US manufacturing competitiveness rising, set to take no. 1 spot from China by 2020

Posted by Michelle Drew Rodriguez

In a study I recently coauthored with several colleagues (including Craig Giffi, Vice Chairman, US Automotive Leader and Tim Hanley, Global Manufacturing Leader) and in collaboration with the US Council on Competitiveness, executives indicated the United States is expected to be the most competitive manufacturing nation, moving China into the number two position by 2020. The study-2016 Global Manufacturing Competitiveness Index-by Deloitte Touche Tohmatsu Limited (Deloitte Global) and the Council on Competitiveness (Council)-follows earlier studies we released in 2010 and 2013. This year’s rankings are based on an in-depth analysis of survey responses from more than 500 chief executive officers and senior leaders at manufacturing companies around the world, and a number of interesting findings arose.

To take a look at the many aspects of the full study, as well as slice and dice the data through interactive drill-downs, be sure to visit the GMCI Interactive Website.

Many findings emerged, and the most talked-about is the US is projected to take number one spot by end of decade, steadily improving its ranking from 4th in 2010 to 2nd in the 2016 study, and is expected to reach No.1 by 2020. As the US invests heavily in talent and technology, the country ranks highest as an advanced manufacturing nation. Additionally, the US is highly competitive in terms of the share of high skill and technology contribution to exports and labor productivity as measured to gross domestic product (GDP). The US also 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.

Another interesting finding is the “Mighty Five” (MITI-V) nations are rising as a potentially new manufacturing power group. Made up of the five-Asia Pacific nations of Malaysia, India, Thailand, Indonesia and Vietnam, the MITI-V or “Mighty Five” could represent a “New China” as they enter the top 15 rankings of global manufacturing competitiveness over the next five years. Low cost labor, agile manufacturing capabilities, favorable demographic profiles, and market and economic growth are leading factors likely to position these countries to rise in competitiveness by 2020.

Additionally, the study shows BRIC breaks down as member nations’ individual ratings shuffle. Among the BRIC countries, only China is viewed as a top manufacturing nation in 2016. The other three–Brazil, Russia and India–have seen continuous declines in the study’s rankings over the past six years, despite initial aspirations that they may emerge as manufacturing goliaths.

North America and Asia Pacific become regional clusters of strength in this year’s Index. The two regions are expected to dominate the competitive landscape in the next four years: All three North American countries (US, Canada and Mexico) in today’s top 10 remain there in the 2020 outlook; five Asia Pacific nations (China, Japan, South Korea, Taiwan and India) factor into the study’s top 10 in 2020 and another five in the top 15. The US stands out as the anchor for the North American region with the highest level of manufacturing investments, a strong energy profile, and high-quality talent, infrastructure and innovation. Canada’s low trade barriers, tariff-free zone and investments in sectors key to its growing high-tech manufacturing future, along with Mexico’s 40 free trade agreements, low labor costs and close proximity to the US round out the region. And, the dominant Asia Pacific countries of China, Japan and South Korea are driven by talent and innovation and along with emerging newer powerhouses, such as Singapore and Taiwan, strengthen the region with a focus on high-tech exports. This region also houses the “Mighty Five” and five of the top 10 countries in current or future GMCI rankings.

Finally, European countries feel pressured to remain competitive on global scale. Many are lagging behind as they work through sluggish economic recovery efforts and look to their anchors, Germany and the United Kingdom, to pull them ahead. In fact, executives indicated most European nations, aside from nations like as Germany, are expected to slip in overall global manufacturing competitiveness rankings in next five years.

Stay tuned as we take a deeper look at competitiveness drivers and how global manufacturers can succeed in upcoming blog posts covering additional findings from the Global Manufacturing Competitiveness study.

Join the conversation on @DeloitteMFG #GMCI16

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