CrossDock Exclusive: Willy Shih on Tariffs, Chips, and the Long Road Back to American Manufacturing

Few thinkers have shaped the modern conversation around manufacturing and supply chains as profoundly as Willy Shih. As the Robert and Jane Cizik Professor of Management Practice at Harvard Business School and a longtime expert in industrial strategy, product development, and global supply chains, he has influenced how executives and policymakers think about competitiveness and resilience.

Before joining HBS, Shih spent 28 years in industry at IBM, Digital Equipment Corporation, Silicon Graphics, Eastman Kodak, and Thomson SA, leading manufacturing and product organizations across multiple continents. His 2012 book, Producing Prosperity, helped reignite debate around why advanced manufacturing remains foundational to innovation and economic strength.

In this interview with CrossDock Insights, Shih talks about the latest tariffs, industrial automation, semiconductors, and the broader forces reshaping global manufacturing.

I’ll wind the clock back to 2009, when you wrote that famous paper with Professor Gary Pisano, and later the book Producing Prosperity. One of the most interesting phrases was industrial commons. More than a decade has passed since the book. If you look back at U.S. industrial capabilities, particularly in the wake of the recent volatile global trade environment, how do you see the evolution or erosion of the industrial commons across industries? What have we rebuilt? What is permanently lost? And what is currently at risk, in your opinion?

Since the original article, a lot of offshoring has continued. It has continued under economic pressure, mainly due to the availability of low-cost goods and services from other parts of the world, and continuing open trade until the first Trump administration, when we started to see some pushback.

What happened is we have continued to see offshoring, and we still see offshoring today as companies keep a rein on costs.

A lot of that has been facilitated by tradability, and tradability has been enhanced by relatively low trade barriers and relatively low transportation costs; therefore, the ability to make things far away from where they are consumed.

For example, if you think about making polo shirts, you can put a thousand dozen polo shirts in a typical 40-foot container, and then you say: What does it typically cost to ship a container from South China to the U.S. West Coast? There have been times recently when it’s two to three thousand dollars. It is going up because of fuel surcharges and so on, but on a thousand dozen polo shirts, that is only maybe twenty-five cents per shirt.

Because so many things have been so tradable, it made economic sense to move a lot of production to different parts of the world.

One of the sectors that I think has gotten a lot of attention has been semiconductors. We’ve been first moving packaging, then production, and now more and more design work offshore. And to your point on the industrial commons, as more semiconductor manufacturing moved offshore, we lost a lot of that capability in the U.S. When people finally recognized this, the Biden administration passed the bipartisan CHIPS and Science Act to restore high-end production to the U.S.

You’ll see that much of the focus was on attracting companies like TSMC to Arizona or encouraging Samsung to expand in Texas, because the U.S. no longer had those high-end capabilities, outside of Intel, which has also fallen behind. What this points to is a broader deterioration of capabilities, and that’s true in many other sectors.

Furniture making, for example, moved offshore in a big way starting in the early 2000s. If you wanted to bring it back to the U.S. today, the people who used to make furniture have retired or moved on. We simply don’t have workers with those skills anymore. You see that pattern across many sectors.

There’s also a lot of confusion around reshoring. People say they want to reshore lithium-ion battery manufacturing, but we never made those in the U.S. to begin with. John Goodenough, who pioneered lithium-ion battery technology at the University of Texas, had to go to Sony Chemical in Japan to commercialize it. We never had those capabilities.

In more recent years, people have started to focus on where those strategic capabilities are, the ones that are critical for the U.S., where there are either long-standing shortfalls or fields that moved ahead, and the U.S. never kept up. It’s a mixed picture. The U.S. still does a fair amount of manufacturing, but there are many areas where those capabilities have been lost.