Strategic Investment in U.S. Manufacturing: A Comprehensive Guide for Asia-Based Businesses

Capturing Opportunity Under U.S. Industrial Policy: CHIPS Act, Inflation Reduction Act, and Tax Incentives

I. Introduction: A Rare Moment for Strategic Expansion

The United States has entered a new phase of industrial policy. Following decades of offshoring, Washington is now actively reshoring critical manufacturing—particularly in semiconductors, clean technology, and advanced electronics. Through a combination of generous tax credits, direct subsidies, export-focused tax deductions, and supply chain incentives, the U.S. government is inviting global businesses to invest and build domestically.

For Asia-based manufacturers, this is a rare alignment of economic, political, and financial incentives. The combination of the CHIPS and Science Act, the Inflation Reduction Act (IRA), and new tax laws now offers an environment where long-term return on investment can rival or even exceed traditional Asian markets—if approached correctly and within the current policy window.

II. Policy Drivers and Economic Shifts Behind U.S. Manufacturing Incentives

1. CHIPS and Science Act (2022)

The CHIPS Act is the centerpiece of America’s semiconductor policy. It provides:

$52 billion in direct funding, including:

A 25% Investment Tax Credit (ITC) on qualifying expenditures in semiconductor manufacturing.

Strict national security guardrails, requiring recipient companies to avoid certain expansions in China and other countries of concern.

The goal is to strengthen domestic capacity in advanced chip manufacturing, reduce reliance on Taiwan and East Asia, and ensure secure supply chains for defense, automotive, and technology sectors.

2. Inflation Reduction Act (IRA)

While known for climate provisions, the IRA offers critical support for manufacturers through:

Advanced Manufacturing Production Credit (Section 45X): For each eligible component manufactured in the U.S. (such as battery modules, solar cells, wind components, and in some cases semiconductor equipment), companies can receive per-unit production tax credits.

Clean Energy ITC (Section 48C): A 30–40% tax credit on qualified investments in clean energy manufacturing facilities.

Loan guarantees and grant funding for clean technology infrastructure and innovation.

This act aims to build domestic ecosystems in EVs, energy storage, solar, hydrogen, and carbon capture—presenting major opportunities for Asian companies in battery, electronics, and energy component manufacturing.

3. Export-Focused Tax Reform: FDDEI

The U.S. offers a reduced effective corporate tax rate (~14%) on income derived from U.S.-based production and R&D exported abroad, under rules covering Foreign-Derived Deduction Eligible Income (FDDEI). This makes it particularly attractive for companies exporting technology products back to Asia or Europe.

4. New Tax Legislation (2025)

In July 2025, a new bipartisan law increased the CHIPS ITC from 25% to 35% for qualifying projects begun before December 31, 2026. This is a limited-time incentive, meant to accelerate investment decisions and help the U.S. meet its domestic chip capacity goals by 2030.

III. Why Asian Manufacturers Should Consider This Opportunity

1. Competitive Economics Through Incentives

While U.S. construction and labor costs are traditionally higher than Asia, the layered incentives can dramatically alter cost structures. For example, for a $10 billion advanced chip fab:

35% ITC = $3.5 billion in tax credits.

Potential CHIPS Grant = $2–3 billion in direct funding.

FDDEI Export Tax Deduction = ~7% reduction in tax liability on export earnings.

IRA Manufacturing Credits (if applicable) = $100–200 million annually.

When combined, these reduce the total cost by up to 50%, leveling the playing field with Taiwan, South Korea, and China.

2. Strategic Alignment with U.S. Policy

Investing in the U.S. enhances long-term access to:

U.S. tech supply chains (Apple, AMD, Intel, Ford, GM).

Defense procurement opportunities (available only to firms with U.S. production).

AI, cloud computing, and automotive innovation clusters.

Additionally, the U.S. is actively working to de-risk reliance on certain foreign suppliers. Asian companies who invest now become part of the “trusted partner” ecosystem that benefits from government contracts and preferential procurement.

3. Resilience and Diversification

Given rising geopolitical tensions and the possibility of cross-strait instability, diversification is prudent. U.S.-based production:

Mitigates political risk exposure.

Provides local capacity for customers requiring U.S.-origin goods.

Enhances corporate ESG and sustainability narratives with Western investors.

