Government Initiatives Spurring Reshoring
The U.S. needs an industrial policy instead of what has been, in effect, a decades-long de-industrialization policy. Especially now, with pandemic-induced supply chain disruption and geopolitical tensions and uncertainty, industry-led government affairs committees can provide valuable insight and guidance to the government on key legislative and regulatory priorities. Let’s look at some of the transformational investments impacting the manufacturing industry today. Reshoring can be an integral part in strengthening the U.S. industrial base.
Reshoring to End the Chip Shortage
By now, most everyone has heard about and/or has been impacted by the shortage of semiconductor chips. To safeguard the situation, the House and Senate have passed versions of the CHIPS for America Act (Creating Helpful Incentives to Produce Semiconductors for America Act) in January 2021. However, differences in the House and Senate bills haven’t been ironed out yet, and the $52 billion subsidy has been delayed despite bipartisan support. Although the funding has not yet arrived, private industry is encouraged and is already investing in building new or expanding existing semiconductor facilities and hiring workers.
For example, Intel is investing $20 billion to build two state-of-the-art semiconductor manufacturing facilities in Ohio by 2025. Intel’s Chief Executive Pat Gelsinger has pledged to increase that investment to $100 billion but the timing will depend upon the U.S. subsidy. Samsung is planning a $17 billion chip plant in Texas. Apple’s chip supplier TSMC expects to hire over 1,500 workers at its new $12 billion chip plant in Arizona. GlobalFoundries is expanding its New York semiconductor chip factory with a $1 billion investment. Reshoring semiconductor manufacturing will increase resilience and safeguard U.S. national security and the economy.
Government Incentives Play a Key Role
According to Reshoring Initiative data, the most frequent factor reported for “reasons companies reshored or did foreign direct investment (FDI)” is government incentives (1,594 cases from 2010-2021). Here are some additional examples of the relevance of government incentives.
Grand Rapids, Michigan-based life sciences manufacturer Grand River Aseptic Manufacturing (GRAM), was previously an “Operation Warp Speed” participant. The company is now investing $160 million to expand its fill-and-finish facilities and will receive $120 million from U.S. government contracts to support the project. The investments will expand GRAM’s capacity and enable it to contract manufacture for pharmaceutical companies and the U.S. government.
The U.S. Department of Defense (DOD) awarded a $117 million contract to GlobalFoundries to support U.S. production of microelectronics that will play an important role in the DOD’s advanced capabilities, such as hypersonic weapons and satellites.
Texas-based bio-manufacturer Scorpion is investing $650 million to build a new bio-manufacturing plant in Kansas to develop new vaccines to accelerate a response to biological threats. Government incentives to support the project include $567 million in industrial revenue bonds and an $8 million forgivable loan based on job creation. The company expects to create 500 new jobs with an average salary of $76,000.
Government Initiatives Spur Reshoring Growth
AM Forward (Additive Manufacturing Forward) is the Biden Administration’s initiative to boost supply chain resilience with additive manufacturing (AM). For example, the U.S. metalcasting industry is experiencing growth due in part to a demand surge related to the COVID-19 pandemic.
A recent American Foundry Society study showed that 90% of respondents anticipate making capital investments in the next year. The study showed a strong foundry interest in AM printing technology. AFS CEO Doug Kurkul said, “The survey also showed that 89% of responding foundries have a positive business outlook for the next 12 months. That positive outlook, coupled with strong demand for castings, has set the stage for significant investments in plants and equipment in the coming months.”
U.S. foundries that are investing in AM technology include, Missouri-based Alpha Foundry, Massachusetts-based D.W. Clark, Ohio-based Founders Service & Manufacturing Co. Inc., and Ohio-based HTCI Co.
In general, however, incentives are not enough to overcome the price gap versus offshoring. Use of total cost of ownership (TCO), automation and skills training are all essential. Let’s level the playing field so that all or most products can be made competitively here for the home market. At the same time, target products that are “essential,” either on their own or as components for other key products.
The Reshoring Initiative offers the Competitiveness Toolkit as a national policy tool to select the optimal actions that will bring back the desired number of manufacturing jobs with the least collateral damage, e.g. inflation and retaliation by other countries. These actions will also keep jobs from leaving and will increase exports. The aim is to put as much emphasis on importing less and reshoring as on exporting more. Reshoring is easier. Imagine exporting average castings or machined parts to China.
Let’s work together to establish long-term, proactive national industrial policies that will positively impact manufacturers’ bottom line and bring back millions of jobs. Look for me and The Onshoring Project this September at IMTS2022. We look forward to discussing reshoring opportunities with you. For help or to help, contact me at 847-867-1144 or firstname.lastname@example.org. CS