This is an article by Lyn Alden on reshoring.
I find Lyn very intelligent and really like her stuff (maybe because she was an engineer). She points out in this article that building back our manufacturing capability isn’t just about the facilities. It is about manufacturing understanding and talent. These don’t come overnight.
When people describe the reshoring effort to bring some of that industrial capacity back to the United States, they usually just focus on the first order details: the manufacturing facilities themselves. “It won’t be old heavy industry”, they say. “It’ll be automated, additive manufacturing. This can all run much cheaper now.”
And some of that is indeed true. 21st century manufacturing will trend in a more automated and additive direction than 20th century heavy industry did. But that doesn’t mean reshoring manufacturing is trivial. The actual building of a manufacturing facility is the easy part; it’s everything else in and around it that is hard.
That brings us to the second and third order details. Industrial capital (e.g. manufacturing facilities) is just one part of the equation. We also need sufficient energy capital to power it all, and sufficient human capital to install, operate, and maintain it all.To quantify some of the energy capital, or more specifically the electricity subset of that, China currently produces nearly twice as much electricity as the United States. Here are the annual numbers via Enerdata:
China: 8,833 TWh
USA: 4,510 TWh
India: 1,802 TWh
Russia: 1,165 TWh
Japan: 1,063 TWh
She also points to the issues TSMC and Craftsman have had building manufacturing in the US. We don’t have the talent. This reflects my personal experience setting up manufacturing facilities in the US, Europe and Asia.
When we started investing in manufacturing in countries that did not have talent, we had to bring the talent. We had to bring everything from machine operators and craft people to engineers and management. Engineers and management would do 2 to 5 year FSE stints. You cannot get sophisticated equipment running without expertise that comes with experience.
The other problem is the vast interconnected supply chain. Whatever is manufactured requires many inputs. This is one issue with tariffs. If you pay 50 percent to bring in nylon, good luck molding a part that costs less than the molded part with a 50 percent tariff. Materials and therefore subassemblies and components make up a large part of the cost.
As I heard a guy say today. We cannot win by out governmenting them. We have to allow and incentivize industry to want to build the capability.