US Industrial Policy: execution
US Industrial Policy: execution
Any plan to restore American industry relies on the successful execution of that strategy
Key takeaways
Create more non-college pathways to work: Addressing the skilled labor shortage is critical, as exemplified by TSMC's delayed factory production in Arizona. Enhancing vocational education, technical training, and apprenticeships is key to preparing a workforce capable of supporting advanced manufacturing and innovation.
Reinforce manufacturing infrastructure: The US must revamp its manufacturing landscape by revitalizing underused manufacturing institutes, promoting R&D in manufacturing technologies, and leveraging federal procurement power. This will help offset cost disadvantages against lower-cost international producers and foster domestic innovation.
Integrate and innovate: Bridging the gap between industry, academia, and government is essential for regaining global manufacturing leadership. By focusing on the development and diffusion of advanced manufacturing technologies and processes, the US can reclaim its position as a leader in the advanced manufacturing sector.
US Industrial Policy Series
1. Overview
2. Metals
3. Defense Base
6. Execution
Related
In 2022, the US passed the $280b CHIPS and Science Act to rebuild domestic semiconductor production by doling out billions to incentivize companies to build chip factories in the US. Taiwan Semiconductor Manufacturing Company (TSMC) plans to build a $20b factory near Phoenix, Arizona as a result of the incentives. But construction of that factory has hit a snag. TSMC, the world’s largest semiconductor manufacturer, has pushed back the planned 2024 start date of production at its Arizona factory by a year due to a shortage of skilled workers. The company is “encountering certain challenges as there is an insufficient amount of skilled workers with those specialized expertise required for equipment installation in a semiconductor-grade facility,” TSMC chairman Mark Liu said during a July 20 2023 earnings call.[i]
The US faced an acute shortage of ventilators at the onset of the COVID-19 pandemic, so it tried to build more. US automakers have come to the rescue when the nation has faced supply shortages during wartime in the past. Ford built heavy bombers and GM built amphibious assault craft, among other things[ii]. But switching from cars to ventilators was not easy, especially since the US had outsourced its manufacturing know-how over the past thirty years. Even in non-emergency situations, the separation of design and engineering from manufacturing that accompanies outsourcing erodes manufacturing ability. Elon Musk has said that building a factory is '100 times' as hard as building a car. "The difficulty and value of manufacturing is underappreciated," he said. “It's relatively easy to make a prototype but extremely difficult to mass manufacture a vehicle reliably at scale. Even for rocket science, it's probably a factor of 10 harder to design a manufacturing system for a rocket than to design the rocket. For cars it's maybe 100 times harder to design the manufacturing system than the car itself."[iii]
This paper will discuss two key pillars for executing the US industrial policy advocated by Ad Astra: vocational education and advanced manufacturing. Labor policy like immigration is important to industrial policy, but is a big topic and out of scope for this discussion.
Educating a 21st-century workforce
The decline in job readiness in the US during the 21st century is a multifaceted issue that encompasses several factors including changes in the educational system, shifts in the economy, technological advancements, and evolving job market requirements. There's been a growing concern that the educational curriculum is not adequately aligned with the evolving needs of the job market. This includes both the type of skills taught and the emphasis on critical thinking versus practical, job-related skills. Jobs today also require more technical skills and soft skills, such as adaptability, problem-solving, and communication, which are not emphasized sufficiently in traditional educational settings.
The pace of technological change is also faster today than any time in history, making it challenging for individuals to keep their skills up-to-date. This is especially true for older workers who may find their skills becoming obsolete faster than they can learn new ones. Automation and artificial intelligence are changing the landscape of work, making some jobs obsolete and creating a demand for new skills that are not being adequately addressed by current educational and training programs.
Whatever the causes, student’s test scores and vocational readiness are declining, outcomes not seen in places like China.
Figure 1: US reading and math scores[iv]
Ad Astra has already explored non-college career pathways and directs the reader there for more information. In short, the US should promote high school vocational training, community college in technical fields, and apprenticeships to boost its workforce readiness.
Made in America
To regain the mantle of global manufacturing leadership, America has to get good at making things again.
The United States was once the global leader in manufacturing, ushering in the mass production era from the end of the nineteenth through the mid-twentieth century. It is not a global leader in the advanced manufacturing of the twenty-first century.[v]
The United States does not currently have the correct institutional infrastructure and accompanying operational mechanisms to support advanced manufacturing. Industry, government, and academia are largely unlinked when it comes to advanced production technology and processes, and there is a similar lack of interagency coordination within the government. Pathways necessary for diffusing new technologies and getting them to market are missing. The corporate lab system has withered.[vi]
A pervasive source of weakness is the disconnect between the US production system and the US innovation system. Unlike Germany, Japan, Korea, Taiwan, and now China, the United States failed to put manufacturing at the center of its innovation system. In fact, it didn’t even consider manufacturing as part of innovation.[vii]
America’s manufacturing prowess can be regained, but it’s going to take the federal government leveraging all of America’s assets. Those assets include industry, including small manufacturing firms and large; state and local government, and educators, including universities and community colleges. Three additional steps should be taken:
(1) Revitalize Manufacturing Institutes
The Obama administration created sixteen manufacturing innovation institutes from 2012-2017.
