The dynamics of manufacturing are undergoing a profound transformation as industries adapt to changing consumer demands, technological innovation, the growing importance of sustainability and, of course, some unforeseen and initially turbulent rifts brought on by the COVID-19 pandemic. A notable shift toward more localized manufacturing is taking center stage and the once-dominant model of distant and outsourced production is gradually giving way. In this article, we will delve into six telltale signs that illustrate how manufacturing is embracing a "think globally, manufacture and/or remanufacture locally" mindset. From the resurgence of small-scale production to the integration of advanced technologies, these signs herald a new era where proximity and efficiency are at the forefront of the manufacturing renaissance.
Geopolitics and the changing relationships between global superpowers
The BRICS countries (Brazil, Russia, India, China, South Africa) are seen as emerging economic powerhouses with growing influence over the global manufacturing landscape, especially considering their combined GDP in 2020 surpassed that of the G7, and their interactions with G7 nations and each other can impact the entire localization vs. globalization equation. BRICS nations collectively represent a significant portion of the world's population, and their large and diverse consumer bases off er substantial opportunities for companies to tap into expanding markets and reach a wide range of potential customers, not to mention their impressive economic growth being indicative of a rising middle class and increased purchasing power. The growing prevalence of e-commerce business tools also plays a role here, helping businesses to overcome the geographical challenges of traditional brick-and-mortar retail while providing data-driven insights to modify their offerings to effectively meet the needs and preferences of BRICS consumers. As BRICS countries continue to develop their manufacturing capabilities and technological advancements, coupled with their potential to access large consumer markets, they become more attractive hubs for investment and could encourage multinational corporations to consider localized manufacturing in those regions.
The flip side is that, as their economies grow, so might labor costs, altering the cost advantage that once drew companies to outsource labor-intensive tasks to these very geographies. The advancement of technology, automation, and digitalization might change the nature of labor outsourcing altogether, putting greater focus on more specialized and high-skilled tasks.
Chips: better when made locally?
Semiconductors have become a strategically important lever as technology enters every part of our daily lives. The Taiwan Semiconductor Manufacturing Company (TSMC) is the world's largest manufacturer of semiconductors. South Korea, Japan, and the USA follow with China accounting for 24% of global production. However, the relationship between China and Taiwan is strained and just one pandemic and the resulting cessation of Taiwan’s semiconductor production caused shockwaves around the world and was a major contributor to the limited availability of tech goods for many months.
So concerned are many countries that when everything from cars to heart pacemakers and kettles were in such precarious supply, countries decided semiconductor production needed to be repatriated or localized. The new news is massive investments in semiconductor production around the world.
The net result, in addition to meeting increased demand & faster reaction to demand fluctuations, will be that, should further Geopolitical shocks such as Russia’s special operation in Ukraine or even, China decide to make a move on Taiwan, then the global supply of semiconductors would be less vulnerable. Also of benefit are the chance for workforce growth and carbon footprint reduction from the transportation of chips from overseas.
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