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.
Constraint I: Hitting the Energy Wall
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 power step changes 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. Or consider a hyperscale data center, which requires about one gigawatt of power (about the same energy consumption of 800,000 homes) for training large scale AI models. These surging power requirements crash against a grid where 70% of transmission lines are nearing the end of their service life, 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 for the next industrial revolution. 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. This glut of reliable, state-backed energy provides Chinese manufacturing and AI sectors with a decisive competitive advantage, while American industry faces rising costs and crippling delays.
Without sustained investment in grid modernization, generation capacity, and permitting reform, America’s reindustrialization push will be hampered by infrastructure limitations rather than technological capability.
Constraint II: Into the Manufacturing Void
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. Even the first and only Small Modular Reactor design to receive U.S. regulatory approval was eventually cancelled. 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. This is reflective of the bigger program for the nuclear supply chain. The United States basically lacks the domestic capability to manufacture large nuclear-grade forgings needed for reactor pressure vessels, forcing reliance on a handful of suppliers, such as Japan and France. Worse, the global supply chain for uranium is caught up in geopolitics and trade wars, with many Western countries dependent on Russia for the fuel, materials, and parts needed to run nuclear power plants. But it is not only Russia, China has embargoed 25 of the top 60 critical minerals for America’s economy according to the U.S. Geologic Survey. China controls approximately 90% of the world’s processing capacity for many minerals and rare earths, such as yttrium, which is vital for semiconductors and weapon systems.
This failure to maintain and build a reliable nuclear power base sends a chilling signal across the entire deep-tech landscape. If the U.S. cannot even build the foundational components for a technology it has operated for 70 years, investors are right to question the ability of American companies and industry to be capable of scaling manufacturing to support the creation of revolutionary hardware for quantum computing. 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. This state-directed industrial might is then used to achieve global market dominance, with China 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.
This dynamic creates a dangerous feedback loop for U.S. deep-tech firms like Rigetti Computing and D-Wave Systems. Without a credible domestic industrial ecosystem to produce components at scale and lower costs, they become un-investable ‘science projects’. This lack of a clear path from the lab to a viable, manufactured product is precisely why private capital is fleeing the sector, leaving America's most promising future technologies stranded in the manufacturing void.
The absence of robust domestic supply chains leaves many tech firms facing higher costs, slower production timelines, and more cautious capital markets. Today’s supply chain risk is about more than capability and capacity, it is also about availability – certain critical materials simply are becoming unavailable to the U.S. industrial base.
Constraint III: The Workforce Crisis
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 as much as America needs engineers and software designers. From 1998 to 2021, America lost over 5 million manufacturing jobs, because it was way cheaper to have it done in third world countries.
Semiconductor delays in Arizona illustrate a broader pattern. Production timelines slipped mainly because of shortages of experienced technicians capable of operating highly specialized fabrication equipment. These constraints are not isolated. Industry estimates suggest the United States faces a shortfall of 3.8 million STEM and technical workers over the coming decade. As experienced trades workers retire, replacement rates in vocational and apprenticeship programs remain insufficient to meet demand. This imbalance directly affects the cost structure of domestic manufacturing, raising operational expenses and extending ramp-up timelines. China, on the other hand, produces 50% more STEM PhDs annually than the United States, hampering innovation and industrial growth.
Without dense supplier networks, advanced packaging facilities, and a trained labor base, even heavily subsidized factories risk becoming technologically impressive but economically fragile. Reindustrialization requires rebuilding the human capital that sustains long-term production. These issue represent a generational labor gap.
Closing the Gap: From CAPEX to OPEX
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), which covers the upfront cost of building fabs, battery plants, and advanced manufacturing facilities. 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. A semiconductor fab can cost between $10 and $20 billion to build, yet its competitiveness depends on years of affordable power, skilled technicians, and stable supply chains. Construction is visible and politically attractive. Sustained production is not.
First, grid modernization and energy permitting reform must be treated as national security priorities because energy is an OPEX driver, not just an infrastructure line item. Industrial electricity prices in the United States are higher than in several competitor economies, and interconnection bottlenecks for new power plants has left 2.6 terawatts of generation capacity waiting to connect. In fact, per the Department of Energy, transmission demands across America may triple by 2035, requiring thousands of miles of new high-capacity lines. Subsidizing construction without ensuring long-term, affordable energy locks firms into structurally higher operating costs. Reindustrialization cannot succeed if OPEX is constrained by an aging grid.
Second, industrial policy must be more than just one-time grants; mechanisms are needed to stabilize production economics. Guaranteed offtakes, long-term procurement commitments, and targeted price supports, can reduce OPEX margin uncertainity. China’s industrial policy reduces operating risk through low-cost credit, managed energy pricing, and stable demand commitments. U.S. firms by contrast, remain exposed to volatile input prices for electricity, materials, and capital, even after receiving construction subsidies. When global commodity prices swing or financing costs rise, domestic producers absorb the shock directly. Without mechanisms to stabilize OPEX margins, newly built facilities are structurally less competitive over time.
Third, workforce development must be treated as an OPEX issue as much as an education issue. Labor is the biggest recurring cost in advanced manufacturing, and wage differentials across countries can compound over decades. When skilled technicians are scarce, firms face upward wage pressures and higher recruitment costs, increasing total OPEX of domestic facilities. Even modest differences in annual labor costs can translate into hundreds of millions of dollars over a facility’s lifespan. These problems will only get worse if the growing labor gap in manufacturing is not addressed. Expanding vocational education, strengthening apprenticeship pipelines, and aligning immigration policy with advanced manufacturing needs become cost-control measures that need to be implemented across the country.
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. That requires aligning CAPEX with sustainable OPEX across energy systems, supply chains, and labor markets. America’s innovative edge remains formidable, but environmental regulations and permitting laws need to be reformed to enhance the economics of production.
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. Treating production economics as an afterthought risks eroding the foundation of American economic strength and military readiness.
Macdonald Amoah is an Independent Researcher with research interest across critical minerals supply chains, advanced manufacturing gaps, the industrial base and the geopolitical risks in the mining sector.
Morgan D. Bazilian is the director of the Payne Institute for Public Policy and professor at the Colorado School of Mines. Previously, he was lead energy specialist at the World Bank and has over two decades of experience in energy security, natural resources, national security, energy poverty, and international affairs.
Lt Col Jahara “FRANKY” Matisek (PhD) is a US Air Force command pilot, nonresident research fellow at the US Naval War College, senior fellow at the Payne Institute for Public Policy, and a visiting scholar at Northwestern University. He is the most published active-duty officer with 2 books and over 150 articles on industrial base issues, strategy, and warfare.
The views expressed in this article are solely those of the author and do not represent the official views or policies of the U.S. Government or any of its agencies.