Why You’d Want to Build a Skyscraper Like an iPhone

05Jul17

by Christopher Mims at The Wall Street Journal

With tech-enabled modular design and building, the construction industry, like consumer electronics, can benefit from economies of scale A worker in the Phoenix factory of Katerra, one of the construction industry’s tech-focused startups that is reinventing modular building and prefabrication.

 A worker in the Phoenix factory of Katerra, one of the construction industry’s tech-focused startups that is reinventing modular building and prefabrication. PHOTO: MARK SKALNY

As prices of components and materials for pretty much every other physical object—cars, cell phones, clothing, etc.—have dropped precipitously, it still costs too much to build a building. Over the past 60 years, productivity in manufacturing has increased eightfold while remaining basically flat in construction, says Jan Mischke, a senior fellow at McKinsey Global Institute who specializes in infrastructure and housing.

Gadgets like iPhones, everyone the same, benefit from economies of scale, but that’s harder to achieve with buildings, which must fit the sites they are constructed on.

Katerra, a construction startup, has raised $221 million at a valuation north of $1 billion, and it projects up to $500 million in revenue this year. It is, in some ways, the standard-bearer of this new, tech-focused wave of interest in building.

Productivity SlumpValue added per worker, adjusted forinflation, has remained fairly flat in the construction industry since 1995,  Instituteanalysiswhile rising sharply in manufacturing.THE WALL STREET JOURNALSources: OECD; WIOD; GGCD-10, World Bank; US Bureau of Economic Affairs (BEA); USBureau of Labor Statistics (BLS); national statistical agencies of Turkey, Malaysia, andSingapore; Rosstat;Institute analysis
%Construction20.7%Total economy70.3%Manufacturing96.6%19952000’05’10-250255075100

The company currently has a single, 200,000-square-foot factory in Phoenix where it manufactures whole walls, including all the windows, insulation, electrical wiring and plumbing. Katerra uses an integrated, computer-aided design-and-manufacturing system that tells all the factory’s automated saws and routers how to produce all the buildings’ components. The same system connects to job-site cranes that lift and place the finished panels.

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