After decades of moving manufacturing abroad and buying cheap, imported parts for their products, US companies were shocked to enter the pandemic and find themselves cut off from all of the vital parts needed to supply their products due to overseas lockdowns and shipping issues. Once having experienced the supply chain snarls of the pandemic period, many US companies have decided to bring their supply chains home and move them in-house to prevent a repeat of that period.
Dodge Construction Network Chief Economist Richard Branch said in an interview that due to the pandemic experience, there is, “a huge incentive to set up shop here in the United States. It’s certainly clear that manufacturers want more control and more predictability over their supply chains than what they’ve gotten used to over the past couple of years.”
Despite the savings offered by manufacturing overseas with cheap labor, Branch notes, construction of new manufacturing facilities, “have totaled $41.6 billion over this last 12 months.”
Chip fabrication plants, steel mills, EV battery factories, food production plants, sawmills, and other building material products, are all moving their supply chains within US borders. Construction of new manufacturing facilities has surged 116% according to data from Dodge Construction Network. Semiconductors are especially prevalent among this trend, as Intel is building two new manufacturing facilities in Phoenix, and right nearby, Taiwan Semiconductor is building yet another.
Although bringing all these jobs home is excellent for the US economy and even national security in the case of sensitive technologies, one major headwind this trend will face is finding sufficient quantities of skilled labor. As of May of 2022, there were 797,000 open jobs in the manufacturing sector. 45% of manufacturing executives have said they passed on business opportunities because of a lack of labor, in a Deloitte survey. Another 83% said finding and retaining a quality workforce was their top focus.
Speaking of the labor issue, Branch said, “If that’s sustained, that could certainly constrain or put a cap on how much manufacturing can come back to the United States.”
Branch feels bullish on the manufacturing sector though, especially looking at high-tech, high value-added manufacturing, like chip-manufacturing, and EV battery plants.
He added, “The supply chain issues that currently exist certainly aren’t going away any time soon. So at least for the near-to-middle term, I continue to think the manufacturing sector here has some legs to run.”
