Surpassing all expectations, the Federal Reserve announced a rise in the US manufacturing production index of 0.5 per cent in August 2019. This development allows us to reconsider our understanding of the American manufacturing industry in comparison with Asian competitors. Here Mark Howard, US country manager at EU Automation, discusses the potential long term upswing of US manufacturing and how to achieve it.
In 2018 the Brooking Institute found that 20 per cent of global manufacturing came from China, with the US coming in a close second with 18 per cent. This classification has remained entrenched in the world economy since China’s initial stretch to number one in 2010. In no place is this clearer than the United States’ trade debt to China, which according to the US Census Bureau grew from $273 billion at the start of the decade to $419 billion last year.
“The problem is that the United States has steadily increased its consumption of imported consumer apparel, electronics, and industrial components, with no corresponding increase in advanced manufacturing goods,” according to Andrew Stettner, Joel Yudiken and Michael McCormack, contributors at the Century Foundation.
“While US consumers have benefited from low-priced imported goods, those goods have been at the cost of increasing debt with other nations (especially China) that will eventually have to be paid back through increased ownership of US assets by foreign nations or higher prices (inflation).”
However, the same opportunities that have allowed Asian manufacturing industries to drastically grow could prove advantageous for the US. According to a Century Foundation report, shipping costs have been steadily decreasing since 2008. Meanwhile, employment in the US machinery industry increased by 10 per cent between 2010 and 2016. Based on these figures, it seems the United States is in an ideal position to step up its manufacturing capabilities.
More robots, increased productivity
The US still has an advantage in robot density in the manufacturing industry when compared with China, but pales in comparison to other Asian competitors. According to the International Federation of Robotics (IFR), Singapore and Korea have more than three times the number of robots installed per 10,000 employees in the US. China is also installing new machinery at a faster rate than the US, which means it could catch up.
The surge in manufacturing output is an opportunity to compete with the technical capabilities of the Asian market. Furthermore, it is a necessity if American manufacturers want to remain at the forefront of automation and Industry 4.0. While the Unites States is still investing more than China in Internet of Things (IoT) technology, IDC statistics suggest that China, Japan and Korea collectively pass America’s yearly spending by more than $79 billion.
To remain in a competitive position, American manufacturers will need to increase their production. Increasing robot density, while also investing in carefully planned automotive upgrades to existing supply chains, is a necessary step to a stronger machine building industry. They will also want to look for other ways to improve, such as committing to minimizing unplanned downtime, using good obsolescence management for the equipment they do not plan to upgrade. Partnering with a reliable supplier, like EU Automation, can make this process extremely easy.
The US trade debt towards China could hinder government spending, meaning growth in manufacturing could translate to a wider economic growth for the country. The 0.5 per cent index growth was surprising, but with it comes the promise of a much more aspiring future. For more information on EU Automation, visit www.euautomation.com/us/.