US electrical equipment manufacturing capacity has fallen 9% since 2019 even as electricity demand from AI infrastructure continues rising, according to analysis shared by venture capital firm a16z. Prices for electrical equipment surged 69% over the same period, with transformer and switchgear costs nearly doubling. The decline contrasts sharply with other manufacturing sectors—semiconductor production grew 77% and communications equipment rose 110% since 2019—creating a supply bottleneck for the power infrastructure needed to support AI data centers.
US Electrical Equipment Production Falls 9% Since 2019
The a16z findings frame the decline as a capacity problem, with US electrical equipment manufacturing capacity down 9% since 2019 as of mid-2026. The 69% price increase represents the highest among the manufacturing categories a16z tracked. For transformers and switchgear specifically, prices have nearly doubled since 2019.
Communications equipment manufacturing grew 110% over the same stretch. Semiconductor production rose 77%. Computer manufacturing increased 16%.
Factories Run at 87% Utilization While Output Drops 7%
Electrical equipment plants are operating at 87% utilization, the highest level since 2008, according to the a16z analysis. Overall manufacturing utilization softened during that period, making electrical equipment plants an exception.
Output from existing plants fell 7% even as utilization increased by 13%. The a16z research described this combination as a sign of inefficiency in production—more effort is going in while less finished equipment is coming out.
Transformer and Switchgear Imports Surge 80% Above 2019 Levels
Imports of transformers and switchgear have surged approximately 80% above 2019 levels to meet demand, according to the a16z findings. The import increase has filled gaps left by declining domestic production capacity.
a16z Analysis Points to AI Infrastructure Bottleneck
The a16z analysis points to potential headwinds for sectors reliant on power infrastructure, with AI as a primary focus. Escalating costs and supply shortages could slow growth and push price inflation across technology sectors, according to the findings.
The 87% utilization figure indicates plants running close to capacity have little room to absorb further increases in orders. Semiconductor production in the US is up 77% since 2019, while the constraint appears to be shifting to electrical equipment infrastructure.
FAQ
What happened to US electrical equipment manufacturing capacity since 2019?
US electrical equipment manufacturing capacity fell 9% since 2019 according to a16z analysis, while prices for that equipment rose 69% over the same period. Transformer and switchgear prices nearly doubled.
Why are electrical equipment factories producing less despite high utilization?
Electrical equipment plants are running at 87% utilization, the highest since 2008, but output fell 7% even as utilization increased 13%. The a16z research described this as a sign of production inefficiency, with more effort going in but less finished equipment coming out.
