Internet of things, analytics expected to push U.S. ahead of China for manufacturing

The U.S. is expected to move up from No. 2 to No. 1 in manufacturing by 2020 due to the digital transformation of manufacturing and business.

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The United States is expected to pass China become the No. 1 global manufacturing economy by 2020 courtesy of technologies such as the Internet of things, analytics, robotics and other advanced manufacturing technologies, according to a report from Deloitte.

Deloitte's 2016 Global Manufacturing Competitive Index is worth a read even if you disagree with the conclusions. The upshot is that industries such as manufacturing are being reinvented via digital and that reality shifts the balance of power away from emerging markets with low-cost labor to developed countries.

The report is based on a CEO survey about their five-year outlooks. The Global Manufacturing Competitive Index is based on everything from labor costs, supply networks to talent and technology as well as government policy.

According to Deloitte:

Advanced technologies are increasingly underpinning global manufacturing competitiveness. Leading 21st century manufacturers have fully converged the digital and physical worlds where advanced hardware combined with advanced software, sensors, and massive amounts of data and analytics is expected to result in smarter products, processes, and more closely connected customers, suppliers, and manufacturing. Predictive analytics, the Internet-of-Things (IoT), both smart products and smart factories via Industry 4.0, as well as the development and use of advanced materials will be critical to future competitiveness.

The upshot is that the research and development spending by China won't be able to overcome its eroding cost advantage as other technologies become critical. Deloitte noted:

As the manufacturing industry increasingly applies more advanced and sophisticated product and process technologies and materials, traditional manufacturing powerhouses of the 20th century (i.e. the United States, Germany, Japan, and the United Kingdom) are back toward the very top of the 10 most competitive nations in 2016. These nations which invested in advanced manufacturing technologies, are projected to remain in top 10 until the end of the decade.

What's worth considering is how the different regions rank importance of advanced manufacturing technologies. For instance, U.S. CEOs rank predictive analytics as most important just like their China counterparts do. However, Europe ranks analytics No. 4. IoT is ranked as the second most important technology in Europe and the U.S., but China considers it No. 7. Meanwhile China CEOs consider augmented reality for training to be much more important than their U.S. counterparts.

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Now China isn't going to backslide far because it's only expected to drop to No. 2. Here's a look at the current top 20 manufacturing countries and where they are projected in 2020.

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And this chart highlights the moving parts between the top countries.

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