The U.S Reshoring Trend is Creating New Engineering Opportunities
How a changing world is bringing industries closer to home and driving innovation.
24 Jun, 2022. 6 minutes read
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For the last three decades, globalization has seen businesses become increasingly international. From supply chains and labor forces to customer bases and laws under which they operated, staying within their own borders was not a high priority for many companies.
But the world has changed.
Geopolitical instability, the pandemic, supply chain pressures, inflation, and surging energy costs have prompted more businesses to look much closer to home.
Reshoring has more companies bringing their operations back to the United States. With the many positives of the trend including greater IP legislation to protect innovation along with access to a highly-skilled workforce – reshoring is providing unique opportunities for the engineering sector.
Seismic shocks
The last few years have wrought havoc on supply chains. A survey conducted by risk management company Resilience 360 found a massive 98% of companies had seen their supply chains affected by Covid[1]. This left two in three US companies (69%) saying they intended to bring production back to North America[2].
The war in Ukraine has only exacerbated problems and has taken a huge toll on the engineering sector, particularly in relation to the semiconductor supply. For example, Ukrainian companies Ingas and Cryoin account for roughly 50% of the world’s neon production, which is crucial to run lasers used in chipmaking[3].
Deep-rooted issues
Even before the larger issues mentioned above, traditional outsourcing and offshoring can provide major headaches for companies. While they were able to enjoy factors such as reduced labor costs, other concerns such as local labor law violations[4], worker safety[5], intellectual property theft, product adulteration[6] and environmental violations[7] loomed. Not only could these prove costly, they could also inflict longer-term reputational damage too.
Reshoring as a solution
All these problems have combined to put a renewed focus on reshoring, with companies all over the world looking to bring operations closer to home.
British bus maker Alexander Dennis (ADL) previously announced it would build the chassis for both its BYD ADL branded single and double-deck electric buses in the UK. The chassis had previously been made in parent company BYD’s Chinese and Hungarian factories and assembled in the UK[8].
This reshoring trend has been building in the country even before the pandemic, with an organization called Reshoring UK[9] providing listings of research institutes and trade associations members with specific engineering disciplines - from fabrication and forging to CAD design - with a view to working collaboratively.
There has been a similar impetus in the US. The Reshoring Initiative 2020 Data Report found that in 2020 alone, reshoring created a record 109,000 jobs and outpaced foreign direct investment for the first time since 2013. The figures surged still further last year to an estimated 220,000 jobs, with more than 1,800 companies announcing new reshoring initiatives – another record[10].
Many major tech and engineering companies have been leading the way. Intel announced it would inject $20 billion into two new semiconductor plants in Arizona[11], while General Motors said it was also reshoring battery production to Michigan with the creation of a new hub for lithium-based products[12].
The current US administration recently ordered scrutiny of supply chain dependencies across the country. An infrastructure package supporting domestic producers was later passed by Congress. It has also issued guidance that projects funded by the $1 trillion infrastructure package use US-produced steel and iron.
Benefits of reshoring for the engineering sector
There are many benefits to reshoring including streamlined supply chains and logistics. Moreover, the reshoring trend creates new and exciting opportunities for engineers and associated workers.
With hi-tech innovation now considered to be at the forefront of the US’s strategy to compete with China commercially, American reshoring momentum centers on the engineering and technology sectors, including PCB manufacturing. This is evidenced by the low reshoring case numbers in low technology manufacturing sectors and more frequent cases in high technology sectors[13].
To fuel this reshoring effort, American companies must have access to a skilled, reliable workforce. When reshored companies tap into these workforces it creates improved employment opportunities for skilled engineering workers. It also leads to more opportunities for large and small engineering companies – including start-ups – to enter into this new reshored tech supply chain and R&D ecosystem.
Meanwhile, reshored American companies have greater intellectual property (IP) protection within domestic borders. This can boost their confidence and lead to newer and faster innovations.
According to industry estimates, trade secret theft is said to cost between 1-3% of GDP in developed economies[14]. Along with Russia, China is one of two countries named as having “inadequacies in trade secret protection and enforcement” within the United States Trade Representative 2022 Special 301 Report[15].
While outsourcing to countries with weaker IP protection, high-tech companies leave products vulnerable to intellectual property theft. And weak local regulatory systems may not intervene if the worst happens.
This can provide non-domestic suppliers insights into new innovations, allowing them to become competitors without any associated R & D burden. To ensure start-ups can innovate and grow, they must be certain their products and methods remain safe. IP laws in the USA and Europe tend to provide more protection to companies.
Additionally, when companies choose to work with a local manufacturing partner, they have a greater ability to oversee product quality and functionality. Companies can have product lifecycle oversight from start to finish, carried out under domestic laws and regulations.
Engineering opportunities have also grown within chip production facilities. While once monopolized by producers overseas, notably China, now companies want more regionalized and stable supply chain. This is a potentially huge boon to domestic producers, who strongly value supply chain resilience[16].
A move towards more ‘made in America’ products is also a reshoring benefit, as it allows companies to connect with those consumers who place additional value on products that are made domestically. This has translated into greater support for start-ups and the idea of a domestic ideas-led economy.
Looking ahead
With the impact of the pandemic and war in Europe underscored by deeper-rooted structural issues, the move from global to reshoring has picked up pace in recent years and is only heading in one direction. Governments eager to support these trends have put the engineering sector in a prime position to capitalize.
Domestic engineering manufacturers and suppliers are therefore able to better capitalize on the growing need for OEMs to source their PCBs, chips, and other essential components closer to home.
Local PCB assembly manufacturing with MacroFab
MacroFab is one company bringing PCB assembly manufacturing back to the USA. And as well as reshoring, it is ‘nearshoring’ with factories in Canada and Mexico too. By doing so, MacroFab has built a reliable, dependable regional supply chain suited to the modern world.
This enables its clients in the US to enjoy greater supply chain integrity, as well as emboldens them with the confidence to innovate, safe in the knowledge that they can access the components they need – manufactured by a skilled workforce. They can also know with certainty that their products will enjoy the IP protections afforded to them by domestic laws.
References
2. https://www.thomasnet.com/insights/manufacturer-interest-in-reshoring-hiring-and-apprenticeships-increasing-during-covid-19-pandemic-report/
5. https://www.theguardian.com/business/2013/nov/18/walmart-bangladesh-factories-fail-safety-review
6. Mattel recalled millions of lead-tainted toys when its supplier used lead paint for toy production in 2008 (Babich and Tang 2012)
12. https://news.gm.com/newsroom.detail.html/Pages/news/us/en/2022/jan/0125-michigan-investment.html
13. 5jm56frbm38s-en.pdf (oecd-ilibrary.org)
15. https://ustr.gov/sites/default/files/IssueAreas/IP/2022%20Special%20301%20Report.pdf
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