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2024 Manufacturing Industry Trends: Individuals looking to work in the manufacturing industry, have much to look forward to in 2024. According to Deloitte, the industry will be focused on advancing technologies, attracting talent, retaining great workers, and increasing safety and sustainability. Some of the top trends to expect are as follows:
1. Heightened Focus on Talent Attraction and Retention – There are currently more job openings in manufacturing than there are skilled workers to fill them. As such, employers will be focusing on hiring and retaining skilled, qualified professionals in 2024. In fact, in a recent survey conducted by the National Association of Manufacturers, almost 75% of surveyed manufacturing executives felt that attracting and retaining a quality workforce is currently their primary business challenge. To accomplish this, employers are offering more and more benefits such as flexible working schedules, remote work options, career advancement opportunities, and higher wages.
2. Increased Use of Digital Technologies and Artificial Intelligence – Manufacturers and their employees are increasingly looking for ways to use and leverage digital technologies and artificial intelligence to improve agility, resilience, and efficiency. In addition, many manufacturers are now striving for a smart factory approach. Smart factories integrate digital, advanced, and artificial intelligence technologies into manufacturing operations. This provides real-time insights, end-to-end visibility, and scalable solutions, resulting in increased safety and sustainability, and substantial cost reductions.
3. A Focus on More Sustainable Processes – Governments, companies, and consumers are all interested in sustainable processes that lead toward a zero-emissions future and utilize green manufacturing efforts. Green manufacturing is the renewal of production processes and the establishment of environmentally friendly operations where workers use fewer natural resources, reduce pollution and waste, recycle and reuse materials, and moderate emissions in their processes. These efforts have led to increased investments in product electrification and decarbonization.
U.S. Industrial Production Rises on Boost from Manufacturing: In March, U.S. industrial production rose for a second month, boosted by a larger-than-expected increase in factory output as manufacturing shows further signs of stabilizing. Capacity utilization at factories, a measure of potential output being used, rose to 77.4%. Manufacturing output rose 0.5%, led by motor vehicles and planes, after rising by the most in a year in February. In addition to autos and aircraft, manufacturing in March was boosted by the output of wood products and nondurable goods such as paper and chemicals. Excluding autos, factory production posted a more modest gain of 0.3%.
Manufacturing, which accounts for three-fourths of total industrial production, is showing signs of turning a corner after more than a year of sluggish activity, helped by resilient consumer demand. In March, the Institute for Supply Management’s measure of manufacturing activity across the U.S. moved into expansion territory on stronger demand and a pickup in output. At the same time, progress has been gradual as U.S. producers contend with tepid export markets and higher borrowing costs limit capital spending. Costs for key commodities like oil have also been on the rise.
Although production picked up in February and March, factory activity was sluggish in January. As a result, manufacturing production for the first quarter decreased by 0.1%. That marked the fifth drop in the last six quarters but was much smaller than the previous declines.
Machine Tool Orders Hit New Low: U.S. manufacturers have slowed their demand for metal cutting and forming equipment, with original equipment manufacturers (OEMs) outpacing the typically higher demand from contract machine shops. The largest constituency in the market for manufacturing technology is contract machine shops, which are independent businesses offering machining services to a range of OEMs and other manufacturers. In January, these shops cut their new order total to the lowest level since July 2023, and 27.1% below the December 2023 level.
In contrast to contract machine shops, large manufacturing businesses, and OEMs have increased their new order totals at a pace that has nearly offset the decline in orders from contract machine shops. This includes orders from manufacturers of machinery for extracting and refining oil and natural gas, which may indicate future capacity expansion and modernization plans in that sector.
U.S. manufacturers’ orders for machine tools and similar capital equipment dropped 31.0% from December 2023 to $338 million in January 2024. While the value of orders in January is typically the lowest in a given year, the value of orders this last January represents the lowest since 2021, and the lowest January figure for units ordered since 2016. “This indicates the demand for manufacturing technology is still being driven by orders of highly specialized, automated machinery,” said the Association for Manufacturing Technology in its latest U.S. Manufacturing Technology Orders Report.
Apple to Consider Manufacturing in Indonesia: Apple CEO Tim Cook said the company will consider manufacturing in Indonesia as he met with Indonesian President Joko Widodo on April 17. Indonesia has worked for years to bring manufacturing to the country to power economic development, while Apple is seeking to diversify its supply chains away from China, where most of its smartphones and tablets are assembled. Apple has no manufacturing facilities in Indonesia, but the company says it has invested 1.6 trillion rupiahs ($99 million) in its app developer ecosystem in the country. Apple began moving some production to countries like Vietnam, and more recently India, after shutdowns to fight COVID-19 in China repeatedly disrupted the company’s shipments.
