By Philip Stoten, with contributions from Jim Rowan (ex-Dyson CEO), Theo Saville (CloudNC CEO), Jeff Benck (Benchmark CEO), Dave Evans (Fictiv CEO), John Mitchell (IPC CEO), Brad Heath (Virtex CEO), Amar Hanspal (Bright Machines CEO), Misha Govshteyn (MacroFab CEO), Bill Cardoso (Creative Electron CEO), Yoav Zingher (Launchpad CEO), Juan Arango (Koh Young America CEO), Chintan Sutaria (CalcuQuote CEO), Mattias Andersson (MTEK CEO), and Rainer Koppitz (KATEK CEO).
With the US Presidential election a few weeks away, I have been talking to friends and colleagues, all CEOs, exploring the right manufacturing policy for the candidates to adopt? Asking what are the right incentives? And where do manufacturers want to see government invest? Here’s what they had to say:
Jim Rowan, Former CEO & COO, Dyson, COO of RIM (Blackberry): When it comes to manufacturing jobs, it’s a case of ‘be careful what you wish for.’ Many of the manufacturing jobs in China would simply not suit the US economy; the wages are low and the numbers are high. In some sectors and industries, the US does not have the skill in the volume needed to compete and retraining would be very costly.
Then, there is the issue of the wider supply chain. 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. This would fragment the supply chain adding freight cost, inventory, and latency.
The next administration needs to carefully consider the type of manufacturing that is best suited to create and expand in the USA. This might not get them the popular vote, but it will help them to build a strong sustainable manufacturing ecosystem for the future.
This strategy must take into account the core technologies required to remain relevant and competitive on the global stage. Robotics, aerospace, life sciences, transportation, clean energy, clean water, clean air, clean food, software/data/AI, and semiconductors are all sectors that need focus.
Theo Saville, Founder & CEO, CloudNC: While America’s protectionist trade policy will prop up inefficient, low-tech manufacturers and reduce pressure to innovate, the candidates will likely consider it necessary to hedge against China-US relations continuing to decline and slip towards a new Cold War. The US will want to protect and expand its capability for manufacturing self-sufficiency. They know that once a particular industry stops, the skills and equipment quickly disappear and can take decades to return, if they ever do.
This danger is clearest in complex industries like shipbuilding, but just as relevant for the basics, like metals production and mineral extraction. The US has spent the last decade reducing its reliance on China for rare earths and on the Middle East for oil.
To compensate, the candidates should subsidise and support development of leapfrog technologies, especially autonomous manufacturing tech. The factories of the future contain no human decision-making – 3D files in, parts out, no people in the middle. A labour cost or skills base advantage becomes almost irrelevant in the face of this.
Such technology is risky, expensive and time-consuming to produce, needing years and tens to hundreds of millions of dollars to perfect. Without government support, the transition to autonomous manufacturing will happen slower. But this support is worthwhile. Most manufacturing processes rely on humans to instruct the machinery, and through software, autonomy could provide 10 to 100 times more productivity.
Jeff Benck, CEO, Benchmark Electronics: The first priority Benchmark has for US policy related to manufacturing is that our country comes to a resolution on the current trade challenges the US is experiencing with China. In addition to international trade concerns, we’d also like to see a larger focus on bolstering domestic manufacturing. This would include grants, tax credits, and other incentives for organizations to invest more in domestic electronics R&D and manufacturing.
It’s critically important that the US manufacturing industry is incented to support a diversified supply chain with a strong US presence, especially as more OEMs in industries like medical and defense are requesting the use of domestic manufacturing facilities. And while the recent trends support manufacturing coming back to the US, it still makes sense for global organizations that produce products around the world to be closer to the final consumption point. Given this competition for manufacturing investment, the US government needs to provide reasons why it’s attractive and cost competitive to consider manufacturing more products in the US.
In addition to investments and incentives for the US manufacturing industry, it’s also critically important that the US invest in education, especially science, technology, math and engineering (STEM) education. This country’s technology industry has become overly reliant on foreign talent because it doesn’t have enough domestic talent to support the growth. The US needs to invest in educational programs that encourage a more diverse population of young people to get involved in STEM, with a heavier emphasis on women and people of color as they are greatly unrepresented today.
Dave Evans, Founder & CEO, Fictiv: The US has some huge advantages right out of the gate. One, it is still a global manufacturing powerhouse, counting itself among the handful of nations that have a manufacturing output above 10 percent of GDP. Two, it is the largest consumer market in the world. And three, it is a global epicenter of innovation and digital disruption.
Incentives need to reflect the assets we have, the path we need to take and the desired destination. They should leverage homegrown innovation, enable investment in digital transformation of manufacturing, and target sustainable well-paid manufacturing jobs.
