It’s Time to Change the Way We Look at the Manufacturing Economy

Flip through the financial media’s coverage of industrial manufacturing in the U.S. and you’re bound to see the same names repeatedly. Headlines about General Motors and Ford. Snippets about Boeing. The occasional piece on Caterpillar or PepsiCo. That’s not surprising, considering these are some of the largest companies in the world by market cap. But are they representative of manufacturing in America in the present day?

In a way, yes. These are still some of the major domestic producers keeping millions employed. But in a growing sense, there’s also a gap. What if we look at companies like Microsoft or Honeywell as manufacturers instead of technology companies, for example? These mega market cap companies are two of the names laying the groundwork for Industry 4.0. Adding them to the manufacturing conversation is a reasonable way to talk about an industry that’s quickly evolving to digital.

Legacy manufacturers vs. new-age companies

Legacy manufacturers have carried the industrial economy for decades. “The Big Three” automakers are a prime example. At one time these producers were responsible for massive portions of the economic market. But they’ve rapidly shrunk in comparison to some of the rising stars in technology. Today, General Motors has a market cap of $52 billion, and Honeywell has a market cap nearly three times the size at $130 billion.

It’s not that new-age companies are replacing legacy manufacturers. It’s that the nature of manufacturing has changed. Technology now weighs more heavily on the state of the sector than the cost of goods produced by it.

Honeywell’s enormous market cap shows its intrinsic value to the manufacturing economy because it creates the technologies necessary for innovation. Its annual revenue is $41.8 billion, while General Motors brings in $147 billion each year. The figures are nearly reversed. Why? Because Honeywell, like other technologies, offers a means to production, where General Motors and other legacy manufacturers focus on the end product. You can’t have one without the other. They’re both part of the modern manufacturing economy, in a symbiotic relationship.

Broadening the focus of manufacturing

General Motors and Honeywell are just two examples of a broad trend. As manufacturing goes digital, the “technology” sector of the economy becomes disrupted. A company may be inherently tech-focused, but that technology may be manufacturing oriented. Companies like IBM, for example, are diverse and broadly technical, but it makes sense to view them as part of the manufacturing economy.

It begs the question: “what is a manufacturing company, really?” Traditionally, it’s been a company that takes raw materials and creates a finished product with them. But it also might be a company that mass produces a product behind a skilled labor force. Depending on the lens you look at manufacturing through, new-age companies and industry-changing technology companies likely deserve a place among the ranks.

Manufacturing isn’t just about taking raw materials and creating something anymore. It’s important to also look at the means of production and the technologies enabling it. Industry 4.0 makes manufacturing technology more important than ever. When valuing the health, stability, growth, and trends of the industrial economy, we need to broaden the scope.

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