1

Introduction

During the second half of the 20th century, the United States became the world technology leader. Science-based research and development (R&D) and mass production of goods led to unprecedented economic prosperity as well as national security during the Cold War.¹ In the decades following, the United States implemented a “linear pipeline” strategy in which the government generally funded earlier-stage research and left technology adoption and its production to industry. Today, the United States now faces a major strategic and economic competitor—China—that has adopted a different strategy built around world manufacturing dominance and has integrated its economic and national security strategies accordingly.

Manufacturing is central to the economic well-being of the United States. A National Academies’ evaluation found that value chains in the U.S. economy that rely on manufactured goods, as either a part of or as a necessary means (such as with software), for delivery of their major economic contribution, account for 25 percent of U.S. employment, more than 40 percent of U.S. gross domestic product (GDP), and almost 80 percent of U.S. R&D spending.² The COVID-19 pandemic and the Russia-Ukraine War have underscored the deep problems of weak manufacturing supply chains and resiliency in U.S. manufacturing.

Despite manufacturing’s importance to the United States, it must be viewed as a system in decline. During the 2000–2010 period, approximately 66,000 factories were

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¹See, for example, S. Shivakumar and J. Heng, 2025, “The United States Cannot Win the Twenty-First Century Innovation Race with a Twentieth-Century Playbook,” CSIS, July 30, https://www.csis.org/analysis/united-states-cannot-win-twenty-first-century-innovation-race-twentieth-century-playbook.

²National Academy of Engineering, 2015, Making Value for America: Embracing the Future of Manufacturing Technology and Work, National Academies Press, p. 15, https://nap.nationalacademies.org/read/19483/chapter/4#15.

closed,³ manufacturing employment fell by nearly one-third, from 17.3 million to 11.5 million in direct employment; by 2025 it had only recovered to 12.7 million.⁴ The employment decline was due predominantly to production competition with Asia, particularly with China. This shift has caused significant social disruption.⁵ Manufacturing was once a pathway to the middle class for those without college degrees, but that path has been significantly curtailed, producing a corresponding rise in economic inequality.⁶

China passed the United States as the world leader in manufacturing output in 2011, and its lead has been growing ever since. China currently has some 35 percent of gross world manufacturing production and the United States some 12 percent, $297 billion in 2024, an over 60 percent rise since 2020.⁷ The nations have literally been trading places. The U.S. trade deficit in goods has been sharply rising and reached a record $1.2 trillion in 2025 with its largest deficit with China ($295 billion). That deficit was not simply in commodity goods; the United States ran a major deficit in advanced technology goods (e.g., aircraft, semiconductors, communications, robots).⁸

THE U.S. MANUFACTURING CHALLENGE

The last 15 years have witnessed the rise of the techno-economic state with competitor nations, principally in East Asia and led by China, practicing systematic industrial policy, linking the economic power of the state with industry to pursue integrated technological advances and production leadership for a host of critical technologies. The United States has also pursued industrial policy approaches through its Department of Defense (DoD) policies in areas such as aerospace and computing, and in recent years the United States has embarked on a series of nondefense industrial strategies for electric vehicles, for development of Covid-19 vaccines through Operation Warp Speed, through the CHIPS Act (P.L. 117-167) for semiconductors, and in pursuit of rare earth and other minerals.

The United States led the production paradigm of mass production in the second half of the 19th and early 20th centuries. However, it missed the quality manufacturing paradigm led by Japan in the 1970s and 1980s. In recent years, it has fallen behind on

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³R.D. Atkinson, 2018, “Why Foreign Competition Not Productivity Is More to Blame for Job Losses in U.S. Manufacturing,” Information Technology and Innovation Foundation, February 26. https://itif.org/publications/2018/02/26/why-foreign-competition-not-productivity-more-blame-job-losses-us.

⁴U.S. Bureau of Labor Statistics, “All Employees, Manufacturing, 1940–2025, https://fred.stlouisfed.org/series/MANEMP.

⁵D.H. Autor, D. Dorn, and G.H. Hanson, 2016, “The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade,” NBER Working Paper 21906, January, National Bureau of Economic Research, https://www.nber.org/papers/w21906.

⁶A. Sherman, D. Trisi, and J. Cureton, 2024, “A Guide to Statistics on Historical Trends in Income Inequality,” December 11, Center on Budget and Policy Priorities, Figure 1, https://www.cbpp.org/research/poverty-and-inequality/a-guide-to-statistics-on-historical-trends-in-income-inequality.

