The COVID-19 pandemic reveals how the increasing dependence on imports over the past 40 years and the resulting hollowing out of the US manufacturing industry have created unacceptable national fragility.

For example, although the United States is a world leader in semiconductor design and R&D, chip manufacturing mainly takes place in Asia. Only 12% of semiconductor chips in the world are manufactured in the United States, down from 37% in 1990. The US's excessive dependence on imports poses national and economic security risks.

The trade war and pandemic have caused widespread supply disruptions in security-sensitive and critical components such as computer chips and medical equipment. Take our semiconductors as an example. As car sales plummeted but demand rebounded rapidly, car manufacturers and their suppliers cancelled semiconductor orders when the pandemic began. At the same time, the surge in demand for personal electronic products has caused chip tightening. "Car manufacturers and suppliers using chips contacted the chip manufacturer and cancelled the order," said Autotrader executive analyst Michelle Krebs (Michelle Krebs). "By then, because people work from home and go to school, the chip capacity is consumed by other businesses-telephones, computers, video games."

When chip manufacturing and packaging are offshored, American intellectual property rights follow, making the United States vulnerable to national security threats. The share of total global semiconductor demand by end use in 2019 is communications (33%), computers (28.5%), consumption (28.3%), automotive (12.2%), industry (11.9%) and government (1.3%). Chips are used in devices such as computers, tablets, and mobile phones, as well as in medical equipment, military equipment, wireless networks, automobiles, and manufacturing equipment.

In order to avoid excessive dependence, the United States should produce at least 50% of its consumption for most products. If foreign supply is cut off, it is feasible in many cases to increase by 100% through 24/7 work. Another criterion is to reduce our trade deficit to zero, which is the average situation of all countries. The resulting 40% increase in production will greatly reduce dependence.

Even before the disruption caused by the pandemic, some companies were already trying to increase the resilience of their supply chains. A survey conducted by MGI in 2019 found that 70% of respondents wanted to change their global sourcing strategy, and 32% planned to be closer to consumers. By May 2020, 93% of supply chain leaders plan to increase resilience, and 44% are willing to do so, even at the expense of short-term gains. Let's take a look at some aerospace and defense companies that have decided to shorten the supply chain and manufacture in the U.S.

NHanced Semiconductors is expanding the clean room of its North Carolina foundry to accommodate new high-volume advanced packaging (AP) equipment production lines. The new production line is expected to build up to 10,000 3D integrated circuit wafer stacks per month. This expansion will also provide greater capacity for 2.5D interposer manufacturing and chip-to-wafer assembly. Domestic procurement of these AP technologies is critical to aerospace and defense agencies and many US manufacturers. Government incentives, delivery time, time to market, underutilized capacity and imported substitutes make the US manufacturing attractive.

In September 2020, SkyWater Technology, a US-owned semiconductor foundry headquartered in the United States, announced the expansion of its facilities with the support of the Department of Defense (DOD) with an investment of up to 170 million U.S. dollars. The Department of Defense’s investment is under the Trusted and Assured Microelectronics (T&AM) program, which is developing enhanced microelectronic resources for the unique needs of the Department of Defense. T&AM plans to seek cooperation with industry and major laboratory partners to provide sustainable and guaranteed technical solutions for national security and defense. The risk of supply chain disruption, natural disaster risks, and political instability make offshore manufacturing less attractive.

Killdeer Mountain Manufacturing (KMM), a manufacturer of aerospace components, invested US$8 million to build its fourth US factory in Texas. KMM is a custom manufacturer of circuit boards, wiring harnesses, fiber optic components and ground support equipment for aerospace, commercial and military applications. The US$900,000 national grant makes the US manufacturing industry attractive. KMM is a Tier 1 supplier in the aerospace sector, and its customers include Boeing, Raytheon and Lockheed Martin. This investment is expected to create 200 jobs.

MEMC Electronic Materials, a subsidiary of Taiwanese company GlobalWafers, is investing US$210 million in its plant in Offalon, Missouri, adding 75 jobs. The project will add a 300mm wafer production line that semiconductor manufacturer GlobalFoundries will use to produce computer chips at its advanced manufacturing facility in northern New York. This investment will help meet the growing demand for advanced radio frequency technology in the telecommunications, automotive and aerospace sectors.

It is vital to invest billions of dollars in chip foundries. However, letting the chips fall where they might fall is risky. The United States may shift from relying on chips from Taiwan and China to relying on these countries to purchase the chips that our new chip foundries will produce. We propose to make the United States competitive in assembling servers, mobile phones, automotive electronics, machinery, etc., to overcome this problem. The best way to achieve this goal is to have a stronger skilled workforce, depreciated U.S. dollars, value-added taxes, and maintain the competitiveness of corporate tax rates.

Now is a particularly good time for the company to reassess its domestic and overseas production options. To help quantify these costs, the Reshoring Initiative website provides some tools to help companies objectively determine whether their expenses will be greater than the reduction in manufacturing costs when purchasing locally.

The free online total cost of ownership estimator will more accurately determine the actual profit and loss impact of return or offshore. After performing mathematical calculations, most companies will decide to resume some work.

See if reflow makes economic sense for your company. Resources for the Rehoring Initiative can be found on the website ReshoreNow.org.