Top 5 stories from Manufacturing Dive

Rising costs were a top challenge for manufacturers in 2023 — and this year looks to be no different. 

Inflation caused prices to spike for not only materials, but wages and energy. And while inflation has cooled in recent months and prices have started to stabilize, the issue of how to mitigate high costs remains a key priority for companies at the start of the year. 

This balance has been difficult for manufacturers, as low demand remained a consistent drag on the industry and has caused more companies to cut both supply and labor costs and lower production. 

In budgeting for the year ahead, manufacturers are weighing stubbornly high material and labor costs with the need to keep up production capacity and remain competitive.

So what are the 2024 manufacturing trends when it comes to costs? We spoke with experts on what companies should expect regarding labor, materials and operational costs like IT and insurance. 

Labor costs are likely to stay elevated, but turnover may ease

The cost of staffing factories is expected to keep climbing this year.

While manufacturing employment is expected to increase by 2% in 2024, wages and benefits costs are anticipated to rise by 5.2%, according to the Institute for Supply Management. That number is down from what manufacturers predicted for 2023 labor costs, which was 5.8%, according to ISM.

The downward tick is the result in part of easing inflation, said John Coykendall, vice chair of U.S. Industrial Products and Construction at Deloitte. In past years, a labor scarcity and high turnover rate drove costs up, reaching an average wage of $33.7 per hour in November, up 21% from January 2019, according to Coykendall. 

But a cooling voluntary turnover rate has prompted optimism among employers that wages won’t increase as steeply this year.

"Five percent may seem high, but relative to some of the labor increases that we saw earlier in COVID, it’s actually a real moderation," Coykendall said. 

Supply prices are slowly moderating from inflation highs

Commodity and energy prices have remained a concern for manufacturers amid high inflation. Looking ahead into 2024, ISM forecasts that raw material prices will rise 3.2% during the first five months of the year. 

That rise is an improvement from past years, said Tim Fiore, ISM's chair of its Manufacturing Business Survey Committee. Prices rose 4.1% in 2023 and have spiked a whopping 25% since 2020. 

"We're going to continue to see price growth in the first half of 2024, and then it's going to stabilize and stay that way for the rest of the year," Fiore said. 

Fiore noted he expects to see some decreases in commodity prices as the year progresses, but without large price swings previously seen in materials like steel and aluminum. 

Lead times for getting supplies to factories are likely to continue improving amid normalizing supply chains. This fact should also help companies' bottom line, Coykenall noted. 

While lead times peaked at an average of 100 days during the pandemic, Coykendall said as of August 2023, they'd fallen back down to 87, showing a positive trend. 

"Time is money, and the longer it takes to receive parts, the longer it takes to do the production, you're inevitably going to see costs coming up," Coykendall said. 

Manufacturers should get ahead on cybersecurity costs

A key manufacturing operations area in which experts say companies need to up their budget in 2024 is cybersecurity infrastructure. 

Data breaches cost an average of $4.47 million for manufacturers and other industrial industries such as chemical and engineering firms in 2022, up 5.4% from the prior year, according to IBM. At the same time, nearly half of critical manufacturers face a significant risk of a data breach. 

And as the threat and costs of cyberattacks in supply chain-related industries continues to rise, manufacturers need to take precautions to protect their operations, said Aaron Tantleff, a partner in Foley and Lardner's technology transactions, cybersecurity and privacy practice. 

Tantleff encouraged manufacturers to increase their spending in 2024 to secure their tech infrastructure and employees' devices. The industry, he said, has lagged behind others when it comes to investing in cybersecurity. 

One of the top spending priorities for the year should be to upgrade security features on all needed devices, Tantleff said, ensuring they are equipped with industrial-grade cybersecurity features. Spending plans should also include "patching" any cybersecurity holes in a company's network on a more frequent basis. 

"The larger the number of devices that are added to the environment, the greater your attack surface vector is," Tantleff said. 

Climate change is driving up insurance costs

The past year's inflationary pressures were felt in not only wages and supplies, but insurance claims. 

As the cost of facilities and equipment has risen, it's also driven up the price of disruption downtime and interruption losses filed for insurance claims, said Brett Hoopingarner, director of underwriting at Sentry Insurance. 