⁷U.S. Census Bureau and U.S. Bureau of Economic Analysis, 2025, “U.S. International Trade in Goods and Services, June 5, 2025,” Exhibit 15, https://www.bea.gov/sites/default/files/2025-08/trad0625_0.pdf.

⁸U.S. Census Bureau and U.S. Bureau of Economic Analysis, 2025, “U.S. International Trade in Goods and Services, June 5, 2025,” Exhibit 15, https://www.bea.gov/sites/default/files/2025-08/trad0625_0.pdf.

the latest paradigm, which can be called advanced manufacturing,⁹ built around new manufacturing technologies from robotics to digital production, biofabrication, additive manufacturing, and advanced materials. For example, although robotics can lead to major productivity gains, the United States is now rated 10th in the world in industrial robots per 10,000 manufacturing workers, just ahead of Slovenia, and far behind leaders such as Korea, China, and Germany.

The underlying U.S. manufacturing problems can be grouped into five broad areas: missing national manufacturing strategy, financing and cost burdens, limited manufacturing innovation, low productivity, and weak workforce education and development. Each of these is briefly discussed next.

Missing National Manufacturing Strategy

Nearly all of the leading competitor nations to the United States have detailed national manufacturing strategies that are aligned with their national economic strategies. These strategies integrate industry efforts with government support at critical gaps, including research, development, and implementation of new manufacturing technologies; financing the scale-up of these manufacturing technologies; regional adoption of these technologies; and workforce development to support them. The United States has various programs along some of these lines, including the Manufacturing USA program. Overall, however, a coordinated strategy for alignment and adoption of advanced manufacturing across agencies and organizations that is integrated with industry is missing. Each year without such a strategy U.S. production leadership erodes.

Financing and Cost Burdens

Financial Model of “Core Competency” and “Asset Light” Has Led to Manufacturing Disinvestment

While the United States has strong capital finance depth, the dominant U.S. financial model has favored firms that pursue “core competency” and “asset-light” strategies, which focus on leveraging unique strengths (e.g., specialized production technologies, advanced R&D), and reducing ownership of capital assets such as factories and machinery. This model has led companies to divest manufacturing assets, through both outsourcing and offshoring. Although U.S. industrial firms were once vertically integrated, a dis-integrated approach has long been favored, leading to manufacturing disinvestment and extensive use of contract manufacturers located in the United States and increasingly abroad.

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⁹See, for example, D. Adler and W. Bonvillian, 2023, “America’s Advanced Manufacturing Problem,” American Affairs Journal, Fall, https://americanaffairsjournal.org/2023/08/americas-advanced-manufacturing-problem-and-how-to-fix-it/; A. Kumar, 2025, “Why the US Needs Robots to Rebuild,” CSIS (blog), July 1. https://www.csis.org/blogs/strategic-technologies-blog/why-united-states-needs-robots-rebuild.

It is also difficult for manufacturing firms to get financing if they are or may be competing with lower-cost Chinese goods. In addition, venture capital (VC) financing, which has funded U.S. start-up and entrepreneurial firms, is overwhelmingly focused on software, biotechnology, and services. Capital needs and rates of return in “hard tech” areas with high-cost fixed assets such as manufacturing tend to be long term—10 or more years—which does not fit the VC timetable of high rates of return within 5 years. Manufacturing’s long development cycle, approach to risk, and its need for large-scale funding simply do not fit VC. This means that start-up firms that need to manufacture have trouble scaling up into production and are often driven to offshore production. In sum, traditional and venture financing models do not fit the capital needs for advanced manufacturing.

Gap in Governmental Financing of Manufacturing Scale-Up

China spends some $500 billion annually in scale-up financing, and through various mechanisms, about 4.6 percent of its GDP.¹⁰ In contrast, the United States spends less than 1 percent of GDP, and little of that is specifically focused, unlike in China, on manufacturing itself. In addition, China offers “guidance funds” that are private sector–led with government matching funding that provides equity investment, not just lending, in industrial firms producing critical technologies.¹¹ These guidance funds are authorized for $1.6 trillion and have invested some $1 trillion. Recently, they have been extended to artificial intelligence (AI) areas. The United States has no governmental financing programs comparable to these funds.

