North American Industrial Manufacturing Outlook: Fairly Robust 2020 Spending to Increase in 2021-22
Project spending by the Industrial Manufacturing Industry took a dip in 2020 as the COVID-19 pandemic hit, but remained relatively robust and is only expected to increase in the next two years, according to David Pickering, Industrial Info's vice of president of research for the industry. About $25 billion of spending was delayed in early 2020 as coronavirus hit North America, but much of this came back before the end of the year, he said during last week's North American Industrial Market Outlook.
Pickering said about $70 billion-plus in North American Industrial Manufacturing projects were expected to begin this year, depending on how the pandemic plays out, a significant increase over last year. In his presentation, Pickering discussed some of the key sectors driving the industry.
The data center sector, which was already strong pre-COVID, has shined during the pandemic, Pickering said. As people increasingly turned online to work, go to school, shop and socialize, data centers became more important than ever. Industrial Info is tracking more than 110 North American data center projects worth $27.2 billion that are expected to kick off in 2021.
Semiconductors & Computers
The semiconductor and computer sector also has been of prime importance during the pandemic, and Industrial Info is tracking a little more than 100 projects in the sector, worth $12.9 billion, that are expected to kick off in North America this year. Before the pandemic hit, U.S. manufacturers were stockpiling semiconductor and computer parts made in Asia as the trade war with China escalated. Because of this supply, companies relying on this sector were able to carry on production in the early stages of the pandemic, when manufacturing and shipping came to an abrupt halt. However, now the world is seeing a shortfall in these supplies, which is having an effect on other downstream sectors.
Spending in this sector typically works on a five-year cycle, and Industrial Info is not expecting another significant increase in spending until 2022 or 2023, when new generations of semiconductors are unveiled. However, there will be some increase in spending this year to keep up with growing demand.
Solar panels also are included in the semiconductor and computer sector. Asia, particularly China, leads in the manufacture of these products, but this sector has a large potential for North American reshoring and near-shoring as more green energy comes into play, which is expected to increase under the Biden administration.
The automotive sector, after seeing strong sales over the past five or six years, took a massive hit as the pandemic struck. In addition to a drop in sales, the sector faced manufacturing problems due to a lack of parts from abroad. Automotive companies are increasingly looking at reshoring and near-shoring parts manufacturing in order to weather events such as this. A semiconductor shortage also has hindered automotive production, causing some production to recently shut down. For more information, see January 19, 2021, article - Let the Chips Fall Where They May - Semiconductor Shortage Stymies Automakers.
The electric vehicle market was definitely slowed by COVID-19. While many companies had plans to unveil new electric models in the near future, several previously planned projects have been pushed out to 2022. Current low gasoline prices and a lack of available charging stations in U.S. regions also are having a negative effect on demand.
Distribution & Warehousing
The distribution and warehousing sector also has shined during the COVID-19 pandemic, as customers increasingly turned to online shopping with the expectations of quick (usually two-day) delivery. Companies had previously established large regional centers to move their products and are now focused on building smaller, more regional ones to move products faster. Industrial Info is tracking more than 130 projects in this sector, worth $8.1 billion, that are expected to kick off in North America in 2021.