Mint Reporter: Can Biden Bring Hi-Tech Manufacturing Back to America?


The US manufacturing sector has also cut corners. Indeed, U.S. businesses have not sought to control the nation’s strengths in manufacturing innovation and R&D spending. It means that the Americans could not be more efficient and effective than the Chinese or even the Germans.

President Joe Biden is hoping to change all that and give America’s high-tech manufacturing a big boost. It’s funding small American businesses — small and medium-sized businesses — and hopes to take manufacturing innovation from US labs to the domestic market and beyond. Getting out of China won’t be easy, but a sleeping giant is finally waking up.

What hurt American manufacturing?

Former US President Donald Trump has launched a tariff war against China, concerned about the US manufacturing trade deficit. While it cures the symptoms and not the disease, it’s a whole lot of trouble for American presidents.

The US trade deficit in manufactured goods has more than doubled over the past decade. It has left American supply chains vulnerable to global threats like the pandemic. And then, of course, thousands of jobs flew overseas.

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In the year McKinsey’s 2021 report, ‘Building a more competitive US manufacturing sector’, captures the US’s problem areas.

“The U.S. has lost six percentage points of global scale-based activity over the past 25 years,” the report said.

* The US share of dynamic activity also decreased by four percentage points. Agile refers to the adoption of digital production technologies to “reduce the amount needed to be profitable.”

*However, R&D and design-based activity increased America’s share of global manufacturing GDP by four percent. This is America’s strength and President Biden may want to capitalize on it.

Simply put, the US is ahead of the pack in innovation but struggles to scale up and take it to market.

It’s a controversy, well, for some. Why is the US failing to harness innovation in research and manufacturing? It has a lot to do with the drive by American companies to make quick profits by cutting costs — after all, even the stock market rewards companies for expanding lines. Many American companies have underinvested in technology adoption, employee training, and research.

Thus, despite being the world leader in R&D, American companies are not ahead of their Chinese and German rivals in terms of productivity and quality.

The White House is waking up to the problem. The Biden administration plans to host a series of roundtables with 16 manufacturing US institutes focused on expanding new technologies, promoting sector-based regional workforce initiatives, partnering with unions and supporting small and medium-sized suppliers. How Institutions Can Strengthen Our Supply Chain”

It also plans to engage industry leaders in identifying and commercializing and funding “transformative innovations” from US-based startups.

There are also other initiatives to adopt new innovations for small and medium enterprises. Now they must be motivated to use them.

Biden rolled out the red carpet for small businesses

More than 99 percent of America’s more than 30 million firms are small businesses, employing 60 million people, or 47 percent of the U.S. workforce. But US SMEs have been losing ground in recent years, with their contribution to GDP falling from about 48% a few years ago to 45% now. Biden hopes to reinvigorate SMEs with the goal of making America a manufacturing hub again.

In recent years, the US has had a strong presence in high-skilled and high-paying services. Although only 5% of service companies are exporters, the country is profitable in services.

In contrast, manufacturing SMEs have been weakened by US companies’ outsourcing to low-cost destinations such as China and Taiwan. In semiconductors, US-based fabs account for only 12% of global production, down from about 37% in 1990.

The Biden administration in 2016 He said he is working with the private sector to mobilize nearly $80 billion in semiconductor investment for new fabrics or textile expansion in the U.S. through 2025.

Meanwhile, President Biden has announced the U.S. Legislation on Supporting Semiconductor Manufacturing and will invest $50 billion in manufacturing semiconductors in the U.S.

The Biden administration is opening new funding lines for SMEs to help them grow. The Export-Import Bank (EXIM), the official export credit agency of the United States, is “developing a strategy to prioritize financing for transactions in environmentally significant, small businesses and transformational export areas, including semiconductors, biotech and biomedical products.” Renewable energy, and energy storage,” says the White House.

That’s not all. The Treasury Department and the Small Business Administration will provide more than $70 billion in additional loans and investments to small businesses and small manufacturers.

Lessons from China

China has been the world’s factory for more than three decades, supported by its cheap labor and a symbiotic ecosystem of suppliers, parts manufacturers and distributors. The change did not happen overnight, but over three decades. The momentum and momentum gained momentum after the dragon’s entry into the WTO in 2003.

In many ways, the Chinese government has turned manufacturing into a mass movement with small businesses sweeping the country. There are more than 140 million small and self-employed people in China. SMEs contribute more than 60% of GDP, 50% of tax revenue, 79% of job creation and 68% of exports. In the year By 2020, 22,000 new businesses were being registered every day.

Biden hopes to do the same by leveraging America’s unique strengths. So the US is opening lines of funding to small businesses, exposing them to high innovation and technology, hoping that productivity gains will follow, neutralizing the cost advantage (cheap labor) of China and other Asian countries, such as Vietnam and India. .

A U.S. manufacturing renaissance—rising labor costs in China and automation on factory floors are two emerging trends that could herald growth.

How Technology Could Be Biden’s Tool

But slowly, China is losing its labor cost advantage, McKinsey’s research has confirmed. Technology is helping companies cut costs and increase manpower.

Many companies in the US were early adopters of Fourth Industrial Revolution (4IR) technologies to stay competitive and continue operations during the pandemic. 4IR is a cocktail of Artificial Intelligence (AI), Robotics, Internet of Things (IoT) and more.

And then, the footprint of robotic automation in manufacturing processes is growing. According to the World Business Administration, installations of industrial robots in the U.S. increased more than 10 percent from 2008 to 2018.

In fact, according to Reuters, there will be a large number of robots joining the US workforce by 2021. North American companies They added 40,000 robots to their robot by 2021, up 28% from 2020.

Clearly, there have been supply chain challenges in the recent past, and companies have been forced to use technology resources effectively. Moreover, the pandemic has created a labor shortage, making robots a real option.

Can America Become the Factory of the World?

The United States is home to some of the world’s best universities and research institutions. In a technology-driven world, the US continues to lead the way in innovation and R&D initiatives. With its economic muscle, it is sure to emerge as a manufacturing destination for the world in the coming years.

Can it make China better in manufacturing, especially in hi-tech products? It doesn’t happen overnight.

China has quickly built a manufacturing ecosystem that is difficult to replicate. And the Chinese are very good at picking up the best business practices from their competitors and partners, as the Germans have discovered. They do everything possible to maintain their cost advantage, even using technology if necessary – robots, 4IR and more.

Also, remember, Vietnam, India, Taiwan, and others. They are cost-effective not only because of cheap labor, but because of the relatively weak dollar currencies. So, if high-tech manufacturing moves out of China, other countries, including India, will also benefit from the move, as Mint previously reported.

So, at age 79, Biden may not be able to make America a manufacturing powerhouse in his presidency. But he wants to leave a lasting legacy that future US presidents can ride on. It took China three decades to get here.

Can Biden unleash the beastly ghosts that have compressed time and catapulted America to the top of manufacturing’s top table, perhaps within a decade? It will challenge Biden and future presidents. But if Biden changes American manufacturing, it will do good for his climbing approval ratings.

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