Here’s why OEMs are investing in US manufacturing, and why they’re not

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Last month we reviewed Reshoring Initiative’s (RI) 2024 Annual Report that summarized announced plans by US companies to reshore manufacturing jobs. 

RI followed up the ‘24 Report with a 2025 survey of US manufacturers “to determine where U.S. manufacturers are with respect to reshoring and the key factors influencing those decisions.” Participation was high: over 500 companies responded.

Read between the lines and the findings also tell us why US companies invest in onshore manufacturing, and why they don’t.

RI wisely divided the survey into two distinct camps: ‘Respondents self-selected as either Original Equipment Manufacturers (OEMs) or Contract Manufacturers (CMs). An OEM is defined as manufacturing end products, often from component parts procured from other organizations. A CM is defined as manufacturing parts, components, and tooling to be used in an OEM end product.’

Highlights from the survey – and comments:

OEM

  • 37% of respondents had no plans to reshore work but almost a third – 30% – ‘have reshored over the last ten years or are actively executing reshoring strategies.’ 20% procure no imported components or products.
  • The survey asks, “On what basis are you comparing offshore vs. domestic options?” Landed-cost is the most-sited metric – by 37% of respondents.
  • Of the 32% who indicated they plan to offshore products in the next two years, 69% cited  cost as the reason.
  • ‘43% of OEMs value fast delivery and would be willing to pay 10% to 20% more for components if they could be delivered within a 1-week lead time versus a 6-week lead time.’
  • 68% of respondents have no plans to offshore work in the next two years, and of the 32% that are, 69% cite cost as the driving factor. 
  • The top three reasons for reshoring:
  1. 45% Saw the benefit of having manufacturing located near engineering
  2. 45% Saw a reduction in freight and duty costs
  3. 38% Agreed they would avoid any potential geopolitical risk
  • China was the top location from which work was reshored – 34% of respondents
  • 30% would reshore more if ‘U.S. workforce had higher skills and were in abundant supply.’

Contract Manufacturers (CM)

  • 43% of contract manufacturers have reshored for customers or are actively executing orders to reshore. 16% are currently quoting on reshoring.
  • As a weighted average, CMs were competing with imports on about 31% of quotes, with only 7% facing no offshore competition.
  • That said, 47% of contract manufacturers said a very small percentage of their work has been reshored (1 to 5% of their work.)
  • 91% of respondents indicated that a primary reason they lost orders to imports was price. This aligns with the findings from OEMs, where 69% cited cost as their main factor for offshoring.
  • When asked which factors would make them more competitive, CMs estimated that relaxing U.S. regulations to match those offshore would increase their revenue by 24%.
  • CMs have lost the most business due to offshoring to China (41%) in the past two years, with India (26%) and Mexico (17%) taking the total to 84% of business lost.

My takeaways:

First, read the entire report. More:

  • Cost continues to be the primary motivator for OEMs to remain offshore, and to send more products offshore. But we knew that. To stay offshore means taking other risks. Some companies feel they have no choice.
  • We’re seeing the last of a generation of business models using lower-cost labor inputs. Ahead is a sea-change in how entrepreneurs model companies and what business schools teach.
  • Much is made of how tariffs are compelling OEMs to reshore work. But you don’t really see that here — confirmation of RI’s ‘24 Summary that tariffs may be slowing down reshoring as much as forcing companies to act.
  • Speed-to-market is a CM’s secret weapon. As the report notes, “43% of OEMs value fast delivery and would be willing to pay 10% to 20% more for components if they could be delivered within a 1-week lead time versus a 6-week lead time.” It’s clear that ‘proximity to design and engineering’ is a top motivator for OEMs.  
  • CMs can help themselves by encouraging OEMs to measure the total cost of offshore manufacturing. Many companies just aren’t doing the math.

I’ll be interviewing RI founder and president Harry Moser to dig in more, and talk manufacturing impact of the Big Beautiful Bill, in the coming days. Stay tuned.

More soon. 

Bart Taylor is founder of InsideMFG and executive director of the GHMA. Reach him at [email protected].