Revamping U.S. Manufacturing: A 2025 Update on Growth Strategies for Small and Mid-Sized Enterprises
Introduction: Reflecting on the Past and Looking Ahead
In my original article from before 2018, inspired by Michael Collins' Saving American Manufacturing, I argued that the U.S. manufacturing sector was eroding the economy's foundation through job losses, trade deficits, and outdated practices. I emphasized the need for transformation beyond lean processes—focusing on growth, profitable customer selection, market expansion, and a shift to market-driven innovation.
Since then, the landscape has evolved dramatically. The COVID-19 pandemic exposed supply chain vulnerabilities, spurring reshoring efforts and record business formations. Federal policies like the CHIPS and Science Act, Inflation Reduction Act (IRA), and Bipartisan Infrastructure Law (BIL) have injected billions into domestic production.
Meanwhile, small and mid-sized manufacturers (SMEs)—which comprise 98% of U.S. manufacturing firms and employ 4.8 million workers—have driven much of the resurgence, adapting to new realities. This follow-up explores recent considerations for SMEs to accelerate growth, including innovations, talent strategies, and promising industry sectors, amid a projected expansion in 2025 fueled by lower interest rates and sustained investments.
The Policy Landscape: Government Support Fueling Reshoring and Resilience
Since 2018, U.S. manufacturing has benefited from a policy renaissance aimed at countering global competition, particularly from China, and building supply chain resilience post-COVID. The CHIPS and Science Act (2022) authorizes $280 billion to boost semiconductor research and domestic production, with over $500 billion in private-sector investments announced by July 2025, creating jobs in fabs and related ecosystems. The IRA (2022) and BIL (2021) further support clean energy and infrastructure, offering tax credits, grants, and loans for SMEs in renewables and advanced manufacturing. For instance, the Advanced Energy Manufacturing and Recycling Grants Program provides funding specifically for small and mid-sized firms to retool for green technologies.
Reshoring has accelerated, with 244,000 jobs added in 2024 alone from reshoring and foreign direct investment (FDI), driven by sectors like semiconductors, industrial equipment, and medical devices. SMEs should leverage programs like the NIST Manufacturing Extension Partnership (MEP) for technical assistance in adopting these policies, focusing on supply chain diversification to mitigate risks from geopolitical tensions and inflation.
Innovations: Embracing Digital and Sustainable Technologies
Innovation remains key to SME growth, but the focus has shifted to digital transformation and sustainability since 2018. Manufacturers are investing in AI, automation, and the Industrial Internet of Things (IIoT) to enhance productivity and reduce costs. For example, 3D printing and robotics allow SMEs to prototype rapidly and customize products, enabling agile responses to market demands. Deloitte's 2025 outlook highlights targeted digital investments to bridge the skills gap and spur innovation, with manufacturers prioritizing data foundations for predictive maintenance and supply chain optimization.
Sustainability innovations, such as circular manufacturing and low-carbon processes, are increasingly vital, driven by IRA incentives. SMEs can collaborate with larger firms in supply chains or industry clusters to access these technologies, as McKinsey suggests, fostering networks for shared R&D and scaling. A practical step: Adopt AI-driven tools for energy efficiency, which could cut operational costs by 10-20% while meeting regulatory demands.
Talent: Addressing the Skills Gap and Building a Future Workforce
The talent crisis I highlighted pre-2018 has intensified, with a projected need for 3.8 million additional manufacturing workers by 2033—up to 1.9 million potentially unfilled due to retirements and skills mismatches. Labor market tightness persists, with workforce issues topping concerns in 2024 surveys. Challenges include attracting young talent to "dirty" jobs, competition from tech sectors, and training for advanced roles in AI and automation.
Strategies for SMEs include investing in apprenticeships and upskilling programs, reducing time-to-proficiency through targeted training—potentially accelerating productivity by months. Partnerships with community colleges and initiatives like the Manufacturing Institute's programs can help. Emphasize flexible work, competitive wages, and career pathways to retain talent; only 29% of businesses expect talent availability to improve by 2030, underscoring the need for proactive strategies.
Promising Industry Sectors: Where SMEs Can Thrive
SMEs should target high-growth sectors aligned with reshoring and policy support. Here's a comparison of key areas based on recent trends:
These sectors offer SMEs entry via niche specialization, with overall manufacturing set to expand in 2025 after contraction periods.
Challenges and Strategies: Navigating Uncertainty
Despite optimism, SMEs face inflation, recession fears, and global competition. Strategies include diversifying markets, as I originally advocated, and building resilient operations through AI-optimized supply chains. Collaborate with larger firms for stability, and monitor economic indicators like the 9.7% GDP contribution from manufacturing in Q1 2025.
Conclusion: A Call to Action for SME Growth
The U.S. manufacturing renaissance is underway, with SMEs at the forefront—driving 43.5% of GDP and post-COVID entrepreneurship surges. By embracing innovations, investing in talent, and targeting sectors like semiconductors and renewables, small and mid-sized manufacturers can not only survive but thrive. As Collins urged, growth is imperative; now, with policy tailwinds, it's achievable. Let's renovate America's economic foundation anew.