Reindustrialization
October 5, 2025
For decades, globalization and offshoring led advanced economies to cede heavy manufacturing to low-cost regions. But driven by geopoltical risk, supply chain resiliance and sustainability initiatives, national industrial policy has come full circle. The US and Europe are rebuilding factories, re-training workforces, and rediscovering the importance of making things again. In the US, the Infrastructure Investment and Jobs Act (IIJA), Inflation Reduction Act (IRA), and CHIPS Act each provided direct funding and tax incentives for public and private manufacturing construction which have led to a boom in manufacturing construction (see chart below).
Some of the reasons reindustrialization has gained ground in recent years include:
Resilience & strategic sovereignty: Reducing dependence on distant, fragile supply chains protects against geopolitical shocks.
High-value job creation and spillovers: Manufacturing anchors higher R&D, local supply networks, and skills ecosystems.
Scale economies & innovation feedback loops: As manufacturing clusters rebuild, productivity accelerates via learning curves, backward linkages, and clustering effects.
Sustainability minded: A new wave of factories is being designed with clean energy, waste recycling, and circular inputs in mind, beneficial both environmentally and financially.
Financial leverage & incentive margins: State subsidies, tax credits, and co-investment models can tip returns for early movers.
Some of the industries and companies poised to benefit from this still nascent trend include: semiconductuctors and fabs as nations vie for chip sovereignty and AI dominance; advanced automation and robotics companies that support modern manufacturing; and regions specializing in upstream inputs (like rare earths and advanced metals). On the other hand, companies still focusing on offshoring and/or legacy distributed supply chains and those still utilizing low-tech manufacturing processes will likely suffer.
For investors, the opportunity lies with the companies taking advantage of the fundamental shift in how goods are produced, particularly by leveraging benefits being offered by governments to foster homegrown growth and secure innovation. Of course there may be short-term pain due to the capital intensity and time required to build factories, fiding and training skilled workers, facing higher fixed and variable costs, and managing potential retalliation from other countries through tariffs and/or trade barriers. Since we at Somar aren’t macro investors, we’ll continue looking at each company one-by-one and gauge how effectively or not it is managing this seizmic shift in production.
-Pedro Ramos