US Advanced Manufacturing Losing Market Share

Jan. 9, 2013
Study finds domestic advanced manufacturers suffering from foreign competition.

Imports for a group of more than 100 advanced manufactured products set a record by capturing 37.5% of the $2.01 trillion American market in 2011, a new report finds. Imports controlled 24.49% of substantially the same group of U.S. manufacturing markets in 1997. Moreover, says the report, advance indicators – principally a big increase in U.S. imports in these industries – are signaling that import penetration rates rose significantly again in 2012.

Contrary to upbeat reports about a U.S. manufacturing renaissance, domestic manufacturing’s highest value sectors – including semiconductors, construction machinery, high tech medical equipment, and machine tools – have in fact been falling behind foreign-based rivals, according to a report from the U.S. Business and Industry Council, titled “Import Penetration Rises Again in 2011; Challenges Manufacturing Renaissance, Insourcing Claims.”

According to USBIC Research Fellow Alan Tonelson, the study’s author, “Companies losing market share in their own backyard would never be described as successes, and whole industries suffering such setbacks aren’t winners, either. Still-rising import penetration rates show that, far from enjoying a renaissance, America’s most valuable manufacturing sectors collectively are ever more vulnerable to the same foreign competition that doomed their less advanced counterparts.”

From 2010-2011, USBIC’s research found, advanced manufacturers examined lost more in domestic sales (through import increases of $89.22 billion in pre-inflation dollars) than they gained in foreign markets (through export increases of $56.80 billion).

Had imports stayed flat in absolute terms during that period, pre-inflation GDP growth would have been 15.47% greater, USBIC stated, calling it “extra output badly needed by a weak recovery from an historic recession.”

Moreover, the study presents evidence that, over the 1997-2011 period covered by USBIC’s research, rising import penetration rates are more closely linked to weak manufacturing output levels than are worsening trade deficits.

Fully 29 of the 106 sectors for which reliable data were available featured import penetration rates of 50% or more in 2011. In 2010, 31 of these industries had lost half of their home U.S. market to imports. In 1997, only 8 of the 114 sectors initially studied faced this situation. (the roster of the 100-plus high value industries studied in the USBIC import penetration reports has changed slightly from year to year, due to the data collected)

USBIC said U.S. manufacturing markets in 2011 with 50% or greater import penetration included construction equipment; electricity measuring and test equipment (critical for producing information technology hardware); turbines and turbine generator sets; metal-cutting machine tools; mining machinery and equipment; industrial process controls; and broadcast and wireless communications equipment.

From 1997 through 2011, only 8 of the 106 industries examined for each of these years gained shares of the U.S. market against import competition: semiconductor machinery; saw mill products; paperboard mill products; motor vehicle stamping operations; transformer, inductor, and coil manufacturing; electron tubes; computer storage devices; and heavy duty trucks and chassis.

The 98 industries that lost shares of the domestic market between 1997 and 2011 include semiconductors; electro-medical apparatus; pharmaceuticals; turbines and turbine generator sets; construction equipment; far machinery and equipment; mining machinery and equipment; several machine tool-related categories; and ball and roller bearings.

Underscoring the link between high rates of import penetration and poor industry health, the report argues, between 1997 and 2011, output before inflation fell in 38 of the 106 total industries studied over this time span – nearly 36% of the total. These “declining” industries include electricity measuring and test instruments; relays and industrial controls; motors and generators; motor vehicle engines and engine parts; several machine tool-related categories; and environmental controls.

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