Bullish on America

Okay, you are a rising young executive at a Fortune 500 manufacturing firm. You have a great idea to boost factory productivity. It could increase earnings by billions of dollars per year for years to come.

But it’s not quite a sure thing. Retooling the factory to try it out would cost a few billion dollars.

What are the chances the board will approve? Heck, what are the chances your bosses will even present this idea?

Right.

Now imagine that you can show your bosses that there is no need to retool or even build an experimental version to test the idea. With mere keystrokes, the “digital twin” of your factory—a perfect virtual replica even down to the physics of every machine, structure, or even person—can model the proposed modifications more accurately than your crew could manage in the physical realm.

As bright a young man as you may be, your idea doesn’t work perfectly the first time. It needs a few modifications, even a second-generation version. Will you be fired because you spent some millions on what is now scrap metal? Nope. There is no scrap metal, and you can try a new version in minutes. Even better, your artificial intelligence (AI) can identify the problems and suggest a fix.

Your project comes in on time and under budget, boosting earnings by even more than you expected because you—and the AI—learned more as you went along.

Okay now multiply this result by, say, half the Fortune 500’s biggest and most important industrial plants. With some 30% of U.S. manufacturers using or building digital twins today, that’s a reasonable estimate of how many will be using digital twins five years from now. Each will be able to identify optimal processes and reduce capital expenditures, even as they upgrade plants at an accelerated pace. Reports so far suggest productivity growth on the order of 40% and increasing over time.

The result: we will see a U.S. manufacturing renaissance far beyond the results predicted by even the most avid protectionists in the Trump administration.

Yet, digital twins are but one—though admittedly one of the most exciting—gifts AI is about to bestow on the American economy. A tsunami of productivity is about to lift American industry, not decades from now, but before this decade ends.

The World Economic Forum’s Light House Factory network, aided by McKinsey & Company, embraces factories that use “Fourth-Industrial-Revolution” technology such as AI/analytics, digital twins, advanced robotics, and the Intelligent Internet of Things, not for pilot projects, but at scale and showing a measurable impact on productivity, resilience, and customer satisfaction.

In 2025, the WEF admitted a dozen new industrial sites to the network. A quick review shows the power of AI.

• GlobalFoundries (Singapore) reported using AI across more than 60 use cases, collectively contributing to a 40% improvement in labor productivity.
• Eaton Electrical Equipment Co., Ltd. (Changzhou, China), with a portfolio of 164,000 distinct products and adding more than 5,000 new custom designs annually, used advanced robotics to boost labor productivity and digital twin solutions to speed responsiveness to customers, reducing lead time by 39%, and increasing revenue by 129%, all without expanding its workforce.
• Tongwei Solar Co., Ltd. (Meishan, China): In the highly competitive solar cell market, Tongwei employed machine learning, genAI-enabled maintenance, and advanced AI algorithms to cut defect rates by 41%, and reduced conversion costs (cost of making a product exclusive of materials) by 37%.
• Haier Washing Electrical Appliances Co., Ltd. (Shanghai, China) used genAI-enabled 3D modelling and deep learning. The site increased production by 37%, improved delivery efficiency by 40%, and cut conversion costs by 33%.
• Lenovo Centro Tecnologico, S.DE R.L. DE C.V. (Monterrey, Mexico) had supply chain challenges managing 2,000 overseas suppliers and 52,000 SKUs across 80+ markets. With help from AI and gen-AI-enabled improvements, the site reduced lead time by 85%, logistics costs by 42%, quality losses by 56%, and boosted productivity by 58%.

More than 40% of the 201 Lighthouse sites are in China, and fewer than 8% are in North America. That may be because U.S. managers do not care very much about the honor, and few apply for the designation. Still, China’s dominance of the list reminds us that we have at least as much to learn from them as they need to learn from us. The decoupling of the two largest economies isn’t good for either.

Nevertheless, AI is coming on strong in U.S. manufacturing.

A survey by Manufacturing Leadership Council (a project of the National Association of Manufacturers NAM) found that more than 70% are already using advanced vision systems. More than 45% are using machine learning and more than 70% expect to be doing so by 2027. Surprisingly to us, more than 40% are already using generative AI. This means in effect that factory managers are depending on large language systems to help them wrestle with problems.

Particularly interesting to us was that although only 20% of member firms were using edge AI, that number is predicted to rise to 45% by 2027. Rising investment in edge AI suggests that AI systems are sufficiently highly valued that managers do not wish to depend on remote infrastructure to aid their factories.

That U.S. companies are responding to the AI opportunity is clear from the explosion of investment in manufacturing capacity from 2021 through today. As displayed in the graph below, however, based on annualized run rates through July of this year, there appears to be a slowdown for 2025, when Trump II took office. How does the tariff gang explain that?

Left to their own devices—which means Washington backing off from subsidizing obsolete technologies, raising tariff barriers to raw materials, and imperiously manipulative capital allocation—American manufacturers are in the world’s best position to benefit from AI’s surge into manufacturing. We have the capital, the market heft, and thanks to our rank upon rank of immigrant engineers, the talent exists to drive “digital transformation” at a breathtaking pace.

Let’s forget trade wars and just get rich.