United States to beat China as top manufacturing nation by 2020

The United States is expected to become the most competitive manufacturing nation over the next five years, with the current leader China sliding into second position, according to the upcoming 2016 Global Manufacturing Competitiveness Index report.

The report is produced by Deloitte Touche Tohmatsu Limited’s (Deloitte Global) Global Consumer & Industrial Products Industry group and the US Council on Competitiveness (Council). The prediction is 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.

“The 2016 Global Manufacturing Competiveness Index shows the importance of policy, investment, and innovation for company and country level competitiveness,” said Deborah L. Wince-Smith, president and CEO of the Council. “Its findings help companies shape their business strategies in order to compete successfully, and create jobs.”

The ability of the United States to take the top spot may be largely due to the country’s investment in research, technology, and innovation, which enhances the competitiveness of its industries and drives economic development, according to the study Advanced Technologies Initiative: Manufacturing & Innovation, a 2015 report also published by Deloitte Global and the Council.

“Manufacturing competitiveness, increasingly propelled by advanced technologies, is converging the digital and physical worlds, within and beyond the factory to both customers and suppliers, creating a highly responsive, innovative, and competitive global manufacturing landscape,” said Craig Giffi, a leader in Deloitte US Consumer & Industrial Products Industry group and co-author of the report.

The 2016 Global Manufacturing Competitiveness Index forecasts that the top eleven countries will remain consistent between now and 2020, with some exchange of rankings. In addition to China and the United States retaining the top two spots, Germany and Japan will remain at third and fourth respectively. India, currently 11th on the list, is expected to jump up to as high as fifth place. South Korea, Canada and Singapore are expected to drop one spot each due to India’s rise, while Taiwan and the UK are expected to drop two spots. Mexico, meanwhile, is expected to move up from eighth to seventh.

The next nine spots, however, show how the industry anticipates that developing markets will continue to mature and become more formidable over the next five years. Malaysia is expected to rise from 17th to 13th, Vietnam from 18th to 12th, and Indonesia from 19th to 15th. Conversely, European nations including Switzerland, Sweden, Poland, and the Netherlands are expected to drop as many as six spots in their ability to compete.

“While emerging markets continue to push the leaders, the findings demonstrate the strength of the manufacturing powerhouses of the 20th century with the United States, Germany, and Japan holding three of the top four positions currently and in the future” Giffi said. “If you add in the UK and Canada, which are also part of the top ten most competitive manufacturing nations, it really emphasizes the ‘back to the future’ theme of these research findings. It also suggests that the BRIC countries – with the exception of China – seem to have lost their allure as highly competitive manufacturing locations today, based on the views of executives responding to this study. India, however, is projected to move back up to the top five in the world, demonstrating executive optimism for the country in the future.”

In addition to the country ranking, the report preview identified the top drivers of manufacturing competitiveness. Talent was the leading driver, with access to skilled workers widely seen by executives surveyed as the most important factor, followed closely by the cost of wages and materials. Productivity of the workforce rounded out the top three. The availability of a quality local supplier base was a distant fourth.

“Talent continues to be the most critical element of global manufacturing competitiveness,” said Tim Hanley, Deloitte Global Leader for Consumer & Industrial Products Industry group. “This is consistent with the sentiments of senior executives that we have surveyed worldwide over the years. It underscores the changing nature of skills needed as manufacturers increasingly adopt advanced technologies to innovate their future products, services, and business models.”

Drivers of global manufacturing competitiveness, in decreasing order of importance:
1) Talent
2) Cost competitiveness
3) Productivity of workforce
4) Supplier network
5) Legal and regulatory system
6) Educational infrastructure
7) Physical infrastructure
8) Economic, trade, financial and tax system
9) Innovation policy and infrastructure
10) Energy policy
11) Local market attractiveness
12) Healthcare system