manufacturing

Activity to build the U.S. semiconductor industry picked up steam on Monday, December 11. On that day, New York State, Gov. Kathy Hochul announced the state was committing $1 billion to what her office described as “a $10 billion partnership with leaders from the semiconductor industry such as IBM, Micron, Applied Materials, Tokyo Electron, and others to establish a next-generation semiconductor research and development center at NY CREATES’ Albany NanoTech Complex.” Also on that day, the U.S. Department of Commerce announced the U.S. Department of Commerce and BAE Systems Electronic Systems, a business unit of BAE Systems, Inc., have signed a non-binding preliminary memorandum of terms (PMT) to provide approximately $35 million in federal incentives under the CHIPS and Science Act to support the modernization of the company’s Microelectronics Center in Nashua, New Hampshire.

Despite a $4.1 trillion increase in annual output since 1987, manufacturing industries in the United States have been declining in both their labor productivity and share of output. The Bureau of Labor Statistics’ labor productivity (output per hour) index, tied to 2012 values, for manufacturing industries has dropped by nearly five points since its all-time high of over 101 in Q2 2013.

Manufacturing in the U.S. accounts for 90% of private-sector R&D, employs 80% of the nation’s engineers, and contributes trillions to the economy—according to Deloitte—with every dollar spent in manufacturing leading to an additional $1.81 added to the economy. However, despite its key importance, the U.S. lags behind much of the world in its proportion of manufacturing value added—the difference between the price of a product or service and any associated production costs—to the economy, seeing less value added each year as a percentage of GDP.

The CHIPS and Science Act (Act) established guardrails to prevent funding recipients from using the money to support the development of semiconductor manufacturing and technology in foreign countries of concern, including North Korea, China, Russia, and Iran. On September 25, 2023, the CHIPS Program Office CPO published the final rules for preventing improper use of CHIPS Act funding. The guardrails in the legislation include the Expansion Clawback and the Technology Clawback. The Expansion Clawback restricts recipients from using CHIPS funding for material expansion of manufacturing capacity in a foreign country of concern; the Technology Clawback limits recipients from engaging in joint research or technology licensing with a foreign entity of concern.

The 2021 BERD dataset reveals the highest level of business R&D spending on record. Since 2015, R&D expenditures have increased by 69% from $356 to $602 billion, representing an average annual growth of $41 billion or 9%. But what industries are contributing the most to this trend? The growth of business R&D in nonmanufacturing industries has far outpaced that of manufacturing industries since 2016, with an average growth of 15% per annum, compared to 6% for manufacturing industries. Nonmanufacturing R&D expenditures have been driven by massive increases in the information sector, among other industries, while chemicals—specifically pharmaceuticals and medicines—have led manufacturing. While nonmanufacturing industries have higher growth rates in their R&D expenditures, they still lag behind manufacturing industries in actual expenditures, but the gap is rapidly closing.

The Department of Defense announced yesterday that it issued $238 million from "Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act" funding for the establishment of eight Microelectronics Commons (Commons) regional innovation hubs. With $2 billion in funding for Fiscal Years 2023 through 2027, the Microelectronics Commons program aims to leverage these hubs to accelerate domestic hardware prototyping and "lab-to-fab" transition of semiconductor technologies. The hope is this will help mitigate supply chain risks and ultimately expedite access to the most cutting-edge microchips for U.S. troops.

Those who gather data know that the results collected in 2020 during pandemic shutdowns do not reveal actual trends. This phenomenon was the case for a recent survey by Babson College researchers for the Global Entrepreneurship Monitor Adult Population Survey (GEM APS). They found that rates of entrepreneurship, which had been on the rise since 2015, dropped in 2020. However, their newest research shows an upward trend in 2021 and 2022, when the U.S. had the highest levels of entrepreneurial activity since their first survey in 1999. In 2022, 19% of working-age adults were in the process of running a business or were running a company less than 42 months old.

On August 14, 2023, OMB issued final guidance on requirements for all infrastructure projects using federal financial assistance. The final guidance requires preferences for American-made steel and iron products, manufactured products, and construction materials. The release of the final guidance follows the signing in November 2021 of the Bipartisan Infrastructure Law (BIL), which includes the Build America, Buy America Act (BABA).

The inaugural Manufacturing Momentum Summit is an opportunity for federal, state, regional, and local leaders to share their efforts to prepare the workforce required for the advanced defense manufacturing supply chain. Held in conjunction with several partners, including the DoD Manufacturing Technology Program, the Center for Regional Economic Competitiveness, and the American Manufacturing Communities Collaborative, the Summit will be held from September 12 - 14, 2023, in Arlington, VA. Featured topics include a focus on AI’s impact on the manufacturing workforce, practical strategies for engaging employers, and an overview of the 2024 Defense budget. The program can be found here.

An MOU between the Korean Institute for Advancement of Technology, the Korean Battery Industry Association, the Korean Electronics Technology Institute, and the NAATBatt Association, aims to bring Korean battery manufacturers to the U.S. NAATBatt, created in 2008 as an R&D consortium of companies to promote the manufacture of lithium-ion and other advanced batteries in the U.S., focuses on connecting foreign battery industry associations and supporting their members in establishing business relationships.