Executive Leaders Embrace U.S. Manufacturing Renaissance

Manufacturing has historically created an outsize impact on the U.S. Fast forward to today, this sector is presenting itself as a modern-day “gold rush” opportunity for many companies, driven by ambitious incentives from the current administration in recent legislation to produce key assets. From electric vehicle (EV) batteries to solar panels and semiconductors, companies are scrambling for the best position to tackle these needs head-on, all while boosting U.S. productivity — worth over $10 trillion dollars.

Recent McKinsey & Company research found that returning the nation’s productivity to its long-term trend of 2.2% annual growth is one of the most important challenges facing the U.S. economy today. During what has been a tumultuous economic landscape, not only would increased productivity maintain U.S. competitiveness from a global perspective, but it is also essential to meet the persistent challenges 2023 has brought on, including inflation, debt loads, entitlements, and the energy transition. As such, many executive leadership boards of manufacturing-heavy businesses must prioritize several key initiatives needed to take advantage of current trends including reshoring, chip manufacturing, and upskilling talent at every facet of the organization.

Bolstered by incentives from the Inflation Reduction Act (IRA) and the CHIPS and Science Act, current legislation is catalyzing investments into U.S. economic competitiveness, innovation, and industrial productivity. With this, the stage is set for the next great era of operations and manufacturing to strengthen the U.S. supply chain resiliency domestically and abroad.

As companies draw up their plans, manufacturers in every sector should take the time to answer key questions, such as: What manufacturing trends will matter most for our industry? How much can we improve our current manufacturing and supply chain performance to compensate? And finally: What are the right big moves for our company over the long term?

The Inflation Reduction Act

The passage of the IRA in 2022 brought $500 billion in new spending and tax breaks to tackle many of our current challenges: boost clean energy, reduce healthcare costs, and increase tax revenues in 2023. The majority of the $394 billion in energy and climate funding is in the form of tax credits. Corporations are the biggest recipients, with an estimated $216 billion worth of tax credits. These are designed to encourage private investment in areas including clean energy, transportation, and manufacturing. With this influx of federal funding and support, there has never been a better time for manufacturers and business leaders to re-shore manufacturing capacity on U.S. soil. The aforementioned “gold rush” is underway, as just four months into 2023, the IRA has already proved to be a business-building accelerator, yielding lofty plans and initial results for these new factories.

The largest EV brands in the U.S. have announced plans to build new gigafactories to ramp up production in key markets such as Michigan, with plans to employ thousands in the next five years. If demand for battery cells grows at about 30% per year, the equivalent of about 90 additional gigafactories — as we know them today — will be needed in the next 10 years worldwide, putting the U.S. in position to be a global EV competitor by 2030.

They’re also investing billions in new battery-cell plants. One of the biggest moves I assume we’ve seen for battery development comes from a Fortune 100 energy company, whose bold promises are seeing initial results for factories in the U.S. and Canada for batteries and semiconductors following the passage of the IRA and the CHIPS Act. The CEO went so far as to declare the company’s aspirations for “zero distance between us and the millions of families across America we serve,” in a statement about shortening their supply chain to shareholders and the public last year. While it is a risk, the leaders at the forefront of this change will spark the ripple effect throughout the rest of the industry.

Tackling the Chip Shortage

The supply of semiconductors remains a significant challenge for fast-growing sectors and high-demand items, with more than 80% of companies currently ill-equipped to tackle chip shortages. The good news is, leaders in the industry have announced they will build new factories — investments that would support economic development at both a state and federal level.

Investments in manufacturing will go hand in hand with investments in labor. Technology is predicted to transform billions of jobs by 2030, with artificial intelligence (AI) and machine learning behind many of the changes. As the FRED reports, manufacturing jobs are on the rise as more organizations make commitments to the development of domestic production and assembly of assets within this complex value chain. For companies and factories to scale up their manufacturing, they will need to digitize and train, implementing innovative technologies and enabling employees to navigate and manage these.

As stakeholders increasingly consider companies’ impact on their industries, communities, and the planet, sustainability has been added as another regular topic to boardroom agendas. Connecting business priorities with shareholder expectations calls for a heavier reliance on operations, increased investments in intangibles, building a workforce for the future, and bending the curve of technology adoption.

Upskilling America

With at least one job available for every person seeking employment right now, companies must also get ahead of the digital transformation and realign their workforce to all present and future needs now, preparing talent with the skills needed to future-proof their careers. By both upskilling and reskilling, the workforce can align with inevitable technologies like AI as they move toward greater automation.

Overnight, American manufacturing became poised for an overhaul and a rebound, with a potentially significant impact on the nation’s overall economy.

The IRA, along with the CHIPS and Science Act, and the Infrastructure Investment and Jobs Act, will continue to set the stage for business leaders to build up U.S. manufacturing, create jobs, and generate new streams of revenue, while maintaining resilience measures in a recessionary environment as political and economic turmoil remain top of mind. It’s evident that the pressure is on for companies to rise to the occasion in their manufacturing initiatives and take advantage of the current environment — or risk being left in the dust.