Let’s have incentives to invest in digital transformation and let’s drive change in an industry that is fit for the future, and fit to lead the world. And let’s not have the uncertainty of trade wars, tariffs or protectionist policies.
The US is a hotbed of innovation and creativity in just about every area, not least manufacturing. Embrace that, create the right environment for transformation, and we will create a manufacturing sector that is the envy of the world.
Dr. John Mitchell, President & CEO, IPC: These ‘if I were king’ questions are always interesting, sort of like getting three wishes, so let me jump right in with my ‘three wishes.’
The first thing I’d recommend the next President of the United States and his administration do is focus on strengthening supply chains to ensure both the security and resiliency of their critical products (electronics is clearly one of these). The pandemic has been a wake-up call to the world that a back-up plan at a minimum is required.
The next area I would focus the US on would be improving trade: resolving disputes with China; engaging with the WTO to become more effective (rally the world to give the WTO more power to globally arbitrate and assess penalties); and, working with allies and neighbors (Canada and Mexico) toward economic recovery. Building barriers is the wrong answer – solidifying respectful relationships is the path forward.
The third area would be to develop and implement a robust and future-reaching national manufacturing strategy. The lack of a directed strategy in the states has caused many factories to migrate away from the US for very good business reasons. This needs to be corrected for the first point to have a chance. Greater funding and appreciation for the electronics ecosystem is required if this industry is to find solid rationale for returning.
Interestingly enough, the above three points are valid for many countries and regions – not just the US.
Brad Heath, Founder & CEO, Virtex: The US needs to decrease reliance on foreign manufacturing for semiconductors and other electronic components that greatly increase US dependence on Asia for continued supply. In addition, incentives should be provided for manufacturing the critical materials needed to support the US industrial base. We are far too dependent on foreign manufacture.
Policies and trade agreements which allow select components to be highly subsidized by China while not available to the rest of the world needs to be treated as a fair trade violation.
Continued expansion of the R&D tax credit, lower corporate tax rates and increased accelerated depreciation of capital assets will continue to allow US manufacturing to focus on and invest in productivity gains which helps level the playing field.
Amar Hanspal, Co-Founder, CEO & Board Member, Bright Machines: There needs to be a proactive long term strategy for factories to succeed. This year, more than ever, has reminded us of the need to (re)embrace localized production in our manufacturing policies in order to achieve more flexible and resilient production. This is something our country used to excel at but lost over the years due to the rise of industrialization and globalization. Policy should encourage local, distributed manufacturing located closer to the customer, while investing in the advanced technologies that enable this shift. This is how today’s manufacturers can gain a true competitive advantage in an economy that is vulnerable to global disruption.
Moreover, policy must prioritize an investment in factory workers. Trade policy accelerated the offshoring of millions of manufacturing jobs, and this year COVID has put even more pressure on workers with the shutting down of facilities and the enforcement of strict distancing guidelines. There should be a sustainable commitment to enhance the ongoing pipeline of qualified workers with re-skilling programs that foster high-tech manufacturing investment and expansion. Policies should embrace technologies that allow for remote work, and prioritize standard and safe-working conditions for manufacturers – allowing healthy competition to thrive in the global marketplace. Ultimately, a robust manufacturing sector is vital for America if it wants to be a leader in environmental sustainability and the right steps should be instituted to allow for a clean and green manufacturing future.
Misha Govshteyn, CEO, MacroFab: No one knows what the November 4th election will bring, but one of the most urgent questions for the manufacturing industry in the US has already been answered – no matter who wins, there is no going back to the status quo. Trade will continue to be used as a major political issue and US supply chains will continue to decouple from China. While President Trump has not offered much in the way of new policy beyond a continued trade war, Joe Biden has given no indication that he plans to roll back tariffs either. Instead, he has published a substantive set of Made in America policies to encourage domestic production.
After decades of ignoring domestic manufacturing, this is a welcome change, but in order to be successful, we’ll need more than position papers and hastily assembled tariff schedules. Neither candidate has set a clear set of measurable objectives similar to the ‘Made in China 2025’ effort. If we want any of the benefits of supply chain rebalancing to accrue to the US, we need meaningful engagement on policy from the manufacturing leaders and true accountability for reaching our goals at the cabinet level. So far, while the trade war has succeeded in being disruptive for China, most of the gains have been captured by countries other than the US, and we simply have to do better.