As manufacturers prepare their insurance budgets for 2024, Hoopingarner encouraged companies to work with their provider to review their property limits. This can help ensure that a company's policy can cover the full scope of possible reconstruction costs, taking into account recent inflation. 

"We have seen, really since the end of 2019, reconstruction costs are up over 40% during that time," Hoopinger said. "If a manufacturer has not kept up, on an annual basis, reviewing those limits and making sure that the buildings are adequately insured, then unfortunately the time they usually find out is if they have a loss, and that's not the time you want to find out you're underinsured."

As the threat of climate change and extreme weather continues to grow, companies also need to account for greater possible storm destruction costs. This could include increasing the amount of interruption time covered by insurance, rather than simply a dollar amount. 

Tornadoes, flooding and other disasters are hitting greater swaths of the country, putting more facilities at risk. In 2022, the U.S. experienced 18 separate billion-dollar weather disasters; the annual average between 1980 and 1922 was 7.9 events, according to the National Oceanic and Atmospheric Administration. 

To mitigate those higher possible interruption costs, Hoopinger encourages companies to get facilities, particularly roofs, inspected and reinforced in advance.

"If a tornado is going to come through and rip up your building, there's nothing you can do to stop that. It's just a fact of the matter," Hoopingarner said. "But what you can do is have a good continuity plan in place if that happens.”

Manufacturing-related construction is surging in the U.S., with spending in the sector up nearly 60% year over year in December. For semiconductor and clean technology manufacturing, investments in the sector have doubled since 2021, and are up nearly 20 times the amounts allocated in 2019, according to Deloitte.

This growth is reflected in the wide range of noteworthy manufacturing construction projects underway across the country. From Intel to LG Energy Solution, here are seven ongoing projects to watch in 2024.

Texas Instruments

• Product: Semiconductors
• Investment: $11 billion
• Location: Lehi, Utah
• Timeline: Construction began in the second half of 2023 and production is expected to begin by 2026

As the largest economic investment in Utah history, Texas Instruments is expanding its current facility by constructing a new 300-millimeter semiconductor wafer fabrication plant near its existing fab on the manufacturing campus. Once completed, the two facilities will operate as a single fab.

The project is expected to create 800 new jobs and thousands of indirect jobs in the region.

Intel

• Product: Semiconductors
• Investment: $20 billion
• Location: Chandler, Arizona
• Timeline: Construction began on the plant in late 2021, and is slated to be finished and fully operational in 2024

Intel is expanding its manufacturing activities in Arizona with two new factories, dubbed Fabs 52 and 62.

The project is part of a $50 billion investment in the state over more than four decades. The expansion is expected to create over 3,000 high-tech, high-wage Intel jobs, along with 3,000 construction jobs. The facilities are also estimated to create 15,000 indirect jobs within the local community.

Other chipmakers have also made recent investments in Arizona, including TSMC’s $12 billion fab that is scheduled to begin production in 2025.

LG Energy Solution

• Product: Batteries
• Investment: $5.5 billion
• Location: Queen Creek, Arizona
• Timeline: The initial footing and foundation work began in October 2023 and vertical construction is anticipated to begin in early 2024

LG Energy Solution is building a battery manufacturing complex in Arizona, with plans for two facilities. The first facility, an investment of $3.2 billion, is designed to manufacture cylindrical batteries for electric vehicles. The second facility, with an investment of $2.3 billion, will manufacture lithium iron phosphate batteries for energy storage systems.

The two facilities combined are estimated to create 3,700 jobs.

VinFast

• Product: EVs
• Investment: $4 billion
• Location: Chatham County, North Carolina
• Timeline: Construction began in July 2023 and is scheduled for completion in 2025

Vietnam-based EV maker VinFast is constructing a facility to produce up to 150,000 vehicles a year. The plant is expected to span 1,800 acres.

The project is expected to generate 7,500 jobs. VinFast touted the project as North Carolina’s first EV manufacturing facility and the largest economic development initiative in state history.

Amkor

• Product: Semiconductor packaging and test services
• Investment: $2 billion
• Location: Peoria, Arizona
• Timeline: The first phase is expected to be operational in the next two to three years

Amkor Technology announced in November plans to build an advanced packaging and test facility. The project is expected to cover 500,000 square feet and create 2,000 new jobs.