Trade Policy Is Not Coordinated with Manufacturing and Innovation Policy

Tariffs can be an important tool for promoting domestic manufacturing, one that was applied extensively through the 19th and early 20th centuries to support nascent U.S. manufacturing industries. A massive new system of tariffs instituted in 2025 to restore U.S. manufacturing, however, has had a secondary consequence of imposing significant new costs on U.S. manufacturing firms, which have come to rely in significant part on foreign components, supplies, and resources. Uncertainty about tariff levels, which have been changing, has also limited industrial planning, leading to declines in hiring and capital investment at numerous firms. Although foreign direct investment in production by foreign firms in the United States has been growing, it has not offset the issues for U.S. manufacturers. Although a standard rule of tariff policies in East Asian nations has been not to tax components you need to manufacture priority technologies,

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¹⁰G. DiPippo, I. Mazzocco, S. Kennedy, and M. Goodman, 2022, Red Ink: Estimating Chinese Industrial Policy Spending in Comparative Perspective, CSIS, May 23, https://www.csis.org/analysis/red-ink-estimating-chinese-industrial-policy-spending-comparative-perspective/; C. Boullenois, A. Kratz, and D.H. Rosen, 2025, Far From Normal, An Augmented Assessment of China’s State Support, Rhodium Group, March 17, https://rhg.com/research/far-from-normal-an-augmented-assessment-of-chinas-state-support/.

¹¹D. Adler, 2019, “Financing Advanced Manufacturing; Why VCs Aren’t the Answer,” American Affairs 3(2): Summer, https://americanaffairsjournal.org/2019/05/financing-advanced-manufacturing-why-vcs-arent-the-answer/.

U.S. tariff policy to date has not recognized this approach and has been imposing uniform national tariffs. Nor has the United States recognized, as East Asian tariff policies long have, the importance of longer-term certainty about tariff tax levels for industrial planning, which is inherently long term.

Key technology innovation policies have also been counteracted by tariff policies; for example, in quantum sensing and computing, U.S. firms must source key components from abroad with new taxes affecting supply chain access, security, and price competitiveness. In general, there has been a lack of strategy coordination between technology, innovation, and manufacturing policy and trade policy disrupting efforts toward re-industrialization.

Regulatory Costs

Regulatory costs are difficult to estimate, with industry estimates consistently higher than periodic federal Office of Management and Budget estimates because of different methodologies used. However, a National Association of Manufacturers study¹² found these costs to be quite substantial for all manufacturing firms ($29,100 per manufacturing worker) and higher (as much as $50,100 per manufacturing worker) for smaller firms with fewer employees across whom to allocate compliance costs. According to the study, for all firms, economic regulations carry 36 percent of regulatory costs, while environmental regulations carry 59 percent and Occupational Safety and Health Administration regulations carry 3 percent.¹³ Furthermore, because the time horizon for achieving a satisfactory return on capital has shortened, long regulatory and permitting cycles in the United States impose a growing disincentive to invest in new manufacturing capacity or to upgrade existing facilities. Of course, there are worker and other benefits offsetting the costs. Overall, however, regulatory costs, including the time-consuming and costly regulatory requirements to develop and equip new factory sites and improvements, remain a significant manufacturing entry and scale-up issue.

Limited Manufacturing R&D and Technology Development

Disconnect Between the U.S. Innovation System and Manufacturing

With the offshoring of manufacturing, a deep divide has evolved between the U.S. innovation system and its manufacturing system. They are no longer well connected. For example, although the United States invented and led early technology advances for solar, lithium-ion batteries, electric vehicles, leading-edge semiconductors, and nuclear power, it now lags significantly behind foreign competitors in manufacturing these technologies. The United States continues to “innovate here” but increasingly

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¹²N.V. Crain and W.M. Crain, 2023, The Cost of Federal Regulation to the U.S. Economy, Manufacturing and Small Business, National Association of Manufacturers, https://www.nam.org/wp-content/uploads/2023/10/Regulations-Exec-Summary.pdf.

¹³This sentence was changed after release of the report to correct the percentages for accuracy.

the results are “produced there,” and since production is deeply tied to innovation, it increasingly risks the problem of “producing there and innovating there.” For example, in the global steel industry, which has undergone major consolidation, virtually all production innovations in the past half century, which have transformed the sector, have come from foreign nations, not the United States. Overall, U.S. leadership in innovative technologies has been eroding at a significant pace. The United States is now engaged in a race to the next generation of technologies such as quantum and AI applications, and China’s manufacturing lead, depth, and emphasis on applications may translate into leadership in those technologies as well. Furthermore, innovation leadership tends to create standard-setting leadership, which often translates into controlling the interfaces and commercial success of new technologies.

Government Funding of Manufacturing R&D and Innovation Is Missing

Historically, the federal government has operated under the Vannevar Bush postwar “pipeline” model in which the government role was to fund basic research but not applied research. This pipeline model largely severed the R&D system at federal agencies from applied technology development and U.S. production needs. Therefore, U.S. R&D agencies have not had a significant applied R&D program for new manufacturing technologies. A notable exception has been DoD, which has long funded extensive applied R&D. However, its R&D spending typically supports new technologies for its platforms; it has generally not invested in overall manufacturing technologies or processes, leaving that task to industry.

