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The author believes that Trump's proposal to promote the return of manufacturing is likely to be successful. Although it seems that the difficulty is not small, Tesla's factory producing electric cars in California is a best case. The U.S. military and automotive manufacturing are second to none in the world. This has become a core force in the U.S. reshaping the manufacturing system. Over the past 20 years, the United States has exported a large number of brands to the world that are popular in the world. It is expected that in the next 5 to 10 years, the United States will completely end its large-scale outsourcing and foundry business and turn to support the manufacturing industry in the United States.
According to Qinghui think tank statistics, the U.S. government began to pay attention to guiding capital back into the manufacturing industry, and has already allowed some big companies such as Apple, General Electric and Ford to invest new funds into the U.S. manufacturing industry or plan to invest new capital. It is expected that U.S. manufacturing will achieve an annual growth rate of nearly 10%, thus becoming the fastest growing field and new engine for U.S. economy. "Let America's manufacturing once again be great" will no longer be an empty slogan, but an important force that will enable the United States to return to the status of a global manufacturing center.
Brady, chairman of the US House of Representatives Tax Committee, recently stated that they are communicating with the Trump team about the production schedule of corporate and personal tax cuts and the re-production of the 2017 US tax code. This shows that Trump is not all bragging. Previously, Trump was a successful businessman. He believed that his genes for business success can play a positive role and have a certain appeal to most multinational corporations.
In fact, under Trump's call for tax cuts, Foxconn, the maker of the Apple iPhone, issued a statement saying that it is considering expanding its business in the United States. Under the background of global capital flows, the United States may trigger a downward adjustment of tax rates and a "global capital battle." After the tax reduction, if the government can't reduce expenditures, then the already high government debt in some countries will increase further.
From another point of view, even if based on labor cost considerations, Apple and other companies may move production lines back to the United States. For example, currently 14 of Apple's 18 global assembly suppliers are located in China, including Nanjing Compal Computer and Shenzhen BYD (50.18 -2.34%, buy). However, these suppliers are in a very weak position during the cooperation of Apple, and they have almost no right to speak. Apple asked suppliers to transfer production lines to the United States. I believe that 90% of suppliers will choose to obey. why? On the one hand, the increased logistics and labor costs are borne by Apple. On the other hand, the U.S. government gives subsidies to the new factories in the United States. In addition, there are a lot of preferential conditions for the Trump administration, such as reducing supervision.
It seems that Apple's decision to transfer the production line back to the United States may not be a fantasy, but only a matter of time. Taking into account Apple's large supply chain scale, it is expected that the return to the US's local manufacturing plan will be completed for at least five years. Once returned, the United States will undoubtedly be the next big maker of mobile phones.
On the surface, manufacturing returns to the United States, and "Made in China" will still have a comparative advantage. In addition to labor costs, the manufacturing industry involves skilled industrial workers and supporting industries. The United States cannot solve these problems in a short time. However, at a deeper level, reducing the supervision of manufacturing-related enterprises and reducing corporate taxes will not only help expand the US job market, but also help promote the rapid development of the US robotics industry (21.53-1.69%, buy-in). Such companies may become the biggest beneficiaries.
It needs to be pointed out that the production of iPhones with cheap human resources is still a relatively economical practice because the cost of using robots to make mobile phones and computers is still high. However, in the long run, the overall cost of industrial robots is lower than the labor cost. Benefiting from the return of manufacturing, the US industrial robot market will develop at a rapid rate. However, for a long time, American technicians have mainly engaged in R&D and design, and many universities have even closed their professional and courses in manufacturing technology and manufacturing science. This is a major shortcoming facing the manufacturing industry in the United States.
For China, the return of global investment and production capacity to the United States is greater than the challenge. For example, at Apple's upstream supply chain level, there are more than 766 suppliers, of which about half are in China. However, a considerable portion of the raw materials, equipment, and production processes used in China's manufacturing process are all from the United States. Under the influence of Apple Inc. and Foxconn's encouragement, it is expected that most of the suppliers may choose to follow up, that is, establish a production line in the United States to meet the supporting needs of Foxconn production. Under the background of the rapid increase in capital investment costs in China, Japan and Taiwan, the entrepreneurs in the three regions are also happy to see the investment opportunities brought by this lower tax rate and higher return country.
Some Chinese companies with strength and dreams can't use part of the manufacturing industry to return to the United States, and take this free ride to enter the US market directly. If Chinese companies can use the advanced technologies of the United States and the experience of start-up companies to improve high-end manufacturing technologies, they will have more positive significance. Therefore, it has repeatedly stressed that the concept of low manufacturing cost in China needs to be changed. Chinese companies need to re-recognize the opportunities that US manufacturing backflow brings to China.
Can China Manufacturing benefit from the backflow of U.S. manufacturing?
At the end of 2016, when President-elect Trump of the United States was about to enter the presidency, it claimed that it would use various means to prompt overseas American companies to move production lines back to the United States, and encouraged global companies to invest and build factories in the United States.