Evidence that U.S. manufacturers are on-shoring or re-shoring continues to mount, and that’s really good news for the electronics supply chain. The IPC industry association has just come out with an update to its On-Shoring in the Electronics Industry: Trends and Outlook for North America, which confirms that companies have continued to locate new operations in North America and are returning some existing operations to the region. It also finds that more on-shoring is planned for the coming year.
Of the 92 companies that replied to the survey, 16 percent indicated they moved operations to North America from overseas since the beginning of 2012. This included OEMs, EMS companies, PCB fabricators, and suppliers of materials and equipment, according to IPC. Based on the value of the operations and number of jobs created, EMS companies were responsible for the bulk of the operations returned to North America. Most of these operations were moved from China to the United States, and a few moved to Mexico.
IPC also found that this activity will continue: Fourteen percent of the companies surveyed indicated that they were planning to bring existing operations back or build new operations in North America from mid-2013 through the end of 2014. The majority of these companies are OEMs and most of the planned operations are manufacturing facilities.
A conversation I had earlier this week supports the IPC’s findings. Digi-Key Corp. is a distributor that specializes in low-volume, high-mix orders that go to engineers, hobbyists, labs and designers. In recent years, Digi-Key has found many of its customers that order for engineering purposes want to source from Digi-Key for prototypes or small-production quantities. Dave Doherty, vice president of global supplier and product operations for Digi-Key, says this business is thriving. There are a couple of reasons for this: first, even in a down economy companies and individuals still tinker with or design electronics products. Once those products are designed, the next step is to test them out by producing a limited number of boards. Digi-Key’s prototype business in the U.S. is growing, Doherty said. Either more designers are moving their products into production, or more new manufacturing facilities are cropping up on-shore. Doherty and other distributors believe it is a combination of both.
What’s driving this? The IPC found more than three quarters of the companies that reported returning operations to North America since 2012 cited cost of transportation as a major driver of that decision. Sixty percent of these respondents also cited quality control concerns, the need to be close to customers, and management costs as major drivers. Other factors included quality of available labor, protection of intellectual property, cost of manufacturing and International Traffic in Arms Regulation (ITAR) requirements.
The combined annual sales of companies in the IPC survey totaled about $50 billion. The U.S. probably won’t see Foxconn-size manufacturers on its shores, but small to mid-sized manufacturers are the lifeblood of many component suppliers in the Americas. The more the merrier.