The CHIPS Act and Texas’ Response

In response to global semiconductor shortages exacerbated by the COVID-19 pandemic, the U.S. government enacted the $280 billion CHIPS Act, allocating $53 billion to revitalize domestic semiconductor manufacturing. In the 19 months since it was signed in August of 2022, manufacturing construction spending has expanded at an unprecedented pace to levels higher than ever as distribution development wanes. The legislation, along with supply chain concerns and global tensions, have led to a resurgence in U.S. manufacturing development, particularly in the semiconductor fabrication and electric vehicle industries. Similarly, the reshoring of manufacturing operations to the U.S. and nearshoring to Mexico have become measurable trends.

Texas, already a semiconductor industry leader, recognized an opportunity to respond, and the state’s Governor Abbott signed the Texas CHIPS Act in June of 2023, establishing the Texas Semiconductor Innovation Consortium (TSIC) and the Texas Semiconductor Innovation Fund (TSIF).(1) With a $698 million fund, the Act incentivizes private businesses to expand semiconductor manufacturing in Texas, promoting economic development. Additionally, it allocates matching funds to universities for chip design and manufacturing projects, including the University of Texas at Austin and Texas A&M University, which received $440 million and $226 million, respectively.(2)

Active Projects

Texas Instruments’ announcement of a $30 billion investment in Sherman, Texas, set to create 3,000 direct jobs, is a monumental shift for the region’s economic landscape. This investment not only solidifies Texas as a burgeoning hub for semiconductor manufacturing but also signals substantial growth in commercial real estate demand. We can expect a surge in office spaces, manufacturing facilities, and housing developments, contributing to Sherman’s transformation into a pivotal tech-centric economy.

Samsung’s $25 billion investment in Taylor, Texas, earmarked for creating 2,000 jobs, is another example of Texas’s increasing significance in the global semiconductor arena. This project will likely catalyze a comprehensive economic boost, enhancing local infrastructure and stimulating the commercial real estate market. With a focus on manufacturing, we anticipate a ripple effect leading to the expansion of ancillary businesses and an upswing in both industrial and residential real estate development to accommodate a growing workforce. As of May 16, 2024, Samsung will receive up to $6.4 Billion in direct funding from the CHIPS Act. (3)

Commercial Real Estate Implications

The semiconductor shortage has underscored the vulnerabilities associated with a reliance on singular suppliers or countries for critical components. The CHIPS Act has catalyzed a paradigm shift in supply chain strategies, and one trend that has surfaced is that companies are seeking to position themselves in regions with a diverse supplier base and strong labor force.

Texas is perfectly positioned to embrace the evolving industrial real estate market and to welcome the expanding investment in advanced manufacturing construction projects. Texas is endowed with a robust and growing tech talent pool that can sustain rapid growth and evolution of cutting-edge technologies that will emerge as a direct result of these growing industries and funding from the CHIPS Act.

The presence of companies like Tesla and Samsung in Austin, and Texas Instruments in Dallas, along with the overall appeal of Texas’ pro-business climate continues to pique the interest of high-tech suppliers and adjacent industries from around the world.

The Bigger Picture

The CHIPS Act is not merely a legislative initiative; it is a seismic force reshaping the contours of the manufacturing industry. This transformative shift presents unique opportunities for commercial real estate development. It is imperative for developers to understand these trends and strategically position themselves to harness their potential. This entails investing in properties located within thriving manufacturing clusters or strategically positioned amidst the robust logistics infrastructure. Whether it be high-tech office spaces or flexible industrial facilities, the demand for specialized buildings housing advanced equipment and infrastructure for semiconductor manufacturing is on the rise.

As the birthplace of the integrated circuit, Texas has demonstrated a commitment to lead in semiconductor innovation. The Texas CHIPS Act solidifies the state’s position as a premier destination for semiconductor fabrication investments and reinforces its dedication to fostering semiconductor technology, innovation, and a skilled workforce. This legislative push aligns with a broader trend in manufacturing reshoring, positioning Texas as a critical player in the future of semiconductor production and its far-reaching implications for commercial real estate development.