This is one of the largest microchip investments announced in Arizona since the passage of the CHIPS and Science Act in 2022, Arizona Sen. Mark Kelly said in a statement.

Amkor has worked closely with Apple for the project and the company will be its first and largest customer.

Waaree Energies

• Product: Solar panels
• Investment: $1 billion
• Location: Brookshire, Texas
• Timeline: Initial production is expected to begin by the end of 2024

The India-based solar panel manufacturer announced plans in December for its first U.S. solar module manufacturing plant in Texas.

This will be one of the largest solar module manufacturing facilities in the U.S. and the company is planning to add an integrated solar cell facility by 2025.

The project is expected to create over 1,500 new jobs when fully operational, which is slated for 2027.

Cummins, Daimler Trucks and Paccar

• Product: Batteries
• Investment: $3 billion
• Location: Yet to be announced
• Timeline: Yet to be announced

Cummins, Daimler Trucks and Paccar announced a joint venture in September to manufacture LFP batteries for commercial electric trucks. Each partner will have a controlling interest and own a 30% stake in the project.

“This planned joint venture enables economies of scale beyond Daimler Truck,” Daimler Truck CEO Martin Daum said in a statement. “It is a key puzzle piece of our battery industrialization strategy, ensuring access to the right battery cell technology at the right cost.”

The labor market in the U.S. clean energy sector is booming. 

The sector added nearly 300,000 jobs between 2021 and 2022, growing to include more than 8.1 million workers, according to a Department of Energy report from June 2023.

Even as the manufacturing industry as a whole is projected to lose more than 113,000 jobs between 2022 and 2032, positions in clean energy-related sectors are expected to increase, according to October 2023 U.S. Bureau of Labor Statistics data. Solar electric power generation-related jobs, for example, are expected to grow by more than 60%, and wind turbine service technician jobs are projected to grow by 45%.  

Last year, many manufacturers were struggling to fill entry-level roles, especially when trying to compete with big companies like Amazon and FedEx. However, that’s no longer the top challenge some manufacturers are talking about.

One of the major challenges among companies now is finding qualified labor for technical roles dealing with AI and automation when it comes to producing semiconductors, electric vehicles and batteries.

These manufacturers are struggling to find enough automation engineers, machinists, welders and even installation workers, said Justin Geach, global director of marketing at Ohio-based metalworks company Master Fluid Solutions. Geach highlighted solar panel installation specialists as one job function that's experiencing unprecedented demand as more companies and individuals make the switch to solar energy. 

“A lot of people are going from your natural gas-powered home backup generators to solar power,” Geach said. “The whole value chain of solar has experienced a labor shortage."

Part of the manufacturing labor shortage also has to do with what Randy Wolken, president and CEO of The Manufacturers Association of Central New York, calls the “silver tsunami,” as experienced workers retire and not as many young workers replace them. 

Wolken said this is due to a perception gap in which younger students don't have an accurate understanding of modern manufacturing.

"Many of these manufacturing facilities, people don't get a chance to go inside and see them and how they operate, how automated they are," Wolken said. "You drive by these nondescript buildings, and they don't really understand the technology being used and the fact that most of these jobs are really technicians or data-driven."

New York has attracted a huge amount of investment in semiconductor manufacturing over the past few years. Micron Technology, for example, announced in October 2022 that it will invest up to $100 billion over the next 20-plus years to construct the largest semiconductor fabrication plant in the U.S.

Wolken hopes that investments like this will attract younger people looking for more data-driven jobs like electrical and mechanical engineers.

More training is needed to recruit manufacturing workers

To attract and train more young people for emerging technical roles in manufacturing, Wolken said schools need to take more initiative to teach AI and automation. He cited apprenticeships as a great way to start.

“These allow individuals to go through a scheduled approach for learning along with mentoring and on-the-job training," Wolken said. "The country actually has been focused on apprenticeships. We think that's going to be one of the most significant changes in the way in which companies both hire and upskill."

The federal government is taking note of the benefits of apprenticeships as well. The Biden administration's fiscal year 2024 budget proposal included $335 million for the registered apprenticeship program to build educational pathways in industries such as construction, clean energy and semiconductor manufacturing.

