Beyond Building a Factory: Why Structure, Risk and Control Matter in U.S. Localization
CFW Advisory | Executive Insight | November 2026
The rapid development of artificial intelligence infrastructure in the United States is reshaping global manufacturing supply chains.
From high-density power supplies, transformers, uninterruptible power supply systems (UPS) and energy storage systems to liquid cooling equipment, thermal management and supporting data center infrastructure, demand driven by AI infrastructure now extends well beyond servers to the entire power and cooling value chain.
For Chinese and other Asian manufacturers currently serving the U.S. market, an increasingly practical question is emerging:
Should the company establish a greater local business presence in the United States? If so, what structure should it adopt?
This involves more than deciding where to build a factory or how much to invest. It also encompasses ownership arrangements, commercial partnership models, capital commitments, operating responsibilities, regulatory risks and long-term control.
Three recent industry developments offer different perspectives on this transformation.
1. MEGMEET Joins OCP: U.S. Localization Begins with Participation in Customer and Technology Ecosystems
On November 2, 2026, Chinese power electronics company MEGMEET announced that it had joined the Open Compute Project (OCP) as a Silver Member.
OCP is an industry organization that advances open data center infrastructure design and collaboration. MEGMEET’s participation involves high-density power conversion, liquid cooling and next-generation power distribution architectures.
Meanwhile, MEGMEET has established AI data center power testing capabilities in the Dallas area and is developing its manufacturing and operating presence in North America.
This example offers an important perspective:
Entering the U.S. market does not necessarily mean starting with a large manufacturing facility.
For technology-driven manufacturers, localization may begin with the following capabilities:
• Conducting joint product testing and technical validation with U.S. customers;
• Participating in industry standards, technology ecosystems and supply chain collaboration;
• Establishing local engineering, after-sales service and technical support teams;
• Progressively developing U.S. manufacturing, warehousing and delivery capabilities; and
• Determining whether to expand fixed-asset investment based on customer requirements.
From a commercial structuring perspective, a company may first establish an asset-light platform for technical services and customer collaboration, then gradually develop local assembly or manufacturing operations.
This approach can help validate market demand while avoiding excessive early capital commitments before customer orders, technical standards and the business model are sufficiently defined.
MEGMEET’s specific investment rationale has not been publicly disclosed. The pathway outlined above represents CFW’s analysis of potential approaches to U.S. localization for manufacturers, rather than a judgment regarding the company’s internal strategy.
2. Modine’s Latest Results: Supply Chain Competition Is Expanding from Products to Delivery Capabilities
On November 3, 2026, U.S. thermal management company Modine announced its latest quarterly results, reporting approximately 95% year-over-year revenue growth in its data center business.
The company also disclosed strong orders and backlog in its data center business and the use of long-term supply agreements to secure critical components.
This reflects an important shift:
Competition across the AI infrastructure value chain increasingly depends on long-term supply commitments, delivery reliability and local service capabilities, in addition to equipment performance and pricing.
For Chinese suppliers of power equipment, liquid cooling systems and other data center infrastructure, entering U.S. customer supply chains may require more than addressing sales.
Companies also need to consider:
Customer Access
How can the company gain access to the procurement networks of U.S. data center developers, equipment integrators, engineering, procurement and construction (EPC) contractors, and major corporate customers?
Technical Support
Are local testing capabilities, engineering teams, certification support and after-sales services required?
Supply Chain
Do critical components require warehousing, assembly, inventory stocking and alternative suppliers in the United States or elsewhere in North America?
Operating Structure
Should U.S. sales, technical services, warehousing, manufacturing and after-sales operations be conducted through a single entity or separate operating entities?
Risk Allocation
Who bears product liability, delivery delay exposure, warranty obligations, contractual liabilities and supplier-related risks?
Localization therefore cannot be understood simply as replicating an Asian factory in the United States.
What companies need to establish is a commercial and operating framework capable of supporting long-term cooperation with U.S. customers.
