How the US plans to replace China as the world’s largest manufacturer

Written By: Stratton Report
June 13, 2018

import tariffs The Office of the United States Trade Representative recently released a list of products imported from China that will be subject to additional tariffs as part of the U.S. response to China’s unfair trade practices related to the forced transfer of American technology and intellectual property.

The United States, the world’s second largest manufacturer with a 2017 industrial output reaching a record of approximately $2.2 trillion, will reportedly apply Industry 4.0 technologies to replace China as the world’s largest manufacturer. This is what leading research firm Industry 4.0 Market Research reveals in its new report on Industry 4.0 Market & Technologies in the US. The report forecasts that the US Industry 4.0 market will grow at a CAGR of 12.9% during 2016-2023, in hopes of dominating the manufacturing race against China once again. China displaced the United States as the largest manufacturing country in 2010.

Since 2002, large-scale transfers of production to other parts of the world have resulted in a sharp increase in the US dependency on imports. However, there have been some signs of gradual recovery since 2010, with rises in both domestic and export demand.

The US manufacturing industry employed 12.4 million people as of March 2017. While manufacturing output has been growing more slowly in the United States than in China, South Korea, Germany, or Mexico, it is still rising more rapidly than in most European countries and Canada. At the same time, US manufacturers spend far more on R&D than any other country – approximately 11% of value added – representing an increase of over 3% since 2002. A large proportion of US manufacturing R&D takes place in “technology-heavy” sectors, such as pharmaceuticals, electronics, and aircraft manufacturing, whereas in most other countries the largest share of R&D is dedicated to “technology-light” sectors, such as automotive and machinery manufacturing.

In the US, every dollar earned in manufacturing reportedly contributes $1.4 to the economy and for every manufacturing job created, approximately 2 jobs are created in other fields. Therefore, the US considers growth of the manufacturing sector a major success for the economy and is ready to invest considerable budgets to achieve it. It is understood that any efforts to reinvent US manufacturing by leveraging Industry 4.0 technologies to create smart factories will have a substantial impact on US economic growth.

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Restoring manufacturing jobs to the United States struggling Rust Belt communities and corporate tax cuts were two of President Donald Trump’s biggest campaign promises. It is expected that Trump’s administration will follow Obama’s Industry 4.0 policy (2011): the formation of the Advanced Manufacturing Partnership (AMP), a national effort bringing together industry and the Federal Government to invest in Industry 4.0 technologies.

The US Federal Government and the private sector are investing in Industry 4.0 to increase the American industrial base, which has been taken over by China and low-labor-cost countries in Mexico, Brazil and Asia-Pacific. During Trump administration’s first year, American factories added jobs at the fastest pace since 2014. In the next decades, it is expected that American businesses will establish global networks that incorporate their machinery, warehousing systems, and production facilities in the shape of cyber-physical systems. In the manufacturing environment, these cyber-physical systems comprise of smart machines, storage systems, and production facilities capable of autonomously exchanging information, triggering actions, and controlling each other independently.

The Industry 4.0 transformation holds immense potential. Smart factories allow individual customer requirements to be met, so that even one-off items can be manufactured profitably. In Industry 4.0, dynamic business and engineering processes enable last-minute changes to production and deliver the ability to respond flexibly to disruptions and failures on behalf of suppliers. With more efficient and optimized production in manufacturing, the entire sector is likely to thrive and rise again as a frontrunner of the US economy.

The market will undergo a major transformation in 2018-2023 through the following drivers:

  1. The US-China competition in the manufacturing sector is becoming fiercer and fiercer
  2. The United States, the world’s second largest manufacturer, with a 2017 industrial output reaching a record of approximately $2.2 trillion, will apply Industry 4.0 technologies to replace China as the world’s largest manufacturer
  3. US Federal Government manufacturing industries invest in Industry 4.0 to increase the American industrial base taken over by ChinaMexico, EU and emerging economies, due to unprecedented opportunities to optimize production processes
  4. Federally-funded Industry 4.0 projects, R&D, subsidies, tax incentives and the December 2017 tax reform act all boost investment in Industry 4.0 initiatives
  5. Industry 4.0 dynamic business and engineering processes enable last-minute changes to production and deliver the ability to respond flexibly to disruptions and failures on behalf of suppliers and customers, offering American start-ups and SMEs the opportunity to develop and provide downstream services
  6. Industry 4.0 can help boost the US manufacturing sector in the race against China

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