U.S. to retake manufacturing lead in competitiveness by 2020: study

Deloitte Global research finds America leading in advanced technology.
By Bob Vavra May 6, 2016

The 2016 Global Manufacturing Competitiveness Index shows that the U.S. has closed the gap on China in 2016 and will establish itself as the top manufacturing economy by 2020. Graphic: Courtesy Deloitte GlobalA new study published by Deloitte Global indicates the U.S. manufacturing renaissance over the last decade may be on the verge of reaching fruition.

The 2016 Global Manufacturing Competitiveness Index, published every three years by Deloitte Global and the Council on Competitiveness, shows the U.S. rising to the No. 2 position in 2016 behind China, and it is poised to take over the top spot by 2020. The study, issued every three years since 2010, is the result of interviews with more than 500 chief executive officers and senior leaders at global manufacturing companies.

"The U.S. is currently among the top nations unlocking advanced manufacturing technologies including smart, connected products and factories, predictive analytics and advanced materials that are core to future competitiveness," said Craig Griffi, vice chairman, Deloitte LLP and Deloitte U.S. Automotive Sector leader.

"The U.S. excels at creating connections and synergy between people, technology, capital and organizations to form a cohesive ecosystem of innovation, generating tremendous value from investments in research and development."

While Deloitte Global’s study points to significant growth in U.S. manufacturing and belies statements throughout the political season that U.S. manufacturing is in decline, that doesn’t mean there are not significant challenges ahead, according to the study’s respondents. "While the U.S. lead is a positive signal, the existing engineering and manufacturing workforce that pushed the country forward is beginning to get older," said Michelle Drew Rodriguez, manufacturing leader for Deloitte U.S.’s Center for Industry Insights. "Therefore, it is important that public and private sectors collaborate on the nation’s educational and technological future to remain a top manufacturing competitor."

The top 15

In the 2016 rankings, China and the United States are followed by Germany, Japan, South Korea, the United Kingdom, Taiwan, Mexico, Canada, and Singapore. Besides the U.S.’s projected move to the top ranking by 2020, the two big movers projected for 2020 are India, rising six spaces to No. 5, and Mexico, which is projected to rise to No. 7. (See chart for the 2016 rankings). The U.S. competitiveness rank rose from No. 4 in 2010 to No. 2 in 2016, and is projected to take a substantial lead over China by 2020.

The report’s authors cited two specific areas of improvement in U.S. manufacturing:

  • As the U.S. invests heavily in talent and technology, the nation ranks highest as an advanced manufacturing economy. The country is highly competitive in terms of the share of high skill and technology contribution to exports and labor productivity, as measured by gross domestic product.
  • The U.S. continues to position itself among the global leaders in research and development (R&D) activities by investing in top universities, R&D talent and venture capital.

The strength of manufacturing is centered in North America and Asia, the report finds, and the growing strength of Southeast Asia is coming at the expense of the BRIC countries (Brazil, Russia, India, and China). "Brazil’s political uncertainty, Russia’s geopolitical activities and impact from the slide in global crude-oil prices, matched with India’s challenged economic and policy actions around infrastructure and investments, have likely triggered the decline from BRIC’s manufacturing competitiveness peak," Deloitte Global said in a press release announcing the study’s release.

Another area of global manufacturing growth is what the Deloitte Global study called MITI-V (Malaysia, India, Thailand, Indonesia, and Vietnam). All of those countries are expected to grow their manufacturing presence significantly in the next four years, and all five will be in the top 15 in the world in manufacturing competitiveness in 2020, according to the study. While Europe only is represented by Germany and the U.K. among the top 15 countries by 2020, it does hold seven of the next 10 slots. South Africa is the highest-ranked African manufacturing country, taking 27th place in 2016, and it is expected to move to the 25th spot by 2020.

The full study can be viewed here.