Partnering with high schools and colleges is also a tactic some manufacturing organizations use, such as the Association of Equipment Manufacturers. The organization aims to train both students and teachers.

“Part of the challenge for schools right now is you're not getting teachers rolling out of college that are really comfortable teaching really hands-on tech ed. It’s just not a training that they've had,” Julie Davis, VP of people strategy at Association of Equipment Manufacturers, said. 

To combat this, AEM collaborates with the Curriculum for Agricultural Science Education to teach an ag-science, STEM-based curriculum to those without a manufacturing background, like science and history teachers.

Geach also said younger generations appreciate having more of a higher purpose in their jobs.

“I feel like they want higher level, more engaging work. They want to leverage technology, where a lot of the older generation had the skill set to do things manually," Geach said. "But the new gen, Gen Z, kind of came up with technology, so they want to leverage it.” 

Randy Carr, president and CEO of custom-made textile company World Emblem, discussed how his medium-sized company invests in employee education as a retention tool. 

“I think a lot of it is because we over communicate with our staff. We spend a lot of time communicating about the vision, the values and principles of the business are, and we spend quite a bit of money educating,” he said.

Looking at the months ahead, manufacturers are not only focusing on what skills need to be taught more, but where the labor pool is and the types of roles for which people need additional training. New developments in the industry have opened up job options for more people, including a growing number of careers in the country that don't require a bachelor's degree. 

“A lot of what we talk about with manufacturers is this shift from, maybe you trained and developed your workers and maybe you didn’t,” Davis said. “But looking forward, we're all going to be needing to be ready to reskill, new-skill and upskill our workers because of the changes in technology that are happening.”

The start of a new year brings some of the manufacturing industry's biggest players back to Washington, D.C., in hopes of swaying politicians and the administration in favor of the causes, policies and regulations near and dear to their work. 

This year, a looming presidential election brings these issues into more urgent light, as lobbying teams and industry associations vie for their regulatory concerns and policies of interest to get in front of candidates. In particular, several groups told Manufacturing Dive funding, oversight and federal goals for clean energy transitions are affecting their industries.

Read on for the issues that are top of mind for three major manufacturing industry groups.

Federal funding remains in flux

Earlier this month, Senate Majority Leader Chuck Schumer and House Speaker Mike Johnson announced they had reached an appropriations deal to fund the government with $1.66 trillion for fiscal year 2024.

The budget includes funds for the National Institutes of Standards and Technology’s Manufacturing USA program, which organizes public and private partnerships in technology, supply chain and workforce development. 

The bill contains over $886 billion in defense spending, most of which comes from the Fiscal Year 2024 National Defense Authorization Act, which President Joe Biden signed into law in December.

“The budget is going to be a major talking point for all parties involved,” Remy Nathan, SVP for policy of the Aerospace Industries Association. "It's important to appreciate how much the continuing global leadership of the U.S. aerospace and defense industry is predicated on sustained and predictable spending by the government."

The FY2024 NDAA funds will go toward modernizing the Defense Department’s weapon technologies and transportation over land, air and sea. It will also fund technological innovation, such as developing fuel cell EVs and additive manufacturing for aerospace parts.

“Innovation and environment that fosters technological advancement, that supports a STEM-driven, STEM-focused workforce,” Nathan said. “The U.S. figured out really well over the years that we have to keep paying attention to it, keep upgrading.” 

However, the appropriations bill is now back in the House and will still need to be voted on before Biden can sign it into law. In the meantime, Congress once again extended a short-term bill on Jan. 19 to fund the government until March 1 and March 8.  The defense manufacturing money provided by the appropriations bill is important to the aerospace and defense industry’s ability to continue to grow its innovation and workforce, Nathan said. 

“At the end of the day, this is a race with other countries, both friendly and not so friendly,” he said. “And we would do well to be paying attention to what we need to do to make sure that we remain ahead in all of these areas because it's critical for national security, it's critical for economic security.” 

Internal combustion engine bans worry some auto groups

As more automakers transition to manufacturing EVs, states are also making moves to ban gas-powered vehicles.

