The next president of the United States will be decided in November and the choice will impact the electronics industry and its supply chain. Decisions coming from the White House on topics ranging from tariffs and trade wars to corporate taxation will continue to change the face of U.S. manufacturing.
Scoop Communications collected feedback from more than a dozen CEOs of manufacturing companies who agreed that supply chain concerns and how they are handled will be central to revitalizing manufacturing in the United States.
“It’s critically important that the U.S. manufacturing industry has the incentive to support a diversified supply chain with a strong U.S. presence, especially as more OEMs in industries like medical and defense are requesting the use of domestic manufacturing facilities,” said Jeff Benck, CEO of Benchmark Electronics.
A strong domestic supply chain will be a critical part of these efforts. “The U.S. needs to decrease reliance on foreign manufacturing for semiconductors and other electronic components that greatly increase U.S. dependence on Asia for continued supply,” said Brad Heath, Founder and CEO of Virtex. “In addition, incentives should be provided for manufacturing the critical materials needed to support the U.S. industrial base. We are far too dependent on foreign manufacture.”
The U.S. Congress appears to be ready to fund domestic semiconductor production. The Creating Helpful Incentives for Producing Semiconductors in America Act (CHIPS Act) is wending its way through the congressional budget process. Politicians, bureaucrats and semiconductor companies – including Intel – increasingly back efforts to beef up chip production on U.S. soil.
Although there is a strong push to move some manufacturing to U.S. shores, America will continue to have global concerns. “While the recent trends support manufacturing coming back to the U.S., it still makes sense for global organizations that produce products around the world to be closer to the final consumption point,” said Benchmark’s Benck. “Given this competition for manufacturing investment, the U.S. government needs to provide reasons why it’s attractive and cost competitive to consider manufacturing more products in the U.S.”
U.S. policies in regard to trade with China will be critical to manufacturers doing business there. “Even if the final assembly is repatriated to the USA it is likely that the majority of the bill of materials (BoM) will still come from China,” said Jim Rowan, former CEO and COO of Dyson, and COO of RIM (Blackberry). “This would fragment the supply chain adding freight cost, inventory, and latency.”
Recent events have put supply chain disruption top of mind. “The pandemic has been a wake-up call to the world that a back-up plan at a minimum is required,” said Dr. John Mitchell, president and CEO of IPC.
The Covid-19 outbreak has exposed vulnerabilities in supply chains such as lack of visibility to upstream suppliers. Factory closures essentially froze the electronics supply chain for a spell and continue to stress logistics. The Institute for Supply Management’s U.S. manufacturing index, the PMI, has been on the rise since the summer but experts are concerned about long-term sustainability.
Other key topics on the minds of manufacturers include the resilience and security of the supply chain. “Without wanting to comment on the politics of the U.S. election, I think the challenges they are facing are familiar elsewhere in the world,” said Mattias Andersson, founder and CEO at MTEK. “Higher labor cost economies will have to compete with China and other low cost locations as the world seeks to reorganize supply chains to create more agility and resilience.”
Regardless of the election results, the supply chain will remain a big part of the conversation. “No one knows what the November 4th election will bring, but one of the most urgent questions for the manufacturing industry in the U.S. has already been answered - no matter who wins, there is no going back to the status quo,” said Misha Govshteyn, CEO of MacroFab. “Trade will continue to be used as a major political issue and U.S. supply chains will continue to decouple from China.”
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