Can Manufacturing Make It In America?

From the Editor's Desk

One year into the second Trump administration, we're looking at a promise both parties have made: bringing back American manufacturing.

Biden passed the CHIPS Act and the Inflation Reduction Act to rebuild factories. Trump implemented tariffs to drive investment. VC money has flowed into the manufacturing sector.  

But is "Made in America" actually back?

We looked at the data. The short answer: not yet.

Read our report.

Let's Start with a Reality Check

Annual factory capital investment tripled from $80 billion in 2021 to nearly $240 billion by late 2024. Sounds significant, but it represents only a 5% growth rate relative to America's $4.5 trillion manufacturing capital base—and only 3% net after depreciation. Compare that to the $2.8 trillion expected to be invested in data centers alone in the United States in the next four years, for example.

Meanwhile, real manufacturing output is flat: we're not actually making more stuff than we did twenty years ago. Manufacturing employment dropped 68,000 from last year to 12.7 million, roughly where it was in the mid-2010s (and the 1940s). Productivity has flatlined.

Where Growth is Actually Happening

Several sectors are adding domestic capacity: semiconductors, lithium-ion batteries, space, drones, and rare-earth magnets.

For example, U.S. semiconductor fab capacity is projected to triple by 2032—the fastest growth of any region globally—with over 140 announced projects across 30 states totaling more than half a trillion dollars in private investment. If projections hold, we'll go from zero domestic advanced-logic chip capacity in 2022 to roughly 28% of the global market by 2032. Lithium-ion battery production could grow tenfold by 2030, with dozens of gigafactories under construction anchoring a broader supply chain buildout.

But from the perspective of the overall manufacturing output and employment, these remain relatively niche sectors that don’t change the national picture.

Where the Venture Opportunities Are

Chips, space, and batteries are clearly strong markets. And there are some promising signs of growth in drones and rare earths. Beyond those, if manufacturing's return is overstated, where should founders and investors focus?

The best opportunities are in software, automation, and process innovations that remove operational bottlenecks, help manufacturers stay competitive, and play to America's strengths in high-tech manufacturing:

1. Energy. New factories need power, and they need it fast. The electrical grid is struggling to keep pace with demand from manufacturing facilities, data centers, and charging infrastructure. Semiconductor fabs and battery plants consume massive amounts of electricity, and interconnection queues stretch to five years. Eighty percent of manufacturers want comprehensive permitting reform. Startups that optimize energy consumption, hedge against rising and volatile electricity prices, or provide alternative or interim power solutions will find eager customers willing to pay.
   

2. Supply Chain Visibility. The era of single-source, China-centric supply chains is ending, but the replacement is messier. As companies diversify by reshoring some production, nearshoring to Mexico, and friendshoring to countries like Vietnam and India, visibility is becoming critical. Manufacturing need high-quality, real-time tracking, risk assessment, and optimization tools. They also need new digital infrastructure for customs, cross-border payments, duty drawbacks, shipping, and insurance. The complexity of modern supply chains has outpaced the tools to manage them.
   

3. Robots and AI Systems to Guide Them. Here's a number that should worry American manufacturers: Chinese factories installed nearly 300,000 robots in 2024, many networked in fully automated "dark factories." American factories installed 34,000. That gap is the opportunity. Twenty-two percent of manufacturers plan to deploy physical AI within two years, up from 9% today. They need customized autonomous systems and training for workers on how to use them. At the same time, a new wave of startups is building the foundation models that will make advanced autonomous manufacturing possible. from general-purpose models at companies like Physical Intelligence, General Intuition, and Skild AI to specific applications in defense and infrastructure. The startups building these systems will capture significant value in the emerging manufacturing stack.

The Bottom Line

A manufacturing renaissance would be good for America. We're rooting for it. But the data says we're not there yet, and tariffs alone won't get us there. What might? Breakthroughs that make it economic to build here like better automation, smarter supply chains, and cheaper energy. That’s where we’re putting our money.

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