DoD pursues critical technology advances if its defense mission requires, and manufacturing itself, meaning U.S. competitive applied R&D and technology development for broader industry production efficiency, has not been one. Aside from its R&D, DoD has another manufacturing investment tool, its procurement budget (including particular niche programs such as DoD ManTech, the Industrial Base Analysis and Sustainment program, and the Defense Production Act Investments).¹⁴ It uses procurement to secure production of products and technologies it requires, but technology development in overall industry-wide manufacturing advances has generally been left to industry. Once its platform programs and requirements are set, DoD focuses more on low-bid acquisition of specific products to meet shorter-term needs, preferring productization that is lower risk and rapid, not longer term. This in effect precludes its support for higher-risk and -reward advanced manufacturing processes and technologies. In the past, DoD was able to operate on the assumption that the United States was the dominant world manufacturing power, with more than adequate capacity to meet both current DoD requirements as well as to scale up to meet new ones. It can no longer make that assumption. It now faces major erosion in its industrial base which is affecting its ability to adopt new defense technologies, such as drones and AI. Despite this challenge, like the civilian R&D agencies, DoD’s R&D and procurement organizations have yet to build significant applied research portfolios in manufacturing technologies.

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¹⁴This sentence was changed after release of the report to correct the name of the program.

Overall, government funding and support for R&D and innovation in manufacturing technologies have been missing. There is a federal R&D manufacturing innovation gap.

Industry Manufacturing R&D and Innovation Are Limited

The model of large corporate R&D labs tied to major manufacturers, which the United States led until the 1980s, has faded and not been replaced. The demise of Bell Labs starting in 1984 was symptomatic. Manufacturing firm labs that remain have increasingly shifted to work on shorter-term incremental advances with immediate payoffs, not longer-term innovative breakthroughs. In principle, firms would welcome the opportunity to pursue bold, long-term breakthroughs. In practice, however, accelerated return-on-capital demands, international competitive pressure, government incentives and regulatory challenges, and financial structures geared toward short-term performance constrain them to incrementalism, even when the strategic need for transformative innovation is clear. University labs could provide a partial substitute through collaborative R&D with industry, but university R&D is primarily focused on basic research because government funding has been largely for basic research. Less than 5 percent of Industry R&D goes to universities.

Although corporate R&D has been a significantly growing part of overall U.S. R&D, leading information technology, software, and pharmaceutical firms dominate this R&D, and dwarf, for example, research on machining or production processes. In general, manufacturing technologies and processes have not been a priority for corporate R&D, a problem exacerbated by the use of the federal R&D tax credit to incentivize industry research instead of going to industry R&D for manufacturing technologies and processes. The current R&D tax credit is inconsistent in its application to manufacturing, so companies cannot plan on its availability; the U.S. tax credit rates are not globally competitive (see Chapter 4); and the credit is not allowed for manufacturing process developments and innovations. These problems with the R&D tax credit have created a further disincentive for companies in pursuing advanced manufacturing innovation.

Stagnating and Declining Manufacturing Productivity

Manufacturing advances through creating new production paradigms. These consist of new bundles of related technologies and process advances that drive significant productivity gains. In short, production innovation largely drives manufacturing productivity. The lack of investment to scale and implement new advanced manufacturing technologies is a primary cause of the declining and stagnating rate of U.S. manufacturing productivity for the past 15 years compared to increases for key competitor nations.

Small and Medium-Sized Manufacturers Have Failed to Adopt Advanced Manufacturing Technologies

The dominant cause of low U.S. manufacturing productivity numbers comes from the lack of adoption by small and medium-sized manufacturers (SMMs) with under

500 employees of advanced manufacturing technologies that could boost their productivity. These firms tend to be thinly capitalized, they face strong international competition in most sectors, they conduct little or no R&D, and they lack the resources and know-how to move on new manufacturing technology advances. Yet, close to half of U.S. manufacturing output is from SMMs. Small firms in general account for some 58 percent of U.S. employment and nearly 40 percent of value added, yet they are only 47 percent as productive as larger U.S. firms. SMMs share these problems. This gap between productivity levels of SMMs and larger firms creates a major drag on the overall efficiency, productivity, and economic impact of U.S. manufacturing.

