Countless headlines over the past few decades have recounted a story of American industry in decline. But media coverage has almost entirely overlooked a resurgence that’s well underway: Much of the industrial sector is thriving, often brimming with innovators in a relentless drive for innovation and a zeal to deploy new technology that rivals the Silicon Valley leaders known as FAANG: Facebook, Apple, Amazon, Netflix and Google. In fact, the returns boasted by some of the companies at the heart of this industrial-tech sector have far exceeded those of FAANG. We refer to this collection of high-tech manufacturing firms as the “Titanium Economy” because they share characteristics with their namesake metal: Titanium is extremely durable and corrosion-resistant.
Despite the durability of the sector, the Titanium Economy is still seen through the lens of the retrenchment of the 1980s. When many plants went dark, entire communities were devastated, as long-employed workers were laid off and young people fled due to a lack of jobs. The hollowing out made a profound impression on the national consciousness, and we’re still suffering from an impression formed that there was no hope for an American industrial sector.
Titanium Economy companies are also significantly underestimated because they aren’t business-to-consumer brands that take out network television ads, nor do many make products that consumers can purchase directly. The products they do make, however, enable the creation of goods and services that are critical to our daily lives. These companies are finding solutions to the many pressing problems the U.S. is facing, including climate change, the need for a more sustainable and reliable food system, and calls to restore and upgrade our infrastructure. Their CEOs aren’t often featured on Bloomberg or the front page of The New York Times, but they’re hugely ambitious, helping their companies across decades of consistent innovations and profits. And while they aren’t unicorns, planning headline-grabbing IPOs or hoping for multi-billion-dollar valuations, they’re as crucial to the current U.S. economy — we would argue even more so — to our collective future.
Consider the example of Graco, a little-known company based in Minneapolis, Minnesota. It manufactures flow-control technology that puts peanut butter into Jiffy jars, ink into pens, and the right amount of medicine into each gel cap. As end-consumers, we might not know of Graco or what it produces, but if its factories were to shutter, many billions of dollars would be lost. Wherever we go, whatever we do, the Titanium Economy is supporting our lives in crucial but often imperceptible ways.
The digital revolution by no means displaced manufacturing; making things, it turns out, is still the key building block for our collective society. At a time when investors and the media are obsessed with all things digital, a modern resilient economy requires an industrial-tech sector that’s resilient to future disruptions.
Take the semiconductor industry. In February, 2022, the federal government warned that U.S. manufacturers had a five-day supply of microchips on hand, compared with 40 days in 2019, due to supply chain challenges. The chip shortage doesn’t just affect the computer industry and big tech; the drive toward digitization has resulted in chips playing an integral part in a host of essential products, from medical devices to credit cards.
Though the chip shortage has delivered a wake-up call about the need for new investments, the economy of the future will require other advanced technologies as well, from lithium-ion batteries that power our energy transition to advanced photonics that enable digital displays. A domestic industrial-tech base that can support the building blocks of our future economy will be needed. Without such an investment, future disruptions to the global supply chain will only be even more catastrophic.
American industrial executives must realize that we have maybe five years to close these technology gaps. Sitting back simply isn’t an option — if we don’t do it, those across the Atlantic or Pacific will. And when we say that the cost of waiting will be tremendous, we’re not just talking about opportunity cost. To be sure, jobs will be lost, but there will be an additional cost to be paid in hard currency by everyone in society.
With so much international focus on industrial-tech innovation, the sector is set to explode, and America must not only keep pace but continue to lead. As we contend with a period of unprecedented disruption, with COVID-19 just one source of upheaval, we can make our economy more resilient to future shocks through accelerating the growth of the Titanium Economy.
Nick Santhanam is chief executive officer of Fernweh Group.
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- Source: https://www.supplychainbrain.com/blogs/1-think-tank/post/35970-the-critical-but-little-known-role-of-the-titanium-economy