Last month, the District of Columbia’s Department of Energy and Environment finalized a rule to adopt California’s vehicle emission standards, a law requiring that all new cars sold beginning in 2035 produce zero emissions. The District joins 16 other states, including Virginia and Maryland, in adopting California’s emission standards. 

The Environmental Protection Agency also released a proposed rule in April to reduce toxic air emissions from heavy and light-duty vehicles beginning in 2027. Comments on the proposal closed in July, though the rule has yet to be finalized. 

Such rules are a concern to industry groups like the American Fuel & Petrochemical Manufacturers. While the industry group supports the adoption of EVs, it worries that bans are too harsh of an action, said Aaron Ringel, VP of government relations at the American Fuel & Petrochemical Manufacturers. 

“Bans aren't the way to get there,” Ringel said.

Ringel added that the regulations take aim at the ability for American producers and workers to improve emissions reduction in gas-powered engines.

“That ensures that new vehicles can't be produced in the internal combustion engine category that have better emission standards than the current cars that Americans are driving,” Ringel said.

Ringel noted that the regulations come as EVs remain out of some Americans' budgets. And while EV prices have decreased and sales are at a record high, people are adopting EVs at a slower rate than many in the industry forecasted. 

The average transaction price of a non-luxury vehicle was $44,827 as of August 2023, while the average EV price was $53,376, according to Cox Automotive. 

American Fuel & Petrochemical Manufacturers hopes 2024 political candidates will discuss internal combustion engine bans and EV mandates. 

“It's going to be an election year topic for certain,” Ringel said. “We anticipate candidates and members running for reelection and even the presidential race, this will be a major focus of it.”

The debate over bans is also making its way into Congress. In September, the Republican-controlled U.S. House of Representatives passed the Preserving Choice in Vehicle Purchases Act on party lines, which would prevent California and other states from enforcing the emissions standards laws and banning internal combustion engines. The bill is currently with the Democrat-held Senate. 

Chemical makers are adjusting to a more closely regulated sector

Over the past year, the EPA has been releasing new guidelines and regulations to more closely monitor the use of a variety of chemicals.

The federal agency, alongside state and local governments, is taking increasing oversight action when it comes to PFAS. The EPA enacted a final rule in November requiring companies that have had PFAS in their supply chains at any time since Jan. 1, 2011, to submit information that helps the federal agency research, monitor and regulate the toxic substances. 

Meanwhile, states like Minnesota and Maine have been enacting laws to ban forever chemicals from products such as cleaners, food packaging and pesticides. 

“Candidates should address regulatory overreach, which currently imposes unjustified burdens on the industry without adequately considering safety or environmental advancements,” Robert Helminiak, VP of legal and government relations at the Society of Chemical Manufacturers and Affiliates said in a statement to Manufacturing Dive.

One example Helminiak mentioned is the EPA’s proposed “Safer Communities by Chemical Accident Prevention Rule” as part of its Risk Management Program, a regulation requiring companies that handle hazardous chemicals to submit a plan to prevent accidents at facilities. 

The rule, proposed in August 2022, would require chemical companies to evaluate risks of natural hazards and climate change, as well as require facilities with higher accident rates to acquire technologies and alternative analysis such as engineering controls and replacing hazardous chemicals with less toxic substances. It would also require third-party audits of sites with an accident track record.

The EPA estimated it would cost the chemical industry up to $76.7 million over a 10-year period to implement the changes if the rule is finalized. 

Helminiak added regulators and lawmakers could recognize specialty chemicals’ manufacturing process and contributions to industries such as healthcare, medical devices, and commercial products as well as advancement in various fields such as farming.

“It is important that regulators and lawmakers understand the distinct role of specialty batch and fine chemicals in the supply chain,” Helminiak said.

The semiconductor industry no longer faces the bulk of the supply chain challenges triggered by the onset of the Covid-19 pandemic.

Instead, the U.S. chip industry is in major growth mode. Billions of dollars in funding is now available through the CHIPS and Science Act to boost domestic growth in the industry, with a total pot of $52.7 billion for semiconductor research, development, production and workforce development, including $39 billion in manufacturing incentives.

Emerging technologies are also enabling new applications for semiconductors across the market. Artificial intelligence-related applications have fueled demand for advanced semiconductors, while technology-enabled cars — as well as battery-powered electric vehicles — are now the top application driving semiconductor sales, according to a recent KPMG report. 