Weak Workforce Education System

For advanced manufacturing technologies to be adopted, a workforce must be ready to implement them. Yet the United States does not have an effective workforce education system for its manufacturing technical workforce.¹⁵ The list of problem points listed next is discussed in more detail in Chapter 6 and only briefly summarized here. There has been a long history of both government and industry disinvestment in workforce education, and efforts by both have been misaligned and under-resourced.¹⁶ The Department of Education’s programs focus on college, not workforce training, and are disconnected from the U.S. Department of Labor programs. In turn, the Department of Labor programs are focused on the unemployed and underemployed with limited focus on upskilling incumbent workers or skills for advanced manufacturing. Although community colleges teach general manufacturing skills, they have only limited focus on advanced manufacturing education. This is in part because most SMMs are not ready to adopt advanced manufacturing technologies, so there is limited demand. These schools are also underfunded. Leadership at most colleges and universities, which could help in developing advanced manufacturing curricula via government policies and incentives, tends to hold the view that career technical education is the job of high schools and community colleges—not theirs.

ORIGINS AND DEVELOPMENT OF MANUFACTURING INSTITUTES

In an effort to address U.S. manufacturing challenges, the 2012 Advanced Manufacturing Partnership report issued by a President-appointed committee of industry and university leaders recommended forming manufacturing institutes:

• as “long-term” collaboration mechanisms between industry, universities, and government (federal, state, and local)
• that would further advanced manufacturing technology R&D and implementation,

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¹⁵W.B. Bonvillian and S. Sarma, 2-21, Workforce Education, A New Roadmap, MIT Press, pp. 43–59.

¹⁶H. Holzer, 2025, “Workforce Development in the US: Recent Trends and Evidence,” IZA DP No. 18061, August, IZA Institute of Labor Economics, https://docs.iza.org/dp18061.pdf.

• including work with regional innovation systems, SMMs, and workforce education.¹⁷

In turn, the Revitalize American Manufacturing and Innovation (RAMI) Act of 2014, directed at the Department of Commerce, authorized creation of a network of advanced manufacturing institutes that would serve eight purposes:

• “(A) improve the competitiveness of United States manufacturing and to increase production of goods manufactured predominately within the United States;
• “(B) to stimulate United States leadership in advanced manufacturing research, innovation, and technology;
• “(C) to facilitate the transition of innovative technologies into scalable, cost-effective, and high-performing manufacturing capabilities;
• “(D) to facilitate access by manufacturing enterprises to capital-intensive infrastructure, including high-performing electronics and computing, and the supply chains that enable these technologies;
• “(E) to accelerate the development of an advanced manufacturing workforce;
• “(F) to facilitate peer exchange of and the documentation of best practices in addressing advanced manufacturing challenges;
• “(G) to leverage non-Federal sources of support to promote a stable and sustainable business model without the need for long-term Federal funding; and
• “(H) to create and preserve jobs.”^18,19

The RAMI Act reauthorization in 2019 expanded the scope of potential technology focus areas for institutes and set established required and permissible activities for institutes,²⁰ The law also authorized the Secretaries of Commerce and Energy and other agency heads to extend the terms of the institutes through merit-based reviews based on a series of factors. DoD participation in Manufacturing USA was separately

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¹⁷Advanced Manufacturing Partnership, 2012, Report to the President on Capturing Domestic Competitive Advantage in Advanced Manufacturing, July 21–23, President’s Council of Advisors on Science and Technology, Executive Office of the President, https://www1.eere.energy.gov/manufacturing/pdfs/pcast_july2012.pdf.
A detailed discussion of the history of the Manufacturing USA program is in W.B. Bonvillian and P.L. Singer, 2018, “Advanced Manufacturing – The New American Innovation Policy” (MIT Press). See also D. Hart, S. Ezell, and R. Atkinson, 2012, “Why America Needs a National Network for Manufacturing Innovation,” Information Technology & Innovation Foundation, December, https://itif.org/publications/2012/12/11/why-america-needs-national-network-manufacturing-innovation/.

¹⁸U.S. Congress, House, 2014, Revitalize American Manufacturing and Innovation Act of 2014 (“RAMI Act”), H.R. 2996, 113th Cong., 2nd Sess., https://www.congress.gov/bill/113th-congress/house-bill/2996.

