshoring is the environmental impact, as the word “industrialization” may evoke the image of smoke, soot, and grime of the Victorian era. However, we believe that this will be a greener form of industrialization, as new manufacturing facilities will source cleaner energy, focus on efficiency and sustainability.

Most of the large corporations highlighted in above table that have also made net zero commitments. For example, Intel, which is looking to invest over USD 100 billion in chip-making plants, has pledged to achieve net zero in its operations by 2040. TSMC, another major chip maker, has committed to reaching net zero emissions by 2050.

Reshoring accelerates the economic and population growth across previously overlooked areas. Large tech companies simply will not commit billions of dollars to build a new plant, without certainty around energy supply, transportation networks, utility services, and high-speed internet. These tailwinds support infrastructure investments across all sectors.

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