The last two years have touched almost every supply chain imaginable. Even before the pandemic started in earnest, American manufacturers were already interested in reshoring. Back in 2019, manufacturers wanted to reduce their dependence on foreign markets and cut their carbon footprints. But now as demand for components continues to outpace supply -- some analysts predict shortages may continue through 2024 -- more companies are following through on reshoring and nearshoring plans that began pre-pandemic.
In an attempt to meet surging orders, Tesla not only moved semiconductor sourcing in-house -- a move began in 2016 -- the company pivoted to Silicon Carbide (SiC) technology rather than continue its reliance on Asian-sourced silicon chips. South Korea’s SK Group will also manufacture SiC chips for the EV market at a new Monitor Township, MI, facility, close to their existing Auburn plant. SK Siltron announced the new facility on August 24, 2021. It will create up to 150 jobs.
Historically, the automotive supply chain’s complexity impedes agility and speed. And yet over the last 18 months, manufacturers have repeatedly had to respond to changing demand by changing production outputs. While reshoring and innovation won’t correct supply chain issues overnight, it may diminish the challenges driving these PCB and chip shortages.
Circuit boards topped Q3 sourcing
According to Thomasnet.com, PCBs topped Q3 2021 product sourcing. Growing demand for new cars, medical devices, and consumer electronics have skyrocketed the need for printed circuit boards. Even the residential construction market now relies on PCBs to run many integrated smart devices and has contributed to product sourcing.
Companies like Schweitzer Engineering Laboratories (SEL), which manufactures PCBs for automated electric power systems, are moving to increase supply by breaking ground on a new Moscow, ID facility. Bringing PCB production in-house will reduce production time, improve efficiency, and secure the company’s supply chain, according to founder and president, Ed Schweizer, who said at the June 2021 groundbreaking that “The Moscow project just changes the whole picture for us. It’s a huge step in vertical integration.”
Meanwhile, Florida’s BK Technologies has expanded their in-house PCB assembly capabilities while migrating other sourcing to other U.S.-based partners for “improved quality control and shortened lead-time while guarding against business interruptions.” The company provides two-way radio systems to the military and first-responders.
Uncertainty continues, but reshoring challenges remain
Researchers at Oxford Economics reveal traditional supply chains are under tremendous stress. Ocean freight costs are up 400+ percent since the end of 2019. Driver shortages have almost crippled domestic trucking, with delays up to 14 days at port, up 350 percent from pre-pandemic. And raw materials remain in short supply for many industries.
But reshoring has its own challenges. The U.S. lacks apprenticeship programs seen in countries like Germany or Switzerland, leading to a skills shortage. Within the current environment, labor constraints have complicated hiring decisions. Positions remain unfilled due to a lack of qualified candidates. Meanwhile, stringent U.S. environmental regulations outstrip those of most Asian countries, with higher attached land and inventory costs.
Taken together, these factors muddle the decision to reshore. Manufacturers considering a change can use the Reshoring Initiative’s Total Cost of Ownership Estimator to assess what’s best for their company.
Supply chain disruption side effects
Component prices continue their upward trend, a not unforeseen side effect of high demand and low supply. As manufacturers enter Q4 end-user demand remains strong, bolstered by the impending holiday season, regardless of cost.
Sourcing automation parts to take care of deferred maintenance is now becoming a priority. In fact, Thomasnet.com predicts an 8 percent- to-11-percent increase in machinery rebuilding services during Q4. This increase can partially be attributed to increased prioritization of waste reduction and sustainability. However, refurbishment can also increase existing equipment’s lifetime during this challenging sourcing period.
Data for 2021 shows the U.S. on track to add over 200,000 jobs from reshoring and foreign direct investment.