3. The Texas Regulatory Environment: Market Demand and Project Feasibility Must Be Assessed Separately
Texas has become an important destination for investment in U.S. AI infrastructure, power equipment and advanced manufacturing.
Strong market demand, however, does not mean that every project has the same conditions for successful implementation.
In September 2026, the Texas state government called for additional review of data center projects concerning the electric grid, water resources and related permitting. This reflects increased scrutiny of the effects of major infrastructure investments on local resources and communities.
An important distinction must be made: permitting requirements for data center projects do not automatically apply in the same way to all power equipment or cooling equipment manufacturing facilities. Different projects must be assessed individually based on their use, location and applicable regulations.
For manufacturers considering investment in Texas, management should evaluate at least the following factors:
• Power Availability: Electricity supply and grid connection conditions.
• Water Requirements: Water demand and resource constraints.
• Site and Permitting: Land, land-use approvals, environmental permits and construction permits.
• Workforce: Access to engineering, manufacturing and technical talent.
• Customer Proximity: Distance to customers and delivery efficiency.
• Incentives: State and local government incentives.
• Capital Requirements: Project capital investment and financing arrangements.
• Regulatory Exposure: Regulatory, trade and investment restrictions.
• Long-Term Economics: Ongoing operating costs and investment returns.
Site selection is one decision within the overall U.S. strategy.
For companies with Chinese ownership or affiliations in particular, certain projects may also require early identification of issues involving foreign investment review, trade restrictions, product origin, government procurement and customer supply chain policies. The specific requirements depend on the investors, transaction structure, products, technology and customer types involved.
CFW therefore believes that companies should develop an integrated assessment across commercial, operational, financial and compliance considerations before committing substantial capital.
4. Structure: A Core Decision That Is Often Underestimated in U.S. Localization
Consider a Chinese power equipment manufacturer that already has U.S. customers and plans to expand its North American business over the next three years.
The company may face seven possible pathways:
U.S. Sales and Service Center
A lower initial investment that strengthens customer support and after-sales capabilities.
U.S. Warehousing and Spare Parts Center
Improved delivery speed and supply chain resilience.
U.S. Testing and R&D Facilities
Support for technical validation and joint development with customers.
U.S. Assembly or Light Manufacturing
Stronger local delivery capabilities while controlling initial capital expenditure.
Full-Scale U.S. Manufacturing Facility
A long-term manufacturing footprint involving greater capital investment.
Joint Venture / Strategic Partnership
Shared resources, capabilities and a portion of the risks.
Acquisition
Access to existing facilities, teams, customers or distribution channels through an acquisition.
Behind these seven pathways lies a deeper question:
What structure should the company adopt?
Ownership Structure
Should the U.S. business be owned directly by the Chinese parent company or through an intermediate holding entity?
Should U.S. partners be brought into the ownership structure?
Different ownership arrangements may have different implications for governance, taxation, financing, regulatory matters and future exits.
Entity and Operating Structure
Should U.S. sales, technical services, manufacturing, warehousing and project investment activities be conducted through the same entity?
Should clear contractual arrangements, responsibility boundaries and management boundaries be established between different business activities?
Investment and Capital Structure
Should U.S. expansion be funded primarily through parent-company capital, external debt, partner funding or phased investment?
If a joint venture is adopted, how should the parties’ respective rights and obligations be defined when they contribute cash, technology, customer relationships or facilities?
Governance and Control
Who is responsible for the day-to-day operation of the U.S. company?
Which material matters require approval from headquarters in China?
Who controls budgets, bank accounts, capital expenditure and key contracts?
If a U.S. joint venture partner is involved, how should board seats, veto rights, management authority and exit mechanisms be arranged?
Liability and Risk Allocation
How should responsibilities be clearly allocated among different business entities?
How should product quality, contractual performance, financing guarantees, employment liabilities and project risks be managed?
