By Mark Shortt

The year 2023 brought a continued surge in the reshoring of manufacturing to the United States. It also featured robust foreign direct investment (FDI) in U.S. manufacturing, coupled with  strong investments by American companies in domestic production plant expansions and new factory construction.

“In the first quarter of this year (2023), average spending on U.S. factory construction was more than double the average from the past 17 years,” according to the Reshoring Initiative® 1H 2023 Report.

The report said the biggest drivers of these increases are the geopolitical risks of manufacturing offshore, combined with an industrial policy that offers manufacturers incentives—via the Inflation Reduction Act, the Chips and Science Act, and the Infrastructure Investment and Jobs Act—to build products in America. Although acknowledged to be “necessary in the short run,” this policy is described as insufficient because it does not “improve the competitive cost structure for the U.S.”

“A true industrial policy is the best option to protect the U.S. from the increasing risks associated with political volatility,” the report stated. “It should focus on leveling the cost playing field via comprehensive actions, such as massive skilled workforce investments, a 20 percent lower USD, and retention of immediate expensing of capital investments.”

The geopolitical risks of manufacturing in distant locations came to the forefront in 2020 at the onset of the COVID-19 pandemic, when supply chain shutdowns wreaked havoc in the medical, electronics, and automotive industries. Making matters worse were simmering tensions over U.S.-China trade, catastrophic climate events, and, later, fallout from the Russia-Ukraine war.

These risks—along with new incentives to build factories for manufacturing electric vehicle (EV) batteries, semiconductor chips, solar panels, and telecommunications network equipment—compounded an already growing awareness among U.S. manufacturers that domestic production often made more sense, from a business perspective, than manufacturing overseas. Much of that increasing awareness can be credited to the work of the Reshoring Initiative, founded in 2010 by Harry Moser, a 55-year manufacturing industry veteran and retired president of GF Machining Solutions.

Since its founding, the organization has worked tirelessly to bring manufacturing back to America by helping companies compare the total costs of manufacturing products overseas, versus in the United States. The Reshoring Initiative has developed numerous tools that manufacturers can use to make an informed comparison, including a Total Cost of Ownership Estimator and a new Geopolitical Risk Report. The organization also offers an Import Substitution Program, a Supply Chain Gap Program, and a Competitiveness Toolkit.

As D2P went to press, the Reshoring Initiative was still analyzing data on reshoring and foreign direct investment (FDI) for the second half of 2023. In December, the organization reported that job announcements resulting from reshoring and FDI during the first half of 2023 (1H 2023) were “in line with 2022’s record rate” of more than 340,000 new manufacturing jobs. Although third quarter job announcements had slowed, the Reshoring Initiative said it still expected more than 300,000 job announcements by the end of the year.

“Even a lower figure of 300,000 would be up about 22 percent from 2021’s record and almost 100 percent from 2020,” the Reshoring Initiative stated in its 1H 2023 Report. “Overall, reshoring and FDI job numbers demonstrate exceptional progress for U.S. manufacturing after decades of offshoring, and companies can feel optimistic about a continued recovery and improvements to local supply chains.”

A new report from market research firm Research and Markets provides a deep dive into supply chain and localized manufacturing investment trends. In a release touting its report, “Growth Opportunities in Global Supply Chain Shifts and Local Manufacturing,” the firm echoes some of the findings of the Reshoring Initiative, stating that “geopolitical tensions and multiple external shocks” have had the effect of “rapidly transforming global supply chains and pushing firms to make strategic site-selection decisions.”

“The need for economic resiliency is fostering a paradigm shift as companies are directing investments into the establishment of local and regional manufacturing and supply chain ecosystems while trade agreements become increasingly centered on national interest,” the company said in the release. “Developed economies are ramping up investments and incentives to encourage their firms to relocate production lines closer to end consumers.”

A variety of companies, from larger manufacturers and construction firms to exchange traded funds (ETFs), real estate investment trusts (REITs), and private equity firms, are seeking to capitalize on these growth opportunities. In a release announcing its third quarter 2023 results, Mayville Engineering reported that it continues to “build a longer-term pipeline of acquisition targets that provide us entry into high-value market adjacencies, including those equipped to capitalize on energy transition, reshoring, and outsourcing themes.”

Elm Tree Funds, a real estate private equity firm, has identified industries, markets, and companies within the U.S. that it said are “best positioned to benefit from favoring domestic supply chains over overseas operations within the long-term investment horizon.”

“Our research team has identified who is best positioned for success within the evolving supply chain landscape, based on their investment activity in domestic manufacturing operations,” said Elm Tree Managing Director MaCauley Studdard, in a release introducing the firm’s research report, “Onshoring: A Growing Demand Driver for the Industrial Sector.”  “Elm Tree believes that an increase in domestic manufacturing will strengthen industrial fundamentals and act as a tailwind for the U.S. industrial market for years to come.”

Read more about new developments in reshoring, domestic investments in U.S. manufacturing expansion, foreign direct investment (FDI), and Made in USA content in Made in America.