In the past 20 years, domestic multinationals shifted millions of jobs overseas for growth opportunities and competitive cost advantages. While certain advantages to offshoring existed then, many have diminished or evaporated. Consequently, "reshoring" is emerging as domestic and international companies look to the United States and all of North America as the next great location for corporate growth.
Sparking this trend are several startling international shifts in relative costs. Who would have imagined a decade ago that Brazil would rank today among the highest-cost countries for manufacturing? Or that Mexico could be cheaper than China?
Thecompetitiveness of other countries long considered low-cost, including Poland and Russia, has eroded significantly in the past 10 years. The U.S. and Mexico have improved their competitiveness and are now considered the "rising global stars" of manufacturing.
As a result, a Boston Consulting Group survey of U.S.-based manufacturing executives finds that 54 percent of respondents are considering bringing production back to the U.S.—up nearly 50 percent since a similar 2012 survey by BCG. Of these executives, the majority anticipate a 7 percent rise in future manufacturing capacity in the U.S. and a 5-20 percent decrease in capacity in China.
Further, these executives say the U.S. has surpassed China to become the most likely destination for companies shifting manufacturing capacity to serve the U.S. market. In addition, 21 percent of surveyed companies expected to bring manufacturing back to North America from China in the next two years, roughly twice as many as in the 2012 survey, including significant growth in Mexico. And at the factory gate, China'sestimated manufacturing-cost advantage over the U.S. has shrunk to less than 5 percent.
Market Dynamics and Aluminum Extrusions:
With such robust growth expected, many companies with already-established and future developments in North America will need an aluminum extrusion partner with scale and domestic production resources. North American companies will pay more to source aluminum from China in light of existing tariffs that likely will remain steady for the foreseeable future. These tariffs or, specifically, customs duties on imports of aluminum extrusions from China, are a competitiveness measure that protects U.S. businesses and levels the playing field for domestic products. Anti-dumping duties protect against foreign companies "dumping" products on U.S. markets at prices below cost, while countervailing duties offset foreign government subsidies.
With these policies in place, the domestic aluminum extrusion industry is likely to see a boon to growth from strengthening reshoring trends. Many of the companies growing domestically or bringing production resources back primarily to the U.S. and Mexico are involved with heavy manufacturing, building and construction, energy, and transportation. Not the least of these industries is energy, specifically solar and lighting companies growing their footprint in North America—helping to reduce energy consumption and diversify the country's energy portfolio. As solar and lighting companies grow domestic development, they can benefit tremendously from partnering with a North American aluminum extruder with the experience and scale to support their ambitious growth plans.
Solar and lighting products often also include some form of electronics or power. The heat generated by electronic devices and circuitry must be dissipated to improve reliability and prevent failure. Companies need expertise from leaders in thermal management, a crucial aspect of electronic design. Techniques for heat dissipation can include extruded heatsinks, modular heat sinks, cold plates and/or fans, which can be used for air cooling. LE D technology, in particular, presents a thermal management challenge because it is significantly hotter than legacy light bulbs. This requires conducting the heat away from the LED junctions to gain long product life and consistent lumen and color maintenance.
Aluminum has been the material of choice for thermal management in the lighting industry. It doesn't conduct heat quite as well as copper but it offers the weight and cost advantages important in many solid-state lighting (SSL) applications. Various forms of aluminum thermal management products exist, including:
- Extruded: Aluminum extrusions are significantlymore efficient than an alternative such as castings because they possess a higher level of thermal conductivity. Tooling for a large extrusion also falls generally within the $5,000-to-7,500 range, with aluminum extruders typically covering all replacement tooling costs, giving extrusions their cost advantage.
- Modular: Sapa developed a new method of makinghigh-ratio, air-cooled heat sinks that are about eight percent more thermally efficient than bonded fins heat sinks and it uses a modular concept that delivers maximum flexibility with fin geometry, fin ratio and heat sink footprint.
