Maroc - EURASIAREVIEW.COM - A la une - 02/Sep 22:47

US Reindustrialization: A True Industrial Revolution – Analysis

By Zhou Chao After the 2008 global financial crisis, the Obama administration launched a reindustrialization strategy. Following Trump's election, the U.S. government continued this plan. Both strategies aim to revitalize American manufacturing and support increased infrastructure investment. However, some have been skeptical of this industrial development strategy. Critics argue that for a country like the U.S., which has already undergone full industrialization, it is economically unfeasible to produce basic industrial goods such as steel, washing machines, and refrigerators, primarily due to high labor costs. ANBOUND's founder Kung Chan argues that this view misunderstands American reindustrialization. He asserts that it is not merely about resuming the production of basic industrial products like steel and refrigerators, but rather involves a significant technological advancement, representing a genuine industrial revolution. First and foremost, the American reindustrialization process has been focused from the outset on a series of high-tech industries. In 2012, the U.S. government launched the National Network for Manufacturing Innovation (NNMI) program, which was renamed "Manufacturing USA" in 2016. This initiative aims to establish several key technology areas in manufacturing as innovation centers and build a collaborative network of these centers. These centers serve not only as bases for technological research and development but also as crucial nodes in forming a nationwide collaborative innovation network. In December 2014, the U.S. Congress passed the Revitalize American Manufacturing and Innovation Act (RAMI Act), officially establishing the NNMI program. As of now, 14 manufacturing innovation centers have been completed, covering fields such as additive manufacturing, power electronics, flexible electronics, digital manufacturing, composite materials, lightweight materials, robotics, biomedicine, functional fabrics, and clean energy—each representing a cutting-edge technology area that will impact the future of advanced manufacturing. Annual reports from Manufacturing USA indicate that the American manufacturing innovation centers have generally met their planned goals and have made significant progress in advancing project maturity. Secondly, the process of reindustrialization in the U.S. leverages the high-tech advantages of emerging industries to transform and update traditional sectors and products. In 2017, the U.S. officially established the Reducing Embodied-energy and Decreasing Emissions (REMADE) Institute. REMADE is built and managed through a public-private partnership model. It was established under the Department of Energy (DOE)'s Advanced Materials & Manufacturing Technologies Office (AMMTO) and is managed by the Sustainable Manufacturing Innovation Alliance Corp, a private-sector organization. The Department of Energy provided an initial investment of USD 140 million, with USD 70 million coming from the DOE and the remaining funds shared through collaboration with private entities. Since its establishment, REMADE has effectively mobilized public and private resources to research energy conservation and emission reduction in industrial products and processes, achieving outstanding results. For example, the U.S. imports over 2.4 billion pairs of shoes annually, but only 13% of shoe waste is recycled, with the rest either incinerated or landfilled, causing significant environmental pollution. REMADE has supported research projects aimed at addressing the recycling challenges of EVA foam used in athletic shoe cushioning. By altering the molecular structure of EVA, the project transforms used EVA materials into new raw materials and develops new recycling processes. This initiative has increased the recycling rate of EVA foam from 15% to 30%, reducing greenhouse gas emissions by 3.9 million tons annually. At the same time, REMADE has also chosen to support the advancement of thermal spray technology and related industries. By developing new quality control tools and integrating advanced technologies such as data collection, REMADE has significantly enhanced the intelligence and automation of the repair process, leading to broader industrial application of thermal spray technology. The newly developed processes are capable of adding 2.1 million tons of component repairs annually in the aerospace sector alone, while reducing greenhouse gas emissions by 91,500 tons. Thirdly, the results of reindustrialization in the U.S. are rather remarkable. The U.S. has long been renowned for its advantages in technology research and high-end design. Over the past decade of reindustrialization, the practical achievements in the manufacturing sector have also been notably significant. The United Nations Industrial Development Organization (UNIDO) classifies manufacturing into three categories, i.e., high and medium-high-tech, medium-tech, and low-tech, based on the ratio of R&D expenditure to manufacturing value added. This classification helps assess the technological strength of major