¹⁹This sentence was changed after release of the report to accurately reflect the authorizing legislation

²⁰P.L. 116-92. See J.F. Sargent, Jr., 2021, Manufacturing USA: Advanced Manufacturing Institutes and Network, R46703, March 3, Congressional Research Service, https://www.congress.gov/crs_external_products/R/PDF/R46703/R46703.3.pdf, report updated, September 2022, https://www.congress.gov/crs_external_products/R/PDF/R46703/R46703.7.pdf.

addressed through DoD statute.²¹ Meanwhile, DoD had also instituted this practice of extending institute funding terms after a full evaluation. The act marked continued bipartisan support for the program.²²

The institutes were designed to help meet the U.S. manufacturing challenges identified in the first part of this chapter, including developing roadmaps and strategies for advanced manufacturing technologies, support for manufacturing innovation, and improved manufacturing workforce education. Although they are not scale-up financing mechanisms, they can assist in the scale-up and transition of new manufacturing technologies. They were by no means the only effort needed to rebuild U.S. manufacturing capability but they were a significant new tool.

The first pilot institute, now known as America Makes (additive manufacturing) was established in 2012. The Manufacturing USA program was established in statute in 2014 as the National Network for Manufacturing Innovation and was renamed in statute as Manufacturing USA in 2019. The institutes filled a critical and otherwise unfilled gap in U.S. manufacturing by bringing together the key actors that must be involved in adopting advanced manufacturing at scale—industry, universities, and government (including federal, state, and local governments). Their goal was to increase U.S. manufacturing competitiveness and promote a robust and sustainable national manufacturing R&D infrastructure. By the mid-2020s, the network had grown to include 17 institutes (see Table 1-1).

The institutes, as their names suggest, support technology development in a range of technology sectors, from additive manufacturing to biomanufacturing, production cybersecurity, photonics, digital production, flexible electronics, and robotics. They were designed to be industry-led; although organized as nonprofits, they generally reflect strong industry as well as university involvement. Although the three mission agencies (Defense, Energy, and Commerce Departments) have selected the technology focus areas of the institutes their missions support, these have generally reflected industry advanced manufacturing technology concerns. Alignment with agency missions has also helped lead to continued agency involvement with the institutes.

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²¹This sentence was changed after release of the report to clarify that DoD’s participation was addressed by a separate statute.

²²For detailed reviews of the Manufacturing USA program, see Government Accountability Office, 2025, Advanced Manufacturing: Aligning Strategies and Improving Agency Reviews Could Help Institutes Achieve National Goals GAO-25-107369, and earlier GAO reports (December 2021, May 2019, April 2017), the periodic Manufacturing USA reports noted above, and reports of the National Academies of Sciences, Engineering, and Medicine, including
NASEM, 2017, Securing Advanced Manufacturing in the United States: The Role of Manufacturing USA: Proceedings of a Workshop, National Academies Press;
NASEM, 2019, Strategic Long-Term Participation by DoD in Its Manufacturing USA Institutes, National Academies Press;
NASEM, 2021, DoD Engagement with Its Manufacturing Innovation Institutes: Phase 2 Study Interim Report, National Academies Press; and
NASEM, 2021, DoD Engagement with Its Manufacturing Innovation Institutes: Phase 2 Study Final Report, National Academies Press.

TABLE 1-1 Current 17 Institutes in the Manufacturing USA Program

^a This sentence was changed after release of the report to clarify that DoD no longer sponsors AFFOA.

NOTE: DoD = Department of Defense; DOE = Department of Energy; DOC = Department of Commerce.

ASSESSMENT OF THE MANUFACTURING INSTITUTES

Under the RAMI Act, the National Institute of Standards and Technology (NIST) has undertaken a periodic strategic planning process in cooperation with the institutes and other involved agencies. The many accomplishments of the institutes (noted at various points in the next chapters) have been well summarized in the annual reports issued by the Advanced Manufacturing National Program Office at NIST.²³ Accomplishments include significant manufacturing technology advances, innovation in workforce education, and support of regional development. The institutes all have large industry membership and have enabled significant industry involvement, through technology strategies and roadmapping, technology development projects, regional engagement efforts, and workforce education.

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²³See, for example, Z. Brunner, 2024, Manufacturing USA 2023 Annual Report, National Institute of Standards and Technology, https://doi.org/10.6028/NIST.AMS.600-14.

Progress of the Institute Model as Implemented

Given the limited scale of the resources provided, the institutes have been tackling a very important set of roles. These are summarized briefly in a few key categories:

• Technology: Using technology roadmaps, institutes have engaged their members to prioritize and pursue technology development as a core mission and have had success in implementing a number of new manufacturing advances, as set out in NIST’s annual reports.
• Standards development: Although institutes vary, many have succeeded in supporting critical standards development—either directly or in partnership with standards organizations—for their technology area.
• Connecting smaller tech firms with larger potential customer firms: Although institutes vary, many have succeeded in creating connections between smaller firms developing new technologies that are working in the institute’s technology areas and larger firms that are potential customers. This has benefited technology validation and adoption.
• Commons for information sharing: Institutes have attracted members interested in their particular technology areas and have provided a unique forum for sharing information on technology advances. Each institute has created its own commons capability where member firms can share technology understanding, can collaborate on development, and, in particular, where small innovator firms can connect with larger firms.
• Workforce education: Although resources are limited, a number of institutes have been successful in developing creative workforce programs and have developed a series of best practices in this area. There has also been networking across some institutes in implementing effective workforce programs.

