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Companies Increasingly Move Manufacturing Back to U.S. Factories from China

Ruth Singleton
Published Date:
Jul 8, 2022


More than two years after the start of the pandemic, companies are continuing to relocate manufacturing back to the United States from China, Bloomberg reported. According to a review of earnings call and conference presentations that the new organization transcribed, CEOs have been highlighting plans to relocate production at a faster rate this year than they did in the first six months of the pandemic. This development defies an initial belief within financial circles that plans to bring production back home in order to shorten supply lines would prove short-lived. 

According to Bloomberg, the construction of new manufacturing facilities in the United States has increased by 116 percent over the past year, while there has been only a 10 percent gain on all building projects combined. Intel is building two massive computer chip factories near Phoenix, and  Taiwan Semiconductor Manufacturing is constructing one within that city. In addition, aluminum and steel plants are being built all across the south—in Bay Minette, Ala. (Novelis); in Osceola, Ark. (US Steel); and in Brandenburg, Ky. (Nucor).  

Here in New York, an Ingersoll Rand plant in Buffalo that had been closed for years will be reactivated to produce air compressors. 

Executives have described this trend using  different buzzwords, such as onshoring, reshoring and nearshoring.  

Bloomberg cited Richard Branch, the chief economist at Dodge, who said that many smaller companies are making similar moves. Not all are examples of reshoring. Some are intended to expand capacity. But they all are examples of a major reassessment of supply chains in response to of port bottlenecks, parts shortages and skyrocketing shipping costs that have affected the bottom lines of companies in the United States and across the globe. 

Bloomberg quoted Chris Snyder, an industrials analyst at UBS, who said that corporate strategy used to be, “if we need a new facility, it’s going in China.” Now, he says, “this is being thought through in a way that has never been done before.” 

According to UBS survey of C-suite executives in January, more than 90 percent of respondents said they either were in the process of moving production out of China or had plans to do so. And about 80 percent said they were considering bringing some of it back to the United States, while Mexico has also become a popular choice. 

Bloomberg noted that this trend will do little to bring back the roughly 8 million manufacturing jobs that were lost here over many decades. For one thing, the rise of automation means that U.S. factories require a much smaller group of workers.

In addition, inflation—including the dollar surging over foreign currencies—may make it more expensive to produce goods in the United States. 

On the other hand, some companies have located their manufacturing in the United States for years, finding it more cost-effective despite the higher cost of labor. Bloomberg interviewed  Kevin Nolan, the CEO at GE Appliances, who said that around 2008, he came to realize that on large items, the savings reaped by eliminating overseas shipping could outweigh the extra money spent on labor here. The key, he found, was to get  maximum efficiency out of factories to keep those labor costs down. 

“I’ve always said, this is just economics, people are going to realize that the savings they thought they had aren’t real,” Nolan said, “and it’s going to be better and cheaper to make them here.” 

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