The Department of Commerce has begun awarding some of the first grants under the CHIPS and Science Act. In January, it awarded semiconductor manufacturer Microchip Technology $162 million to increase its domestic production. Other chipmakers have also publicized their intent to apply for funds. Amkor announced plans in December to build a $2 billion advanced packaging and semiconductor test facility in Arizona and apply for federal funding to help pay for the project.

Still, time remains a major challenge facing the U.S. semiconductor industry, even amid the excitement spurred by increased government funding, explains John VerWey, an advisor in the Pacific Northwest National Laboratory’s global security, technology and policy group, who studies semiconductors.

"The actual construction time from the date of breaking ground to the first wafers being manufactured, it kind of nets out to around two years," he said. "But that does not take into account any of the pre-permitting [or] any of the permitting that happens before you break ground."

U.S. funding emerged amid a domestic chip shortage that hit the auto industry particularly hard, but factories can take several years to construct, which means it could be some time before that investment will translate into expanded manufacturing capacity, VerWey said.

And that financial support is primarily directed toward boosting U.S. technological advantage and reducing dependence on foreign producers like Taiwan for advanced semiconductors. This often doesn’t include a focus on the more simple chips that experienced a shortage in the auto industry during the pandemic. 

At the same time, building new factories and starting from “scratch” is significantly more difficult than adding production at an existing plant, said Patrick Penfield, a supply chain management professor at Syracuse University. Because of this, U.S. manufacturers are behind competitors in producing the most advanced chips.

“When you're making huge monster investments like this, you're talking probably five or six years before you actually start to see some type of production,” Penfield said. “To manufacture these really highly advanced chips [is] extremely hard. You have to have experience and you have to have the workforce and the knowledge to be able to produce those types of chips.”

Notably, chip companies face several chokepoints throughout their supply chains, with sometimes only one or two companies producing a part they need. For example, only three companies in the world — South Korea-based Samsung and SK Hynix and U.S.-based Micron Technology — produce advanced semiconductor memory. 

Another challenge facing chip manufacturers is a bevy of regulations. Chip factories use an intense amount of water and emit greenhouse gasses, making them subject to particular environmental rules, VerWey said. Companies building facilities in the U.S. must consider legislation like the National Environmental Policy Act, the Clean Water Act and the Clean Air Act, among others. Complying with these laws can be a new experience for chip companies, many of which are moving operations from overseas.

“Each country regulates emissions of those things differently,” VerWey said. “A Taiwanese firm may know what it means to have an adequate environmentally compliant HFC emission program in Taiwan, but it's different in the US.”

Finding and maintaining talent raises challenges too. One difficulty, VerWey noted, is finding workers who are familiar with the process of greenfield construction for fabrication plants, particularly because many haven’t been built in the U.S. for several decades. While chip factories are mostly automated, uniquely qualified workers are still needed to run the facilities. 

“Over the next three years, talent will continue to be the most pressing issue facing chip manufacturers,” said Mark Gibson, national sector leader for global and U.S. technology, media and telecommunications at KPMG. ”The demand for technical talent is only expected to increase — and chip manufacturers are placing a greater strategic focus on talent development and retention ahead of supply chain resiliency.”

Some construction labor problems might abate, VerWey noted, as firms get more accustomed to building fabs. In terms of the workers who will one day operate these facilities, companies face two choices: attracting international talent or training and educating workers based in the U.S., he said.

The issue is one that Taiwan Semiconductor Manufacturing Company is dealing with as it builds two fabs in Arizona. The company has pushed back the opening dates of both facilities, including a delay on the first fab because of a lack of specialized labor in the U.S. TSMC had planned to bring in foreign labor to fill these roles, a move that received swift backlash from local unions. 

The company reached a deal with the Arizona Building and Construction Trades Council earlier this month, which included a stipulation to focus on hiring workers locally. The agreement could be a bellwether for how recruiting will be handled at other upcoming chip plants. 

"The goal is, eventually, hopefully to get to those high-end chips,” said Penfield. “But I think probably the middle of the range is what we'll see from a chip manufacturing standpoint as far as the complexity and the capability of those chips."