The motivating concept was that US manufacturers could only compete with lower-cost Asian producers, particularly from China, if they became much more efficient and productive, to offset their cost and wage disadvantages. The institutes were collaborations, with federal core funding cost-shared with industry, universities, and state governments. Each institute was organized around a particular key manufacturing technology strand—robotics, digital production, bio-fabrication, advanced composites, etc.—and they were loosely modeled on Germany’s Fraunhofer Institutes, which play a comparable role.[viii]
These institutes are underutilized and should be revitalized.
(2) Back R&D for manufacturing technologies
We also need to enlist our federal R&D agencies in the cause. Manufacturing is not a subject of their research, but it needs to be, so technology advances move into the manufacturing institutes for experimentation and adoption.[ix]
Our R&D agencies have historically shunned research on manufacturing technologies—that’s been viewed as industry’s purview, although industry emphasizes later-stage development not research. We need to see manufacturing as a system, with connections throughout, from research to production.[x]
(3) Use government procurement power to promote new manufacturing technologies
The DoD is by far the largest procurement agency, and it needs to strengthen its industrial base and build more resilient supply chains for increasingly pressing national security needs.[xi]
DoD historically played a role in fostering new manufacturing technologies, such as the interchangeable machine-made parts developed at Army arsenals in the 1840s. A more recent example is computer numerically controlled (CNC) equipment, pervasive now in all manufacturing sites. It was first developed through DoD-supported research at MIT. When DoD saw the new level of precision manufacturing it enabled, it required its contractors to implement CNC machining for its missile programs, which spread this advance throughout US industry.
DoD, working with manufacturing innovation institutes, could identify productivity savings available from new technologies such as digital production advances, robotics, or 3-D printing, and require its defense contractors, through specifications and contracts, to implement them. It also has authority under the Defense Production Act to acquire these new technologies and lease them back to its contractors. While DoD procurement does not dominate US manufacturing, it has a significant market share. DoD could adopt the approach of mandating improvements, along with funding support for new equipment, that it used with CNC machining, enabling larger-scale adoption of the new manufacturing technologies.[xii]
The rubber-meets-the-road execution of US industrial policy is pivotal for reviving American industry. The CHIPS and Science Act of 2022, with a $280 billion investment, exemplifies efforts to stimulate domestic production, notably in semiconductors, highlighted by TSMC’s $20 billion factory in Arizona. Historical challenges, such as the ventilator shortage during the COVID-19 pandemic, underscore the difficulties of shifting manufacturing focus and the erosion of manufacturing capability due to outsourcing. America also needs to increase workforce readiness through enhanced vocational education and apprenticeships. The decline in US manufacturing leadership demands a strategic pivot, including revitalizing manufacturing institutes, R&D in manufacturing technologies, and leveraging government procurement to foster innovation. This comprehensive approach, integrating industry, academia, and government, aims to reposition the US as a leader in advanced manufacturing, ensuring economic resilience and national security.
[i] https://qz.com/tsmc-blamed-a-lack-of-skilled-us-workers-for-delays-at-1850662936
[ii] https://www.cnn.com/2020/03/27/business/automakers-ventilator-production-coronavirus/index.html
[iii] https://www.businessinsider.com/elon-musk-says-building-factory-100-times-harder-than-making-car-2019-3
[iv] https://www.nationsreportcard.gov/highlights/ltt/2023/
[v] https://americanaffairsjournal.org/2023/08/americas-advanced-manufacturing-problem-and-how-to-fix-it/
[vi] https://americanaffairsjournal.org/2023/08/americas-advanced-manufacturing-problem-and-how-to-fix-it/
[vii] https://americanaffairsjournal.org/2023/08/americas-advanced-manufacturing-problem-and-how-to-fix-it/
[viii] https://americanaffairsjournal.org/2023/08/americas-advanced-manufacturing-problem-and-how-to-fix-it/
[ix] https://americanaffairsjournal.org/2023/08/americas-advanced-manufacturing-problem-and-how-to-fix-it/
[x] https://americanaffairsjournal.org/2023/08/americas-advanced-manufacturing-problem-and-how-to-fix-it/
[xi] https://americanaffairsjournal.org/2023/08/americas-advanced-manufacturing-problem-and-how-to-fix-it/
[xii] https://americanaffairsjournal.org/2023/08/americas-advanced-manufacturing-problem-and-how-to-fix-it/