For those of us designing, or helping to design and manufacture big, beautiful machines, 2023 could only be described as a year of mixed results. The digital transformation of industry has continued in full force but the onset of PTSD after 3 years of COVID ravaged economics, continues to drive fundamental changes in the way industry is operating and performing. Supply chain shortages are still with us, and these shortages are driving fits and starts in production lines in the USA, and all over the world. Despite good news about overall US unemployment rates at record lows, a labor force in transition was unable to produce all the specific talent we needed for faster growth. Wars broke out, the cost of living has increased and inflationary concerns for the first time in many years, made electronics manufacturers more cautious about their investments in 2023 than we might have hoped.
Of particular interest to CPI, is the effect all this has had, or maybe failed to have had on supply chain decision making. As a determined US based supplier of products with more than one offshore competitor, we feel like what we’ve been saying for years about supply chain stability being worth something, has been dramatically vindicated.
Anyway, here’s a few key thoughts for our end-of-year group therapy, and why we think that despite our global challenges, a period of more stable and sustained growth might be just around the corner.
New Vocabulary for 2023, “ReShoring”
During 2022 and into 2023, China continued to struggle with COVID-19 outbreaks and continued its “Zero COVID” policy, pushing companies to move manufacturing out of China. According to a CNBC report from December 2022, US manufacturing orders from China dropped 40%, and new US export controls on semiconductors and chip manufacturing technology are hampering China’s plans to lead the semiconductor industry as well as its ability to produce advanced chips. Internally, wages in China have doubled in the last few years making it much less of a bargain than it used to be for large manufacturers.
Thus was a new term coined, “reshoring,” as large manufacturers like Apple computers announced major moves to relieve some of the dependence on China. In August of 2023, the first shipments of IPhone 15’s made in India, rolled off assembly lines. Despite some examples like this, reshoring will not be a quick process and companies likely need to plan for continued component shortages in 2024. Solutions for manufacturing include improved digitization of the supply chain, the continued move to agile manufacturing, and the solution near and dear to our heart: find a better, more stable component supplier right here on US shores.
Overall, reshoring helps to establish a more resilient supply chain, which prevents the frequent starts and stops in production that have become common. It also offers additional benefits, such as increased quality control, shorter delivery times, reduced shipping costs, easier product customization, and smoother communication between manufacturers and suppliers due to language and time zone commonality.
2024 Is Already Showing Some Promise
Legislation enacted in 2022 continues to have a significant impact on investment despite continued supply chain disruptions. These Acts include the Infrastructure Investment and Jobs Act (IIJA), the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act, and the Inflation Reduction Act (IRA). Together, these laws prioritize rebuilding infrastructure, advancing clean energy initiatives, and building out the domestic semiconductor industry, while also aiming to foster job growth, workforce development, and equity. By introducing an infusion of funds and tax incentives into US manufacturing across various sectors—including semiconductors, clean energy components, electric vehicles, batteries, and the constituent parts and raw materials of these products—the IIJA, CHIPS, and IRA have already spurred record private sector investment in the manufacturing industry.
While this legislation sets the stage, the evolution of Technology and the industrial metaverse will also play an enormous role in 2024. Manufacturers are embracing a smart factory approach, exploring the fuller digitization of the global supply chain, and investigating the possibilities of generative AI, one of the latest additions to everyone’s vocabulary, as tools they can use to add value to their operations and ultimately help manage a much more efficient supply chain.
And last but not least, are the massive global changes designed to address decarbonization and electrification. Awareness of the need for sustainable products has never been higher. Global warming is quite literally a burning topic, with consequences felt worldwide. This has created a rising demand for sustainable products, and manufacturers are also increasingly required to use more sustainable and socially-responsible manufacturing methods. The electronics industry, which accounts for 4% of global greenhouse gas emissions, will be forced to make changes to meet the new requirements and demand.
Note that at CPI we were ahead of the curve here. The solar array on our front lawn installed almost 10 years ago, supplies a significant amount of our factory’s daily operating electricity!
Final Thoughts on 2024
The reshoring of manufacturing and by extension, supply chain, is probably long overdue and in many ways, the world has woken up to the inherent risks of having all one’s proverbial eggs in one manufacturing basket. For the foreseeable future, this is not likely to improve, at least with respect to China.
While CPI products have some of the most unique performance characteristics in the world for the markets they target, there will always be builders who really need what we are, but want to pay for what we are not. As manufacturers get over their global PTSD, and begin to add up the costs of factory downtime, shipping costs, and poor quality control, a key learning must be that an unstable supply chain cost them much more in the long run.
Here’s to a great holiday season and a prosperous 2024!
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