“I think the investment ability in Indonesia is endless. I think that there are a lot of great places to invest, and we’re investing. We believe in the country,” Cook said. The previous day, Cook met Vietnamese Prime Minister Pham Minh Chinh in Hanoi, where he said Apple plans to invest more in Vietnam and increase spending on suppliers in the Southeast Asian manufacturing hub.
Given the slowing Chinese economy as well as the Chinese government’s ongoing efforts to squeeze out foreign companies and replace them with domestic brands, Apple wants alternatives for manufacturing. It has already invested in India and Vietnam, but it is likely looking at other partners in Southeast Asia for additional manufacturing and assembly operations.
Samsung Awarded $6.4 Billion to Boost Texas Chip Output: On April 15, the Department of Commerce announced that the Biden administration will award up to $6.4 billion in grants to South Korea’s Samsung to expand its chip production in central Texas. This is being done as part of a broader effort to boost the manufacture of chips in the U.S. The goal is to reduce reliance on China and Taiwan, as the U.S. share of global semiconductor manufacturing capacity has fallen from 37% in 1990 to 12% in 2020. Samsung said it expects to begin production in 2026 and plans to invest roughly $45 billion in building and expanding its Texas facilities through the end of the decade.
The funding from the 2022 Chips and Science Act will support two chip production facilities, a research center and a packaging facility, in Taylor, Texas. It will also enable Samsung to expand its Austin, Texas, semiconductor facility while boosting chip output for the aerospace, defense, and auto industries and bolstering national security. “These investments will allow the U.S. to once again lead the world, not just in semiconductor design, which is where we do now lead, but also in manufacturing, advanced packaging, and research and development,” said Commerce Department Secretary Gina Raimondo. Samsung Electronics Co-CEO Kyung Kye Hyun said: “To meet the expected surge in demand from U.S. customers, for future products like AI chips, our facilities will be equipped for cutting-edge process technologies and help bring security to the U.S. semiconductor supply chain.”
“By investing in leading-edge semiconductor manufacturing, we are helping secure this vulnerable supply chain, boosting our national security and global competitiveness, and creating new jobs for Texans,” said John Cornyn, a Republican U.S. senator from Texas who cosponsored the original legislation.
Manufacturing Industry Outlook
In March, U.S. manufacturing grew for the first time in 1 1/2 years as production rebounded sharply and new orders increased. The Institute for Supply Management (ISM) manufacturing Purchasing Managers Index (PMI) increased to 50.3 from 47.8 in February. Economists polled by Reuters had forecast the PMI would rise to 48.4. A PMI reading above 50 indicates growth in the manufacturing sector. This marked the highest and first reading above 50 since September 2022 and ended 16 straight months of contraction in manufacturing, which accounts for 10.4% of the U.S. economy.
The April 1 survey taken by the ISM suggests the manufacturing sector, which has been battered by higher interest rates, is on the mend, though risks remain from rising raw material prices and a subdued labor force. While the manufacturing rebound is a boost for the economy’s growth prospects, the rise in raw material prices suggests goods inflation could pick up in the months ahead. In March, 24% of companies reported higher prices compared to 18% in the prior month. Also, factory employment contracted for the sixth consecutive month, though at a moderate pace. Businesses continued to reduce headcounts through layoffs, which the ISM said accounted for 76% of the decline in employment, up from 50% in February. Attrition and hiring freezes also contributed to the workforce reduction.
Nine industries, including textile mills, paper products, primary metals, chemical products, and transportation equipment, reported growth last month. Electrical equipment, appliances and components, machinery, computers, and electronic products were among the six industries reporting a contraction. The commentary from businesses was fairly upbeat. Makers of chemical products reported that “performance continues to defy projections of a downturn in activity,” adding that “demand remains strong, and the pipeline for orders is robust.” Transportation equipment manufacturers said they were “expecting to see orders and production pick up for the second quarter.” Makers of wood products reported that “business activity is up,” adding that “many manufacturers are anticipating better business in the second quarter.”
At the same time, manufacturers of machinery struck a cautious note, saying they were “noticing an increase in suppliers’ selectiveness regarding orders they quote and take.” Makers of paper products were worried about “energy pricing.” Computer and electronic products manufacturers said, “Demand remains soft, but optimism is high that orders are just on the horizon”.
Timothy Fiore, who chairs the ISM’s manufacturing business survey committee, said: “Demand remains at the early stages of recovery, with clear signs of improving conditions.”