Reshoring 'Gold Rush' Outpaces Previous Record Highs
Reshoring and foreign direct investment (FDI) manufacturing job announcements are continuing to outpace recent record highs, reaching 101,500 jobs in the first quarter of 2023. If the current rate continues, new job announcements will reach over 400,000 by year-end. Additionally, the cumulative number of jobs brought back since the manufacturing low in 2010 will reach two million—about 40% of what we lost to offshoring (Figure 1).
New investments in U.S. manufacturing by domestic and foreign companies have accelerated even more than anticipated due to the Inflation Reduction Act (IRA), the Chips and Science Act (CHIPS), and de-globalization trends. Some are calling it a “modern-day gold rush” driven by incentives and new technologies. Semiconductor chips are being hailed the “new oil.” Green energy investment in the U.S. from domestic and foreign companies is surging.
Manufacturing Essential Products
A strong and resilient manufacturing sector is critical for economic security and national defense. To date, over 50 new semiconductor ecosystem projects and $210 billion in private investment have been spurred on by the CHIPS and Science Act of 2022, which will reduce dependence on critical technologies from China and Taiwan.
Automakers and the U.S. government are spending tens of billions of dollars to establish a domestic battery supply chain. A total of $92 billion has been invested in the U.S. battery supply chain, including recycling, materials separation and processing, and component manufacturing since January 2021.
Due to the many federal subsidies for manufacturing of essential products, four broad industries now account for over 90% of jobs announced (Figure 2). Electrical equipment remains the top industry due to continuing large investments in EV batteries. The industry moved from 42% of total jobs announced in 2022 to 47% in the first quarter of 2023.
Factors Fueling the Rush
The top factors that companies are reporting as reasons for reshoring highlight the concerns, priorities, and benefits of returning production to the U.S. (Table 1).
The factors that are gaining momentum cover topics of efficiency, improving local supply chain, innovation, and consumer preference for Made in USA (Table 2).
Top 3 “Pull Factors”
Toyota will build its first US-assembled electric SUV in Kentucky to boost flexibility by “building them where they’re sold.” America Makes announced a $11.7 million project call to demonstrate the productivity and yield benefits for casting and forging manufacturing and to bridge component sourcing gaps via additive manufacturing (AM) technologies. Ventilator company CorVent Medical is working with the Reshoring Initiative to reshore manufacturing from China to the U.S. due to strained offshore relationships. CEO Richard Walsh said, “The quicker we can get away from the Chinese components the safer we’ll all be.”
Fueling the Surge—U.S. Competitiveness
The lack of focus on manufacturing over the past 40 years got the U.S. so dependent on imports that it needed $100s of billions in government incentives to start the recovery. It is imperative that the country levels the manufacturing cost playing field to continue the momentum. The manufacturing industrial base will then return the U.S. to a safer and more self-sufficient state.
The Reshoring Initiative is available to help government policymakers establish a more effective, lower-cost industrial policy to bring millions more jobs back. We also help companies make the right decision on whether to reshore their products.
Many companies are finding U.S. manufacturing to be a modern-day gold rush opportunity. Our main mission is to get companies to do the math correctly using our free online Total Cost of Ownership Estimator (TCO). By using TCO, companies can better evaluate sourcing, identify alternatives, and even make a case when selling against offshore competitors. For help, contact me at 847-867-1144 or firstname.lastname@example.org. CS