manufacturing countries. In 2020, the U.S. ranked second in all three categories, indicating its competitiveness across a wide range of manufacturing sectors. When it comes to brand strength in manufacturing, the Boston Consulting Group (BCG) listed 27 American companies among the top 50 most innovative companies globally in 2022. Of the top 10, 7 were U.S. companies, predominantly from the manufacturing sector. Regarding manufacturing competitiveness, a key indicator is a country's ability to export manufactured goods. Although U.S. manufacturing export growth has fluctuated since 2010, it has maintained a long-term upward trend with an average quarterly annualized growth rate of 7.8%, surpassing the 2.3% growth rate of real GDP. The U.S. remains the third-largest goods exporter globally, with manufactured goods being the primary export. In 2022, U.S. exports included a wide range of products: industrial goods (38%), capital goods (29%), consumer goods (14%), automobiles (8%), and food, feed, and beverages (8%). Additionally, the global share and GDP proportion of U.S. manufacturing have stabilized and even begun to recover since 2010, despite some fluctuations. There is also significant public consensus in the U.S. on reindustrialization and its products. The Reshoring Institute's 2023 survey showed that nearly 70% of respondents prefer products made in the U.S., and over 83% are willing to pay a 20% premium for domestically manufactured goods. Kearney's survey also indicates that consumers are increasingly evaluating and focusing on companies' environmental, social, and governance (ESG) practices, making them willing to pay a premium for U.S.-made industrial products.In the corporate sector, Kearney's survey revealed that 96% of U.S. CEOs in 2022 committed to or had already implemented reshoring their manufacturing operations, a significant increase from 78% the previous year. Among those companies that decided to reshore, about one-third reported that some or all of their operations had already been doing so. Meanwhile, the proportion of companies not considering reshoring dropped from 22% in 2021 to 4%. This indicates that by 2025, around 84% of U.S. companies that had offshored their manufacturing will partially or fully reshore their operations. This trend is gaining momentum. Notably, the companies surveyed by Kearney include not only high-tech sectors like health/pharmaceuticals/medical devices, and computer/telecom/electrical equipment but also more traditional and labor-intensive industries such as food and beverages, apparel/textiles, and household goods/toys. Regarding the aging population in the U.S., it does not constitute a significant barrier to reindustrialization. The widespread adoption of artificial intelligence (AI) and automation is making it increasingly feasible to address labor shortages. Maintenance World predicts that increased automation and robotics will help mitigate labor shortages, with automated manufacturing processes potentially increasing by 30% by 2024. Surplus Record (RS) research indicates that by 2035, AI in the U.S. will drive an average output growth of 1.7% across 16 industries, including manufacturing. At the same time, the demand for human labor in manufacturing is decreasing. For example, McKinsey forecasts that by 2030, the share of physical labor in the overall economy will decrease by about 27% compared to 2016, with an increase in investment in technical and cognitive skills. Kearney's findings also show that among executives who decided to reshore, 63% have planned or already increased automation levels as part of their reshoring strategy, and some companies have established training programs to address skill gaps. In terms of labor costs, the U.S. disadvantage is not particularly prominent among major global economies. McKinsey's 2021 survey found that labor costs in other major economies have been catching up with those in the U.S., leading to reduced cost pressures for U.S. manufacturers. After adjusting for productivity, this cost gap is even smaller. Currently, the U.S.'s unit labor costs adjusted for productivity are comparable to those of OECD countries like Japan and Germany, and the gap with China is narrowing, with China's overall advantage over the U.S. now less than 20%. The U.S. still has room for productivity improvements, and Industry 4.0 technologies are expected to increase productivity by 40%, which will further reduce unit labor costs. The growing benefits of reshoring and decreasing drawbacks will also drive more reshoring. Final analysis conclusion: It is evident that reindustrialization in the U.S. is more than just a restoration of ordinary industrial production. Advanced industries have been a key target from the outset of U.S. reindustrialization. The U.S. has leveraged the latest technologies to innovate traditional industries and products. Moreover, the cost disadvantage is shrinking, and societal consensus on reindustrialization is expanding and solidifying. U.S. reindustrialization represents a substantial industrial revolution. Zhou Chao is a Research Fellow for Geopolitical Strategy programme at ANBOUND, an independent think tank.