- Cold Plates: Cold Plates are a form of liquidcooling that is used in applications that generate large amounts of heat, such as power electronics, electric vehicles or large computer systems. Sapa has developed a lower-cost cold plate by using Friction Stir Welding to replace slower brazing systems.
When working with a domestic extruder, additional benefits should be considered, including the ability to keep design work confidential to reduce risk of competitors using a design, to enable shorter lead times and to lower transportation costs.
High-Level Solutions/Benefits for Solar/Lighting:
With 23 locations in North America, Sapa can ship directly to a customer from the nearest plant, paring freight costs. Rather than having to develop a supply chain with multiple suppliers, Sapa customers can enjoy one-stop shopping.
In addition, its Sidney, Ohio, facility concentrates on long-term programs and the delivery of products following the just-in-time model as well as possessing 250,000 square feet of fabrication and assembly space.
Further, once at the installation site, crews save time because the systems are ready to go. Sapa can produce mounting system components that are delivered just when installation crews require them. Crews in the field simply fit them together. This all saves time and money through faster installation of the photovoltaic system.
This expertise resonates in North America particularly, where Sapa has registered strong sales growth to the solar industry over the past few years. Its offering has been enthusiastically received by its solar partners and, consequently, Sapa recorded double-digit growth in market share in this application in each of the last three years.
Besides being the largest aluminum extruder in North America, Sapa also provides the most diverse capabilities. With extrusion presses ranging from a three-inch circle size to a 21-inch circle size, Sapa is the only extruder that can offer as many options. Additionally, Sapa offers indirect presses that allow control of the extrusion process for even tighter high fin ratio heat sink products.
Sapa's engineering strength represents another differentiator. More than a dozen engineers at its North American Technical Center (NATC) locations throughout North America assist customers in designing their products, including those that require thermal management capabilities. The center's staff comprises a diverse group with engineering, marketing, metallurgical, machining and product design backgrounds.
Sapa showcases its engineering expertise in the lighting industry. For instance, designers often require a light wider than can be economically extruded – or it's just too wide for any extrusion press. Sapa's engineers then design a solution that employs Friction Stir Welding, an automated process that allows extrusions to be joined together to create large assemblies. The process also has been used to create sealed enclosures.
Detailed Sapa Solutions Expertise and Performance:
- Committed to saving customers weight and moneywith aluminum for steel, and copper to aluminum for electrical applications
- Aluminum extrusion dies are typically 10 to 20times less expensive than a casting die
- Specialized engineering services (thermal,structural, alloy development)
- Unrivaled capabilities with extrusion solutionsizing, from 0.5" to 21"
- Superior fabrication and assembly services
- Equipped to manufacture extrusions 10-foot wideor 4-foot diameter using friction stir welding
- Connected operations in 23 locations acrossNorth America
- Global network of 30 additional facilities worldwide
- Networked scale enables design in one facilityand manufacturing in another
As we look to business opportunities and trends influencing future growth, none are potentially more impactful than companies reshoring in North America. Companies are reconsidering previous offshoring strategies as labor, transportation and material costs rise in emerging countries, making North America a much more competitive—and convenient—location for manufacturing companies to return home.
Among them, numerous energy and lighting companies are reshoring their manufacturing back to North America. The reasons vary. Some desire to protect their designs as well as save both transportation costs and lead times. Others recognize from recent port shutdowns on the West Coast that they cannot sell products if the cargo is out at sea. Companies increasingly recognize that to be truly efficient, they must serve their various manufacturing plants in the best way possible. These companies, many of them North American lighting manufacturers, are realizing it is increasingly more cost-efficient today to consolidate their manufacturing locations to their most efficient plants in North America. And when they require aluminum extrusions, they find Sapa a perfect supplier that can help them pare costs and engineer better solutions. As they design the product at one location then move their products throughout the region, they find that Sapa can shift production to the closest, most efficient Sapa plant.