Dr. Bill Cardoso, CEO, Creative Electron: The recent pandemic has set new levels of government intervention in business as large sectors of the economy are forced to close to mitigate the spread of the coronavirus. Small restaurants have been driven to bankruptcy, while large retailers enjoy record revenue. In tandem, discussions related to the pros and cons of a protectionist policy against China’s thirst for the American market have permeated the debate in US politics. Government intervention, deliberately or collaterally, picks winners and losers.
Since post World War II, the US has been the global crusader for democracy and free markets. We believe in designing and making products locally. We believe we need to take care of the environment before it’s too late. We believe we need to pay our team good wages so their families can prosper. We believe in hard work so we can leave a better world for our children. We also believe that diversity and freedom of expression make us a better company and a better country.
As such, we support policies that allow us to prosper while punishing states that foster anti-competitive activities. Besides that, customers must be given the proper information to act in a rational manner so that the market – not governments – can pick the winners and losers.
Yoav Zingher, CEO, Launchpad.build: Both candidates are trying to compete with China by encouraging or mandating jobs move back to the US. But these are not the right types of jobs. Americans shouldn’t and won’t work under the financial and safety conditions of low cost offshore workers. They are both trying to encourage or enforce the purchasing of US manufactured products, but unless they tackle the major cost advantage that China has, this will not work.
The real solution is to embrace productivity through automation. The cost is low paying, low skilled, easily offshored jobs. The benefits are the creation of higher value, higher paying jobs. The resources needed are innovation, investment in technology, and proximity to consumers, which the US has in abundance.
In other words, we should stop promoting policies that play to our rivals’ strengths – low wages, poor living conditions, lax environmental standards, lower individual freedoms – and start promoting policies that play to our strengths: innovation, wealth, and freedom.
Juan Arango, Managing Director, Koh Young America: US government policy should promote US manufacturing investing because it is key to our economy, today and in the future. It needs to invest in training for skilled employees with specific incentives designed to generate interest among the next generation of employees in the manufacturing industry.
It should also encourage ‘Made in the USA’ with tax incentives and benefits designed to help the [manufacturing] company, as well as the employees. It should find ways to make US manufacturing more competitive to reduce our dependence on foreign countries where low-cost manufacturing lures away domestic manufacturing. Tariffs, although not popular by many can level the playing field. It was reassuring to see the Corporate Tax reduction, because it was hindering domestic company investments here in the United States.
A starting place could be funding manufacturing educational investments in schools. It is never too early to invest in our future. If the next generation of employees possesses advanced technological skill, it will promote higher-level thinking, and in turn innovation that will help the entire segment.
Chintan Sutaria, CEO, CalcuQuote: We should focus on advancing and diversifying our manufacturing capabilities, which would be conducive with a services-based economy like the US, where the standard of living and cost of labor are higher.
One way to do this is to invest in automation technologies. Automation can improve the competitiveness of electronics manufacturing in America, and become a growing industry of its own as we eventually deploy automation technology across the globe.
Secondly, rather than focusing on growing our common manufacturing base, we should invest in our capabilities to manufacture cutting-edge technology and goods. Microelectronics, flexible circuitry and energy storage are all growth areas in the future. As a matter of policy, there are tax incentives for Research & Development investment already available, but there should also be an investment in upgrading the workforce with training on new technology.
Mattias Andersson, Founder & CEO, MTEK: Without wanting to comment on the politics of the US election, I think the challenges they are facing are similar elsewhere in the world. 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.
We think the smart policy is smart manufacturing. We’ve been working for sometime to simplify smart manufacturing by unleashing the value in manufacturing data that currently exists in numerous silos. Regardless of location or political persuasion, investment and incentives need to focus on creating the most digitally transformed and enabled industry, embracing automation, AI and all the ingredient technologies that go to make a manufacturing sector that is competitive and fit for the future.
Tariffs and trade wars create uncertainty and instability. Investment in innovation and digital transformation will create a manufacturing sector that is predictable, adaptable and resilient to any disruption that might occur in the future. The US has the largest consumer market and is a global center for innovation, those are the assets to leverage. Those are the assets that will deliver skilled sustainable manufacturing jobs now and in the future.
Rainer Koppitz, CEO, KATEK: Both presidential candidates are rightly focused on boosting the US economy after the pandemic to reduce the long lasting impacts on jobs and the stock market. The result is a big infusion of money into the economy. The trade war with China also seems set to continue regardless of which candidate is successful, even though their diplomatic approaches may differ. This is likely to weaken the trade partnerships the US has with China and strengthen those with other countries in the Americas as well as with Europe. Concerns come when this style of confrontation exists with more nations and the actions become unpredictable. This unpredictability is bad news for manufacturing as a whole, we want stability in the market and in trade relations.
In summary, we want a partnership based approach that sees the US being collaborative and takes some of the risk out of investment plans for our industry.