On December 17, 2024, the Federal Reserve released data showing that the output value of the US manufacturing, mining, and utilities sectors decreased by 0.1%. The October data was revised downward to a decrease of 0.4%. The growth rate of the manufacturing output value was 0.2%, and the October data was revised downward to a decrease of 0.7%.

Among this decline, the output value of the utilities sector saw the largest drop in four months, and the mining sector recorded the largest decline since May.

The industrial output in the US has declined for the third consecutive month. The weakness in the US utilities and mining sectors is an important factor contributing to the poor industrial production. The output value of the US utilities sector has hit the largest decline in four months, and the mining sector has seen the largest drop since May.

In 2020, the US enacted a series of industrial policy support bills, including the CHIPS and Science Act and the Inflation Reduction Act (IRA), aiming to drive the return of overseas manufacturing capacity through increased investment. This has indeed stimulated investment in industries such as semiconductors within the US and led to a rapid increase in construction spending in the US manufacturing sector.

However, other factors still affect the recovery of the US manufacturing industry. One is inflation constraints. The US government’s industrial policies have not only increased the fiscal burden but also pushed up labor wages. TSMC stated in its 2023 financial report that the cost of building a factory in the US is four times that in Taiwan, China. As a result, the chips produced by TSMC’s US factory will increase in price by 20% to 30%.

The second is the shortage of talent. There has been no large-scale factory construction in the US for more than 20 years. From the contractors delivering the projects to the technicians operating the machines, and to the scientists in related electrical and chemical engineering fields, all are facing a shortage of experience and manpower. Taking semiconductor talent as an example, a report by the international accounting firm Deloitte shows that in the next few years, the US semiconductor industry may face a labor shortage of approximately 70,000 to 90,000.

In addition, in the context of globalization, the US policy of seeking “decoupling” from other countries is also making it increasingly difficult for the US manufacturing industry to return. China is an important node in the global supply chain, providing comprehensive support from raw materials to finished products, as well as a huge consumer market.

Despite the continuous trade competition and geopolitical tensions between the US and China, considering factors such as cost-effectiveness, supply chain maturity, and the attractiveness of the Chinese market, most US companies find it difficult to truly cut off their supply chains with China.

Behind this lies the trade-off between economic efficiency and strategic decisions. On the one hand, seeking supply chain diversification to reduce risks has become a consensus, but on the other hand, large-scale relocation of production bases in the short term faces high costs, time costs, and uncertainties in adapting to new markets.