Appropriate entity and contractual structures can help define risk boundaries, but they cannot guarantee complete isolation from liability.
Structure determines more than how a company enters the United States. It also determines who will bear risk, who will control assets, who will make decisions, and whether the company can expand or exit flexibly.
Structuring should therefore be discussed before lawyers begin drafting company formation documents or joint venture agreements.
It should enter the board’s decision-making framework at the business strategy stage, with the detailed professional design and implementation subsequently carried out by appropriately qualified legal, tax and other professional advisers.
5. CFW’s Core Approach: Structure · Risk · Control
At CFW Advisory, we believe that U.S. localization decisions must answer three core questions.
STRUCTURE
Through what business model, entity arrangements, ownership structure and capital structure should the company participate in the U.S. market?
RISK
What market, regulatory, contractual, tax, operational, supply chain and capital risks does the company face? Which risks can be reduced, transferred or managed through appropriate professional mechanisms?
CONTROL
Who holds decision-making authority? Who is accountable for execution? How should governance mechanisms, delegated authority, budget approvals and oversight arrangements be established?
These three questions run through six stages of a company’s development in the United States:
ENTER → INVEST → OPERATE → COMPLY → CAPITALIZE → GROW
U.S. market entry, investment, business operations, ongoing compliance, capital strategy and continued growth.
For CFW, these are not six separate services. They form a strategic decision-making framework that companies continually need at different stages of development.
For example:
A company may initially need only to assess a U.S. sales and technical service center.
It may subsequently need to establish assembly facilities, select partners and build a U.S. management team.
As the business develops further, it may also face decisions involving U.S. financing, acquisitions, a second manufacturing facility, multistate operations and more complex governance and compliance arrangements.
Each business expansion may require a reassessment of whether the existing structure, risk management and control mechanisms remain appropriate.
6. What Should the Board Address Before Approving a U.S. Localization Investment?
For companies considering U.S. manufacturing, assembly, joint ventures or acquisitions, CFW recommends that management discuss at least the following questions:
Is U.S. market demand sufficient to support a long-term localization investment?
Do current customer and delivery requirements actually require full-scale U.S. manufacturing?
Which localization pathway offers a more appropriate level of capital efficiency?
Are the company’s existing ownership and operating structures suitable for its U.S. business?
Which legal, tax, regulatory and trade issues must be resolved before investment?
How should management authority and decision-making responsibilities be allocated between headquarters in China and the U.S. team?
If a joint venture is adopted, how should control rights, risk allocation and exit mechanisms be arranged?
Where will project financing, operating cash flow and capital for subsequent expansion come from?
If market conditions, policies or customer requirements change, can the company adjust or exit?
Can the U.S. business develop from a single project into a platform for long-term operations?
The answers should ultimately form an actionable U.S. localization strategy and structuring roadmap.
Conclusion: Effective Localization Means Building a U.S. Business with Long-Term Strategic Control
AI infrastructure is creating new market opportunities for global manufacturers.
Long-term success in the United States depends not only on product technology, market size or the amount invested in a factory, but also on the company’s ability to establish appropriate business structures, operating systems, risk management mechanisms and governance capabilities.
U.S. localization is not simply a matter of relocating a factory to the United States. It requires redesigning how the company operates, invests, assumes risk and maintains strategic control in the U.S. market.
This is the long-term value CFW Advisory seeks to create for business leaders.
CFW ADVISORY
Structure. Risk. Control.
ENTER · INVEST · OPERATE · COMPLY · CAPITALIZE · GROW
CFW Advisory provides business advisory services to companies and investors in U.S. market entry, investment structuring, operational coordination, ongoing compliance management support, capital strategy and growth-related decision-making. Based on project needs, CFW also coordinates with independent legal, tax and other professional firms.
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This article is provided for general business and strategic information only and does not constitute legal, tax, securities or investment advice. Specific projects and the applicability of regulatory requirements should be independently assessed by appropriately qualified professional advisers.
