IT spending in Manufacturing makes a comeback in 2022

• During COVID-19, the manufacturing operations sector was disrupted primarily due to social distancing, weak demand, and broken supply chains. As countries started to recover from the pandemic waves and demand increased, manufacturing activities have also started to pick up. Though some of segments face challenges (e.g., the automotive industry is affected by the chip shortage), overall, the manufacturing output has increased significantly from pandemic lows.
• North America leads in manufacturing IT investment in 2022. Besides traditional industrial manufacturing, there are a few notable investment commitment in the US. For example, Intel announced a $20B+ semiconductor factory in Ohio and Samsung is planning a $17B semiconductor factory in Texas. With electric vehicles gradually replacing the ICE segment, leading OEMs are also investing in EV battery factories. GM plans to build its third EV battery factory in the US. These investments will improve opportunities for the overall US manufacturing landscape in the near future.
• As the prospects for the automotive and aerospace industries continue to improve, European manufacturers are planning to increase their IT spending. The majority of their spending used to focus on the existing operations efficiency improvement/ongoing product development. But, with an improving business climate, they will increase investments in advanced R&D development projects.
• The two key investment areas of the manufacturers are operations digitalization and supply chain management. Most firms are working on supply chain resilience through digitizing supply networks using data analytics. Investments in IT/OT convergence, cloud engineering, data intelligence, and cybersecurity is enabling more visibility and control of manufacturing operations. Sustainability is another priority for the manufacturers. We have observed several initiatives in the areas of energy and water consumption, emissions, and waste management among others.

The Bottom Line: Trade embargoes, supply chain uncertainty, and smart manufacturing have forced reshoring and nearshoring of some of the manufacturing operations in the North American and European regions. Though APAC will remain a key manufacturing hub, North American and European manufacturers will lead technology spending in the near future.