IV. Who Should Invest: Profiles of Ideal Asia-Based Investors

A. Semiconductor Companies

Chip foundries (logic, memory, advanced packaging)

Design-to-fab integrated firms (IDMs)

Equipment and materials suppliers with end-use in U.S. fabs

B. Clean Energy and Electronics Manufacturers

Battery cell and module producers

Solar and wind component fabricators

EV supply chain firms (inverters, sensors, thermal management)

C. Consumer and Industrial Electronics Firms

Advanced component makers (e.g., MEMS, RF, SoC)

OEMs targeting U.S. military, medical, or aerospace sectors

D. Contract Manufacturers (EMS/ODM)

Those looking to localize for U.S. clients, reduce tariffs, or respond to “Buy America” procurement rules

V. Implementation Guidelines: Step-by-Step Roadmap

Step 1: Internal Feasibility Assessment

Calculate projected CapEx and OpEx for a U.S. facility.

Estimate qualifying costs for the 35% ITC.

Map export income flows to determine FDDEI eligibility.

Assess impact on global supply chain, logistics, and workforce.

Step 2: Strategic Site Selection

Choose states with additional incentives: Arizona, Texas, New York, Ohio, and North Carolina are hotspots for chip and clean-tech manufacturing.

Factor in:

Step 3: Engage with U.S. Government and Regional Partners

Apply to the CHIPS Program Office for funding eligibility.

Consider joining regional tech hubs or manufacturing alliances.

Partner with local universities and workforce development programs.

Step 4: Legal and Tax Structuring

Establish a U.S. legal entity (usually a C-Corporation).

Work with U.S. tax advisors to elect ITC and FDDEI deductions.

Ensure compliance with CHIPS Act guardrails (e.g., no expansion in adversarial countries for 10 years).

Step 5: Permitting, Design, and Construction

Begin permitting, environmental reviews, and federal coordination early.

Submit detailed fab/project design to CHIPS Program Office for grant evaluation.

Ensure timelines allow groundbreaking before December 31, 2026, to qualify for enhanced ITC.

Step 6: Operational Planning and Hiring

Develop training pipelines through U.S. technical colleges.

Prepare for long-term labor and supply chain management within the U.S.

Explore apprenticeships, union collaboration, and diversity hiring incentives.

VI. Challenges and Risks to Navigate

Investing in U.S. manufacturing comes with several risks that businesses must proactively manage. One of the most significant challenges is the high cost of construction in the U.S., which can be 30–40% more than in Asia. However, this can be substantially offset through the use of the 35% Investment Tax Credit (ITC), federal and state-level grants, and local incentive programs that reduce the net capital outlay. Another key concern is the shortage of skilled labor, particularly in semiconductor and clean-energy manufacturing. To mitigate this, companies should form partnerships with U.S. universities, community colleges, and government-sponsored workforce development agencies to build training pipelines and apprenticeship programs tailored to their operational needs.

Regulatory compliance is also a complex issue, especially under the CHIPS Act and the Inflation Reduction Act. Businesses must hire experienced U.S.-based legal and tax advisors who are well-versed in these frameworks to ensure they meet eligibility requirements, reporting obligations, and ongoing compliance standards. Additionally, the CHIPS Act includes guardrails that restrict recipients from significantly expanding manufacturing in China or other countries of concern for a period of ten years. To manage this, companies must establish clear operational boundaries and internal governance that separates U.S. operations from restricted regions, thereby avoiding policy violations and potential clawbacks of funding or credits.

Finally, the long return-on-investment (ROI) horizon typical of large-scale manufacturing projects in the U.S. can deter investors. This can be mitigated by securing long-term contracts with major U.S. clients or accessing federal procurement channels, which provide revenue predictability and financial stability over time. By addressing these risks with strategic planning and localized engagement, Asian businesses can position themselves to thrive in the U.S. industrial resurgence.

VII. Conclusion: Act Within the Window of Maximum Incentives

The United States is in the midst of a once-in-a-generation industrial reinvestment. For qualified Asian manufacturers—particularly in semiconductors and energy-related sectors—there has never been a better time to expand into the U.S. market.

The combination of 35% ITC, federal grants, export income tax deductions, and access to the U.S. innovation ecosystem makes this a globally competitive opportunity. But timing is critical. The elevated incentives are temporary, with many programs requiring action by December 2026.

VIII. Next Steps for Asia-Based Business Leaders

Assign a cross-border expansion task force.

Conduct a feasibility study focused on tax optimization and site selection.

Initiate discussions with U.S. advisors, tax professionals, and local partners.

Explore state and local incentives layered on top of federal programs.

Position your firm as a strategic partner in U.S. industrial growth and technology security.

If your business produces strategic components or technologies and is exploring long-term global diversification, U.S. manufacturing investment is no longer a cost center—it is a competitive, state-supported opportunity.