Boeing and Intel symbolise America’s manufacturing decline

Pennsylvania is a critical swing state in the imminent US presidential election. Contributing 19 votes to the national electoral college, the state was narrowly won by Donald Trump by a mere 0.72 per cent in 2016, and by Joe Biden with a similarly slender margin of 1.17 per cent four years later.
The state is squarely in the rust belt, with prosperity historically from steel manufacturing, coal and iron ore mining. Philadelphia alone at one point contributed 30 per cent of the US total manufacturing output, from its production of heavy machinery including ship building and railroad locomotives. Andrew Carnegie, an entrepreneur and industrial magnate, renamed Pittsburgh the “steel city” in the late 19th century.
In 1973, American steelworkers became among the highest paid blue-collar workers worldwide, with a six-year peace deal agreed between employers and the United Steelworkers union. Within a decade, substantial numbers had been laid off. The US steel industry faltered as competitors in Japan, South Korea and Brazil had substantially lower production costs. Then worldwide demand slowed and the industry also began switching from the primary production method dominated by the Pennsylvania steel mills, to secondary “mini-mills” using recycled scrap steel and more automated production. Today, some 35 per cent of steel worldwide is recycled.
Demand for steel in the US stagnated compared with the glory days of the 1950s and 60s, as factory and skyscraper construction slowed, car manufacturing moved to lighter materials, and investment in new railways, bridges and freeways largely stalled. The stock price of the leading US steel producer, Nucor, has dropped steadily so far this year, about 27 per cent down from its previous high, reflecting the general bearish investor sentiment to the US steel market.
Trump is promising a nostalgic return to the economic dominance of the US, by raising import tariffs and stimulating domestic production. But it is challenging to rebuild a labour market in the Rust Belt for steel production, which has been disrupted by automation. Meanwhile, from high tech California, Kamala Harris offers the Rust Belt renewal via unproven alternatives based on a green industrial policy.
Steel production is not the only strategic sector in the US under pressure.
Boeing is a critical player in the US aviation, space and defence industries. Its new chief executive, Kelly Ortberg, appointed just two months ago, faces innumerable challenges.
He needs to re-establish the manufacturing quality of both the 737 and 787 lines to the satisfaction of the regulator; increase the production levels of both of these lines to that promised to customers (including Ryanair) who hold substantial back-orders; overcome jamming rudder controls on some in-service 737s; obtain certification for the new long range 777X model despite recent cracks in its engine mountings; re-energise the certification of both the 737 Max-7 and Max-10 models; complete the reabsorption of Spirit Aerosystems (spun out of Boeing in 2005), and restore confidence in the hugely expensive Starliner space capsule after it embarrassingly stranded two astronauts in space.
But the highest priority of all is to resolve an ongoing labour strike. At the time of writing, the Boeing machinists union has just broken off mediation talks with management, with 33,000 machinists on strike since September 13th.
Meanwhile, the saga at Intel has become another high-stakes business thriller. Once the dominant semiconductor player worldwide, it has stumbled despite the explosive growth in cell phone chips from two decades ago and now the recent AI revolution. Its chief executive, Pat Gelsinger, faces a Wall Street that is heavily sceptical about the prospects of Intel’s leadership position being re-established; a resulting stock price down 56 per cent since the start of this year; weak demand for its new AI chip; slow returns from heavy investments in R&D and retooled manufacturing, and now potential labour disputes as it seeks to reduce its headcount by 15 per cent.
Nevertheless, Intel is one of only four companies worldwide, and the only American company, actually manufacturing leading-edge chips. Most technology companies, including Apple and Nvidia, contract the manufacturing of their chip designs to outside fabrication plants. If China were to disrupt semiconductor supply chains from Taiwan or even from South Korea, the US high technology sector would become critically exposed.
Thus, Intel is now an actor on the geopolitical stage, and strategically the US cannot risk Intel’s failure. Somehow US semiconductor manufacturing has to return to commercial competitiveness, and multiple rounds of huge public subsidies are speculated.
The next US president will have to nurture its strategic industries to compete in the economic cold war with China. Innovation is urgently necessary to restore manufacturing leadership and market authority, led by workforce pride in high quality and environmentally sound products.
Generative AI increasingly appears an entertaining sideshow, a new emperor but so far with little material economic impact. Whether the American electorate choose Trump’s politics of reminiscence or Harris’s politics of renaissance, simply giving subsidies and imposing protections either to recreate jobs as things used to be decades ago, or to merely replicate modern skills already pervasive in lower cost jurisdictions, are unlikely to be economically sustainable.