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Why The American Manufacturing Revival Is Bound To Get Bogged Down

Why The American Manufacturing Revival Is Bound to Get Bogged Down

Why The American Manufacturing Revival Is Bound to Get Bogged Down

America is about to be made great again. In case you hadn’t heard, there’s a renaissance in U.S. manufacturing in the works. President Biden and CEOs including Intel’s INTC – $35.89 0.2 (0.557%) Pat Gelsinger and Sunrun’s RUN – $10.01 0.135 (1.349%) Mary Powell are enraptured over the prospect. America, reeling from supply-chain snags and taken aback by a more assertive China, is aiming to become more self-reliant, kickstarting a new age of prosperity in the process. Truth be told, it’s not about to happen any time soon, if ever. Much of what you hear is sloganeering by politicians and company heads who are inhaling billions of dollars in subsidies. One invisible and unmovable object stands in the way: Reality. Those who push the revival narrative point to energy independence as evidence of America’s ability to regain past glories. The U.S. became a net exporter of oil in 2019 for the first time in seven decades. But pumping oil out of the ground isn’t equivalent to producing precise metal, plastic and glass parts with tight tolerances. If you want to see America’s feeble manufacturing industry in action, watch the excruciating documentary “ American Factory ” – a tragicomedy of sorts. So far, Elon Musk, with Tesla TSLA – $260.05 6.29 (2.419%) and SpaceX, is the sole bearer of advanced U.S. manufacturing. There are gains at the margins: electric-powered boats, small nuclear reactors, remote-controlled farm tractors. But can you think of another company or CEO who’s pushing the boundaries on a mass scale? Me either. America is No. 1 in the world of bits, not atoms, as venture capital investor Peter Thiel likes to say. And it’s been that way for 50 years. Even think tanks are confounded by the situation. The Economic Policy Institute’s solution for a blooming manufacturing sector is for the government to weaken the dollar . The Council on Foreign Relations says the U.S. ought to band together with Canada and Mexico – sound familiar? – to create supply chains and strengthen stockpiles. In the world of industrial policy, President Trump shut the door on trade, and Biden is finishing the job with his concept of “build back better.” (The alliteration of the phrase hides the fact that the more accurate “rebuild” would suggest something is broken.) Biden has pushed through three policies at a cost of $1.2 trillion: The Infrastructure Investment and Jobs Act (of 2021), and the CHIPS Act and Inflation Reduction Act (both 2022). The president’s focus is on semiconductors and green energy, two areas in which the U.S. trails China by wide margins. That’s no surprise: Manufacturing as a share of gross domestic product (GDP) has declined in advanced economies for decades , to the benefit of brain power (computers, medicine) and services (financial, health insurance). But Biden and some CEOs want to bring us back there. The result: The reshoring of U.S. manufacturing will be painful. Here are five additional reasons: 1. Growing Pains The manufacturing transition will take many years and likely won’t go smoothly. Meanwhile, China, Mexico and other manufacturing powerhouses will keep innovating and advancing, as they have been since the U.S. gave up on manufacturing. Intel will be, by far, the largest recipient of U.S. government money for making chips, according to Bank of America analysts. The company, once the world’s biggest in that industry, has stumbled badly. It is now an also-ran, as it’s blown targets so often, analysts discount what its executives say. In the words of CEO Gelsinger in January 2022: It is “an embarrassing thing to say” that Intel’s technology has not improved in five years. 2. Lost Time The U.S. has squandered generations of manufacturing expertise. That is hard to get back. Other nations have robust ecosystems – networks of interlocking companies, financing ties, grand industrial policies. Five years is a long time in the world of advanced manufacturing, never mind 50. In the words of Mike Beckham , CEO of drinkware company Simply Modern: “The challenge is the U.S.’s anemic manufacturing ecosystem. Compared to China, we aren’t even close. If you want to build a high-quality tool or source a new material, it is 10 times more difficult in the U.S.” The reason is simple: There are a lot fewer manufacturing experts in the U.S. 3. Enhanced Competition As the U.S. doles out more than a trillion dollars in manufacturing credits, incentives and subsidies, Chinese and other nations’ companies are likely to lower prices, putting U.S.-made products at a disadvantage. That […]

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Daisie Hobson

Daisie Hobson is a Director at the Reshoring Institute and an engineer with many years of experience in manufacturing and project management.

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