There have been a lot of changes in medtech manufacturing in recent years. New substances such as silicone, nanomaterials (carbon nanotubes), graphene (for enhanced strength and lightweight implants), body temperature-responsive shape-memory alloys, absorbable polymers (for tissue engineering), drug delivery hydrogels, biocompatible ceramics and composites, other plastics, and specially engineered polymers with enhanced properties for single-use medical devices have helped define a new class of medical device products.

The need for specialized manufacturing talent has become paramount as commonly used and available materials have become increasingly more complex. But finding trained local workers to make these products is particularly difficult nowadays due to the transfer of U.S. medtech manufacturing to Mexico in the 1990s and to China the following decade. Existing workforce development challenges have been further exacerbated by the COVID-19 pandemic, thus prompting companies to re-examine reshoring options. 

Among the factors contributing to manufacturing’s continuous evolution include reproducible, high-quality, AI-enabled technologies; higher product demand; and cost pressures.

Fortunately, manufacturing 4.0 (a.k.a., Industry 4.0) is making progress in medtech. Investing in smart technology integration, automation, and data-driven decision-making (a nocturnal-functioning manufacturing floor, for example) is becoming standard protocol for profitable production. Known as the 4th Manufacturing Revolution, Industry 4.0 is here to stay. For proof, consider the previous three manufacturing (or Technology) revolutions: The first coincided with the invention of coal and steam engines; the second arose with the dawn of electricity, steel, and chemicals; and the third commenced with the Computer Age. All three revolutions were paradigm shifts for the manufacturing industry and continue to impact the sector. 

Manufacturing 4.0’s claim to fame integrates digital technologies into every facet of the production process. It transforms traditional factories into smart, interconnected, and data-driven systems. While Manufacturing 4.0 is not new (its inception actually began in the early 2010s and first infiltrated medical manufacturing around 2015), it has now become key to staying competitive in the marketplace as medical device production returns to the United States. 

Obviously, the pre-Manufacturing 4.0 protocol of batch manufacturing is generally outdated and too time-consuming for the current ecosystem’s demands. Due to its costs, batch manufacturing was one of the many drivers of offshoring. With frequent checks for quality control (necessary, given the possibility of human error) and hold times where materials or finished goods are potentially stored or transferred before final review, lead times can be long, and the risk of defects often increase. By contrast, Manufacturing 4.0’s customary continuous batching allows materials to be moved in a constant process that significantly shortens production time, thereby getting products to their users faster than ever. 

As will be discussed at the upcoming MPO Costa Rica event, reshoring and nearshoring strategies continue to gain traction to reduce supply chain risks, cut lead times, and improve quality control. When these strategies are combined with Manufacturing 4.0 technologies, they create a powerful proposition for modern production. Investing in Manufacturing 4.0 makes sense because it encourages profitable reshoring or nearshoring with its advanced automation, robotics, IoT (Internet of Things) and data analytics, and AI. These investments give companies the tools to create an “in the region for the region” manufacturing strategy, which helps offset the traditional cost advantages of offshoring. 

Thanks to the lingering aftereffects of the COVID-19 pandemic, the ongoing Russia-Ukraine war, and the uncertainty wrought by the Trump administration’s escalating tariff war, the nearshoring and reshoring trend is stronger than ever. When manufacturing is brought closer to home, supply chains can become more resilient. In doing so, companies can shorten supply chains, mitigate potential risks from global disruptions, and reduce transportation costs. The integration of real-time data, agile production systems, and advanced technologies enabling higher precision and quality control are paramount for medical device manufacturers to be successful in the current environment. Today’s manufacturers must be able to quickly pivot—practically daily—to respond to constantly changing market demands.  

Manufacturing 4.0 has been well-established in Asia for quite some time, having been spurred by lower cost manufacturing and a longstanding reputation for lower-quality products. Facing such challenges, a significant effort was made by some Asian governments to push for modernization and the adoption of better quality manufacturing. Singapore is a prime example of this success. The island city-state currently manufactures about 60% of the world’s microarrays and one-third of the planet’s mass spectrometers. Singapore’s Manufacturing 4.0 success was driven by a focus on both technology and people—a collaborative approach to innovate rapidly and remain competitive—and an emphasis on quality control. Although medtech firms and investors are attracted to Singapore’s success, the country is not alone in embracing the latest manufacturing revolution. In the next three years, Thailand and Malaysia are expected to catch up to Singapore in manufacturing prowess, according to industry data. Other Asian contenders include Indonesia and Vietnam. China is currently not in the running but is expected to eventually catch up to its rivals.

Major OEMs like J&J MedTech (in collaboration with their contract manufacturers) and other strategics have been investing for years in smart manufacturing. It has not been an easy transition for small- and medium-sized companies, however, because the next phase of manufacturing has historically been costly. Manufacturing 4.0’s keys to success are expensive both in tangible—the actual tools/machines themselves—and in intangible ways (workforce training). 

Thankfully, the return on investment is becoming clearer for small and medium size manufacturers. Smart manufacturing’s affordability will eventually help more U.S. CDMOs adopt the technology and ensure they are not excluded from the latest manufacturing revolution. 

The speed at which the medical device industry moves to smart manufacturing remains to be seen. But it may depend on what the next level of manufacturing looks like and the innovations that will define Industry 5.0.

In the meantime, medtech industry professionals can expect to witness solid growth in the number of companies that adopt SMART manufacturing practices and devise nearshoring/reshoring strategies. It is an investment that will bear fruit on many levels.

MORE FROM THESE AUTHORS—Tariff Tango: Why Asia Manufacturing Remains Relevant for the Medtech Industry

Florence Joffroy-Black, CM&AA, is a longtime marketing and M&A expert with significant experience in the medical technology industry, including working for multi-national corporations based in the United States, Germany, and Israel. She currently is CEO at MedWorld Advisors and can be reached at florencejblack@medworldadvisors.com.

Dave Sheppard, CM&AA, is a former medical technology Fortune 500 executive and is now focused on M&A as a managing director at MedWorld Advisors. He can be reached at
davesheppard@medworldadvisors.com.