America’s New Manufacturing Hub: The Southwest

Tax Breaks, Land, and Talent Drive Growth

The Southwest is becoming a new manufacturing hub in the US. The region is luring companies with tax breaks, vast areas of land, and a growing workforce of technology professionals.

From 2017 through 2020 the four states which make up the American Southwest—Arizona, New Mexico, Texas, and Oklahoma—have increased their manufacturing output at a faster rate than any other region in the country. Those states plus Nevada added more than 100,000 manufacturing jobs during that time frame. That growth is expected to continue for the foreseeable future.

Pandemic Causes Manufacturing Shifts

The pandemic caused global supply chain disruptions, prompting companies to bring production stateside. Many of these firms ramped up domestic operations in the Southwest.

Lucid Motors, an electric vehicle startup, plans to open a $700 million vehicle manufacturing facility in Arizona this year. The company looked at more than 60 locations in 13 states before choosing Arizona. Meanwhile, Taiwan Semiconductor Manufacturing (TSM) chose Arizona as the home for its new $12 billion chip plant, which is expected to employ some 1,600 workers. The company highlights affordable housing and outdoor recreation in its recruitment material. Intel (INTC) is also opening a new plant in Arizona while Tesla’s (TSLA) newest assembly plant will be in Texas.

States Offer Perks to Attract Manufacturers

States in the Southwest are taking steps to lure manufacturing their way. To attract Lucid to Arizona, Governor Doug Ducey and other local politicians have offered perks including tax breaks and land zoned for industrial use. Texas and Nevada are offering tax abatements which exempt businesses from paying local property taxes. Nevada has offered tax exemptions on sales, property, and business taxes, as well as other credits.

When manufacturers open a new plant, jobs are created, boosting the local economy and increasing tax revenue for cities and states. For these reasons, Southwestern states are doing everything they can to attract manufacturing companies. Many analysts expect that manufacturing growth in the region will continue for years to come.

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