Each institute has an expansive list of achievements in these and other areas, including accomplishments largely not being addressed by any other program.²⁴

Challenges in the Institute Model as Implemented

Despite success in some areas, the manufacturing institute model has also faced a series of challenges, including:

• Limited interagency coordination exists. Each of the three departments supporting the 17 Manufacturing USA institutes that have been formed (Commerce through NIST, DoD through Office of the Secretary of Defense Manufacturing Technology [DoD ManTech] Program, and Energy) has somewhat different policies and focus areas for their institutes based on

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²⁴This sentence was changed after release of the report for clarity.

• departmental missions. However, the institutes face overlapping challenges and needs that require collaboration to meet national needs. While AMNPO provides high-level coordination, there is presently no interagency body that sets a detailed interagency strategy to guide institute program coordination and investment within a review of national manufacturing priorities.²⁵
• Networking across institutes is limited. Although manufacturing firms typically want integrated packages of technologies, the institutes have worked predominantly within their particular technology areas. Some institutes have collaborated with each other on workforce education and some on regional engagements. However, no mechanism or incentive exists for institutes to develop complementary packages of technologies together.
• Institutes focus the bulk of their funding support on R&D and technology development. Development projects are aimed at Technology Readiness Levels (TRLs) 4–7 and involve groups of collaborating firms as well as universities. Smaller, entrepreneurial firms working on developing a technology are also often involved. However, since SMMs—the “main street” manufacturing firms—tend to do little R&D, they are largely left out. Also, institutes do not reach TRL levels after TRL 7, which creates a gap in technology implementation. This focus also tends to limit investment in workforce development.
• Engagement with SMMs is limited. SMMs that are developing new technologies are often involved in institutes. But what about SMMs that don’t undertake R&D and constitute the great bulk of what could be called Main Street manufacturers? Institutes are membership organizations with members paying for participation at various levels. Hence, SMMs that are not particularly involved in an institute’s manufacturing technology development are unlikely to join an institute. Since these SMMs are not members, institute outreach to SMMs is limited because it does not fit the current membership model. This is not the fault of the institutes, because they have not been given the scale of resources and organizational model to support this task of reaching the Main Street manufacturers at the scale needed. SMMs generally have the lowest productivity rates, lagging well behind larger firms in adopting new technologies, and this means that a key constituency that needs to adopt advanced manufacturing in the United States is generally not reached. The fact that the institutes are primarily technology focused and less regionally focused, as noted in Chapter 5, also affects the level of SMM involvement.
• Efforts by institutes in workforce education, with SMMs, and in regional manufacturing collaboration are allocated very limited resources. These areas have been generally supported in various forms, but technology development has been the institutes’ priority.

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²⁵This bullet was revised after release to clarify the role of the AMNPO.

Limited Funding Has Affected the Institutes’ Mission and Impact

Institutes have had limited overall funding which affects their missions. Institutes were initially funded with $50 million to $70 million for 5-year terms.²⁶ Because technology revolutions require larger resources, and longer time horizons, their ability to tackle their technology areas at scale was limited at the outset. The institutes faced the expectation that they would be independent and sustainable after their 5-year terms, which meant that they would have to be sustained mostly by larger firms that had the resources to do so. Most analysts viewed this approach as a fundamental design flaw since most large firms would not be willing to support the SMM outreach, regional engagements, and workforce programs that institutes were expected to carry out but would not directly benefit them.

In recognition of funding challenges, the agencies, starting with DoD, moved to extend the terms of their institutes based on a performance evaluation. Buttressed by the RAMI Act reauthorization in 2019, noted previously, DOC likewise implemented this approach. DOE, although delayed for various reasons, has also been moving in this direction. However, only DOC has extended its one institute (NIIMBL) that has come up for a term renewal at the same funding level that it initially received, whereas the other agencies have provided core funding in substantially lower amounts.²⁷ In turn, institutes have had to find other R&D funding projects, largely from their sponsoring agencies, for sustainment, which in turn runs the risk of diverting institutes away from core missions.

