Many companies across sectors rely on contract electronic manufacturers to produce their products’ electromechanical elements, such as printed circuit board assemblies, wire harness and cable subassemblies, full-system assemblies, and mechanical assemblies. Whether these projects are simple or complex, the integrity of these builds is essential. Most critical product manufacturers, such as in the medical, automotive, and defense industries, understand the importance of protecting their supply chains from costly disruptions. Therefore, taking active steps to reduce supply chain risks makes good business sense. One way companies are doing this is by turning to American Electronics manufacturers.
The Shift To American Electronics Manufacturing
The late 1970s and early 1980s saw a shift of electronics manufacturing to Asia. Countries like Taiwan, South Korea, and Singapore emerged as key manufacturing hubs, attracting global electronics companies with lower labor costs, skilled workforces, and government support. In the 1990s, China became a key manufacturing hub for electronics because of its economic reforms and opening up to foreign investment. China’s vast labor pool and strategic location made it a desirable destination for electronics manufacturing.
In the past few years, there has been an increasing trend of returning to American electronics manufacturing. In 2023, China saw a nearly 13% drop in exports of electronic equipment to the United States. While the shift is still ongoing, it is clear that the US electronics manufacturing industry is experiencing a resurgence. This trend is expected to continue, driven by a combination of factors, including supply chain resilience, cost considerations, geopolitical factors, and government support.
Supply Chain Disruptions — The COVID-19 pandemic exposed vulnerabilities in global supply chains, leading many companies to reconsider their reliance on offshore manufacturing. It is interesting to note a spike in Chinese imports in 2021, which quickly began to drop. There are several reasons why this may have occurred. As supply chain uncertainties persisted, businesses and consumers started stockpiling electronic products to mitigate potential shortages – many coming from China. Products in high demand (laptops, smartphones, gaming consoles) were prioritized, even as the automotive and industrial sectors struggled. China allocated the limited supply of chips to products with the highest demand or profit margins, many of which were destined for the U.S. market. Finally, there may have been a lag between production and import data because as quickly as it peaked, it began to drop. So, for many companies that rely on critical electronic components and assemblies, the recent data suggests that reshoring and nearshoring have become a strategic move to mitigate risks and improve supply chain resilience.
Rising Labor Costs in Asia — Labor costs in traditional manufacturing hubs like China have been steadily increasing, making the US a more competitive option for certain types of manufacturing, especially those requiring skilled labor.
Geopolitical Tensions — Trade tensions and geopolitical uncertainties have prompted companies to diversify their manufacturing locations to reduce exposure to potential tariffs and disruptions.
Government Incentives: The US government has implemented policies and incentives to encourage domestic semiconductor and electronics manufacturing. These initiatives aim to boost domestic manufacturing and have been pivotal in revitalizing American electronics manufacturing.
The Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022 (CHIPS Act) provides approximately $52.7 billion to enhance U.S. semiconductor manufacturing and research. This significant investment aims to reduce reliance on foreign semiconductor sources and strengthen the domestic supply chain. The Act indirectly benefits electronic circuit board manufacturing by focusing on semiconductor production, as these components are integral to circuit board assembly.
Buy American Executive Orders aim to prioritize the procurement of American-made products in federal contracts, potentially benefiting domestic manufacturers, including those producing electronic circuit boards. However, the impact is more generalized and not as targeted as the CHIPS Act’s provisions.
Additionally, various federal and state programs offer tax incentives and grants to encourage domestic manufacturing. Tariffs and trade policies have been implemented to make importing certain electronics more expensive, encouraging domestic production.
Benefits of Reshoring Electronic Components
Reshoring electronic components to America presents several benefits that align with current industry trends and strategies. Companies increasingly recognize the strategic advantages of bringing manufacturing back to domestic soil. This movement is not only driven by economic factors but also by a desire to enhance operational efficiency and mitigate risks associated with international supply chains. Some of the benefits of reshoring include:
- Supply Chain Resilience —Companies can enhance their supply chain resilience by relocating manufacturing closer to end consumers. Shorter supply chains are less susceptible to disruptions caused by global events, such as pandemics or geopolitical tensions. This proximity allows for more agile responses to market demands and unforeseen circumstances.
- Quality Control — Manufacturing domestically enables companies to maintain stringent quality control standards. With closer oversight and coordination, companies can ensure that their products meet high-quality standards, reducing the risk of defects and enhancing overall reliability.
- Innovation and R&D — Proximity to research and development (R&D) centers and academic institutions fosters greater innovation. Companies can collaborate more efficiently with local universities and research organizations to develop cutting-edge technologies and processes, maintaining a competitive edge in the global market.
- Environmental Impact — Reducing the distance that products travel from manufacturing sites to end consumers can lower the carbon footprint associated with transportation. Domestic manufacturing can contribute to more sustainable production practices, aligning with global environmental goals and consumer expectations for environmentally responsible products.
- Strategic Independence — Reshoring reduces reliance on foreign manufacturers, promoting greater strategic independence. By developing robust domestic manufacturing capabilities, the United States can safeguard critical industries and technologies, ensuring national security and economic stability.
Siemens Manufacturing: Your Domestic Partner For Quality EMS Solutions
Reshoring can help to solve problems associated with overseas manufacturing, but you may still struggle with tight deadlines, fluctuating production volumes, and dependable communication. With three facilities in North America and teams dedicated to quality and open communication, we have the flexibility to deliver your complete EMS solutions when you need them. Contact us to learn how we can help you reshore your electronics manufacturing.