Ever since the COVID-19 pandemic and Russia’s invasion of Ukraine, supply chain resiliency has become a top priority for every company. Consumer electronics manufacturers are no exception. Companies involved in creating the products and components that are critical to our everyday lives face an urgent need to make their supply chains less vulnerable to events that could interrupt their businesses.

This was the impetus for a major research study commissioned by the Consumer Technology Association and conducted by Kearney. The study explored how U.S. consumer electronics manufacturers could build resiliency by reducing their supply chains’ dependence on China and Taiwan.

These two countries account for nearly 40 percent of the global share of exports in four key consumer technology sectors: computers and peripherals, communications, audio and video, and semiconductors and electronic components. In contrast, the U.S. experiences a trade deficit for most consumer technology products in those sectors, importing more than twice as much as it exports. This is primarily because the U.S. focuses on device design while ceding responsibility for manufacturing and other downstream activities to other countries.

The dominance of China and Taiwan, combined with our heavy reliance on imports, creates significant risks for U.S. companies and governments. Now, many in both government and industry are asking an important question: Is it time to bring most consumer technology manufacturing to the U.S.? Is it even realistic to assume that it can be done successfully?

The answer, according to Kearney’s research, is “no.” It may be conceptually and politically attractive to think about reshoring most or even all of the consumer technology supply chains to the U.S., but it’s simply not practical or economically feasible given the scale and complexity of the required resources and underlying economic production structures. The U.S. lacks many of the critical raw materials and associated processing capacity. Moreover, reshoring production of all technology products now taking place in China and Taiwan for the U.S. market would require a direct investment of well over $500 billion. And, our manufacturing workforce would have to increase by a factor of 10 to meet the expected production output.

The fact is, U.S. tech companies will find it difficult, expensive and time-consuming to replicate the immense production capacity, large and knowledgeable labor force, industrial infrastructure, and relatively low costs that China and Taiwan offer in their collective position as “the world’s manufacturer.”

What’s the alternative? Based on Kearney’s research, a multicountry “team approach” is the best route to greater supply chain resiliency. Kearney advocates using a combination of the U.S. and its treaty allies and trade partners to provide a long-term alternative to China and Taiwan in the global supply chain. Kearney’s assessment reveals that capacity and capabilities exist across these countries to help the U.S. meet growing demand for consumer technology products.

For example, Kearney’s assessment of the semiconductor and electronic component industry found that the U.S., South Korea and Japan have the potential to be leaders. The U.S. scored highly in output and innovation due to expertise across chip design. In contrast, Japan’s strengths are in labor proficiency and facility capacity alongside complex materials and equipment. South Korea excels in output, productivity and facilities, and it has extensive advanced logic and memory fabrication capabilities. Germany and France also perform well, particularly in productivity and in having additional latent capacity. For these reasons, Kearney recommends expanding manufacturing in a combination of the U.S., South Korea, Japan, Germany and France for this sector, using a team approach that maximizes each country’s advantages.

Based on its analysis, Kearney believes the U.S. can significantly wean its dependence on China and Taiwan imports by boosting the combined share of the U.S. and its treaty allies and trading partners—from the current 66 percent to 90 percent by 2033, with the remainder made up by other countries. Significantly greater use of imports from Mexico, Vietnam and, to a lesser extent, India will largely drive this increase. Mexico’s share of total U.S. consumption will need to increase from 12 to 16 percent, Vietnam’s from 6 to 16 percent, and India’s from 0.4 to 5.3 percent. This scenario also includes selective increases in the use of the U.S.’s own capacity, as well as those of other allies such as South Korea, Japan, Germany and the United Kingdom.

This shift will require investments in capabilities at these allies and trade partners to support the U.S.’s growing demand, but that will generate significant economic benefits for them, as well. Overall, rebalancing the supply chain away from China and Taiwan will collectively boost incremental gross value added by an estimated $3.6 trillion cumulatively over the decade while creating north of 18 million direct and indirect jobs by 2033. These benefits will flow disproportionately to Mexico, Vietnam and India, because these geographies would experience the largest increase in their share of fulfilling U.S. consumption.

None of this will happen overnight, of course. It will take time to plan, budget, build, test and ramp up new manufacturing facilities, as well as to attract and train new employees. Furthermore, moving away from China and Taiwan will not reduce costs in the short term. Shifting supply chains will incur costs, but the idea is to focus on long-term supply chain resiliency and investing in a sustainable future.

To read the report for yourself, click here.