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Manufacturing is an industry where perception and reality do not always match up, especially when it comes to foreign direct investment. In many developing countries, both the general public and political leaders believe their manufacturing industries are dying or already dead. They also tend to attribute the cause of death to manufacturing facilities, and associated jobs, moving overseas.
Donald Trump made the decline of American manufacturing a center piece of his successful 2016 campaign for the presidency, while his rival for the 2024 GOP nomination, former South Carolina Governor Nikki Haley, criticized him for not bringing enough factories back to the U.S. Across the Atlantic, opposition party leader Keir Starmer has blamed the current Conservative leadership for overseeing a decline in U.K. manufacturing, and President Emmanuel Macron has vowed to “re-industralize” France.
A recent report from real estate advisory firm Colliers suggests the U.S. manufacturing industry is performing strongly in attracting investment, despite some assumptions to the contrary. Colliers’ 2023 review of FDI into the U.S. found that cross-border investment into the U.S. exceeded expectations with the Biden administration’s Inflation Reduction Act fueling both domestic and foreign investment.
Colliers based its assessment on underlying greenfield FDI data from the Financial Times’ fDi Intelligence data service, which it then interrogated and adjusted according to its own methodology.
The report revealed that job creation through FDI in the U.S. increased 6% across all industry sectors in 2023, and investment into the U.S. has increased by 65% since 2019. On a sector basis, manufacturing has attracted the largest volume of FDI due to attractive operating costs and incentives. Despite the popular narrative of U.S. manufacturing jobs being transferred to Asia, Asian investments into the U.S. remain particularly strong with South Korea leading the way as a source of FDI. South Korean companies’ investments into U.S. manufacturing grew 6% in 2023 compared to the previous year.
“We have certainly seen an incremental uptick in FDI, specifically in the manufacturing sector in the U.S., as companies look to reshore or friendshore,” Monty Turner, senior vice president and principal at Colliers Site Selection. “I attribute much of this to the realigning of supply chains to a regionalized approach (i.e. making where you sell) versus the distributed global supply chain of yesteryear.”
The reshoring trend was in effect prior to the IRA, but the IRA accelerated it especially in sectors such as semi-conductors, solar, electric vehicles and batteries, Turner says.
“It’s important to note the IRA has been very favorable to existing industry in the U.S. as well as FDI, leading to expansions across the nation,” he adds.
By incentivizing U.S. companies to reinvest domestically, the IRA has had a cooling effect on U.S. investment into other regions. U.S. investment into Europe saw a 35% decrease year-on-year, causing Asia to overtake the U.S. as a source market for FDI into Europe.
However, Europe’s manufacturing sector saw strong FDI results in 2023, posting a 33% growth as companies nearshore operations due to continued frictions in global supply chains. This is in contrast to the struggles of the European business services sector, which saw a 67% decrease in FDI in 2023 as a result of a global slow down in the technology sector coupled with high interest rates at the start of 2023.
While a perception exists that manufacturing jobs in Europe have shifted eastward, Elias van Herwaarden, head of location strategy for Colliers Occupiers Services EMEA, points out that manufacturing jobs created via FDI since 2019 have been predominantly in western and central Europe.
The durability of manufacturing in the U.S. and Europe has important and beneficial consequences, since production activity is the backbone of economic stability.
“Manufacturing is where the real money is made,” van Herwaarden says. “There is a lot of talk about services, call centers, headquarters, back offices, etc, both in the U.S. and Europe, but services live off manufacturing and fortunately manufacturing investment has been going up steadily.”
“The long term view suggests strong robust continued investment in manufacturing,” he adds. “It’s certainly not dead yet.”