The resource problem for institutes deteriorated in 2025. The program overseeing the seven DOE institutes went through a major reorganization and was consolidated into a new organization. The federal funding share for these institutes has not been forthcoming, so they have faced major staffing cuts and program cuts and corresponding declines in membership support. These developments risk turning these institutes into empty shells. DoD’s nine institutes are in a somewhat better situation but received 25 to 30 percent cuts in their federal share although they have been facing new program demands from the agency—they appear to be being asked to do more with less. At DOC, although the Manufacturing Extension Partnership program that reaches small manufacturers has faced elimination and reorganization, the agency Manufacturing USA program staff has not been cut. Both DOE and DoD institute programs are not sizable, so they are “below the account line,” which means they do not receive specific, separate appropriations and thereby are not shielded by the congressional appropriations process. DOC’s single institute has received sufficient funds to keep operating at last year’s level, although its new institute for semiconductors and digital twin technologies was canceled.

In summary, given the importance of their missions, institutes have been under-resourced through lack of a sustained federal support model.

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²⁶E.G. Blevins, 2022, Manufacturing USA: Advanced Manufacturing Institutes and Network, Congressional Research Service, Report R46703, Oct. 3, https://www.congress.gov/crs-product/R46703, details in Table 1 on the initial funding awards for each institute; and GAO, 2025, Advanced Manufacturing: Aligning Strategies and Improving Agency Reviews Could Help Institutes Achieve National Goals, June 2025, GAO-25-107-369, https://www.gao.gov/assets/gao-25-107369.pdf, details in Table 1 and Figure 3 on the total funding for FY2019–FY2023 received by DoD-, DOC-, and DOE- supported institutes.

²⁷Two more DOC institutes were recently authorized, but one has since been canceled.

STUDY STATEMENT OF TASK

The task of this committee, as set out in the statement of task (see Appendix A), is not to evaluate the decade of work under the current program but instead to develop a vision of where the program should move in the 2030–2035 time period. The report is therefore forward-looking, not a program assessment. It briefly highlights the current program including some of the challenges it faces, then moves to detail new features and efforts the program should undertake to help meet the deep manufacturing challenges the nation faces.

STUDY PROCESS AND DATA GATHERING

The committee’s 13 members (see Appendix C) represented academia, industry, and other sectors and had expertise in areas relevant to the statement of task, including transitioning, financing, and commercially scaling advanced manufacturing technologies and products; workforce education policies; involvement in industries heavily reliant on advanced manufacturing R&D; and global competitive dynamics and best practices. Additionally, several members serve on boards of the institutes or are otherwise engaged in and highly knowledgeable about the Manufacturing USA institutes. The study was conducted over the course of approximately 9 months and consisted of a series of committee meetings and public information-gathering sessions. During this time, the committee held 30 public meetings, including several full-day or multiday workshops, roundtables, and a site visit (see Appendix B), speaking with nearly 100 experts across industry, academia, and government covering a wide range of topics to gather information that informed its findings and recommendations. Requested information was forthcoming when available from both government and experts. Focusing on the future vision of the Manufacturing USA program emphasizing the impact of technology development, transition, scale-up, and workforce development efforts, the committee largely relied on and based its recommendations on these interviews as well as themes that emerged from input received from the institutes through a questionnaire and their own expertise.

STRUCTURE OF THE REPORT

The report contains the committee’s findings, conclusions, and recommendations. New National Academies’ policy in effect as of the publishing of this report is that a finding, defined as a summary statement about the evidence presented in the report that is relevant to the statement of task and includes no judgment by the committee, is embedded with the supporting text within the report and has no deliberate callout, formatting, or style emphasis. There are many findings, therefore, embedded within report text. There are also two conclusions, one overarching conclusion, and 26 recommendations specifically called out. The report is divided into eight chapters. Chapter 1 provides background on long-standing and new challenges to U.S. advanced manufacturing and context for the report’s recommendations. Next, in Chapter 2 (addressing Tasks 6 and 7), the committee focuses on benchmarking of leading international advanced

manufacturing programs early in the report because best practices from these analogous programs inform its analysis and recommendations regarding the main topics in the remaining chapters, including technology transfer (Chapter 3, addressing Task 1), interagency and cross-institute engagement (Chapter 4, addressing Task 2, the domestic program benchmarking of Task 6, as well as Tasks 8 and 9), regional economic development (Chapter 5, addressing Tasks 4 and 5a), and workforce education (Chapter 6, addressing Tasks 3 and 5b). The report concludes with A Vision for the Future Manufacturing USA Program in 2030 and 2035 (Chapter 7, addressing Tasks 10a–f) and a complete list of study recommendations (Chapter 8).