Balancing Cost-Efficiency with the Need for Domestic Manufacturing

In this Pharmaceutical Executive video interview, Marcel Botha, CEO of 10XBeta, discusses shortcomings in the US' emergency plans for rapid innovation and manufacturing during public health crises, highlighting the need for innovation pipelines, supply chain resilience, and regulatory clarity. He also emphasizes the importance of localized manufacturing, public-private partnerships, and advanced manufacturing techniques like AI and additive manufacturing. Botha notes the success of the Spiro Wave project in reducing ventilator size and the need for better coordination and funding structures. He also advocates for a more agile and collaborative approach to ensure rapid response in future emergencies.

Pharmaceutical Executive: How do you propose the US can effectively balance the need for cost-efficiency with the need to build domestic manufacturing capacity for essential medical devices, especially considering the complexities of modern supply chains?

Marcel Botha: The US initially outsourced manufacturing due to rising labor costs, unionization, and long-term entitlements, which made domestic manufacturing increasingly less viable. However, many companies underestimated the long-term consequences of these policies on US manufacturing competitiveness. Today, as costs in China and other offshore regions rise, we’re faced with an opportunity to rethink our approach and develop a more innovative industrial policy that balances cost-efficiency with domestic capacity.

To achieve this balance, we need targeted incentives to attract manufacturing talent, intellectual capital, and a skilled labor force back to the US manufacturing sector. The solution lies not in replicating low-cost labor models from Asia but in leveraging advanced manufacturing and automation. Tesla has demonstrated that we can create cost-efficient manufacturing ecosystems domestically with innovations like direct metal injection molds—reducing car chassis components from hundreds to one. We need to scale similar innovations across industries.

However, the future isn’t about bringing everything back to the US. A hybrid model works best—blending domestic manufacturing with strategically sourced offshore components. Companies can analyze whether it’s more cost-effective to absorb tariff costs or invest in local automation. For example, using additive manufacturing can reduce human labor costs while maintaining control over supply chains. Automated machining operations allow high-volume output without requiring constant operator supervision, further enhancing efficiency.

Another key element is fostering manufacturing ecosystems, not isolated factories. In New York, for instance, I operate from a 300-acre site where nearby manufacturers provide complementary services like metal bending and powder coating. If my machine is down, I can quickly turn to a competitor-turned-partner for assistance. Building these manufacturing clusters allows cross-referencing of capabilities, enabling faster adaptation to changing supply demands.

Long-term procurement agreements can be structured creatively to improve supply chain resilience. Small companies may struggle with high minimum order quantities (MOQs) from larger suppliers, but by committing to purchase the same volume over 24 months instead of all at once, both parties benefit—ensuring stability without excessive financial strain.

We also need stronger public-private partnerships to establish manufacturing hubs and build ecosystems that can scale local production to levels not seen since Henry Ford’s Model T revolution. This approach already takes root in the automotive, aerospace, and space sectors but hasn’t fully extended to MedTech or other industries.

Finally, we must rethink trade agreements and global supply chain policies. Medical devices rely on computer chips currently sourced from Taiwan, Japan, and China. While the CHIPS Act and other initiatives are bringing semiconductor manufacturing back to the US, cost-benefit thresholds for lower-complexity microcontrollers have not yet been met. Until domestic chip manufacturing reaches scale, balancing cost-efficiency with secure supply chains remains a challenge.

By investing in automation, fostering local manufacturing ecosystems, and adopting a hybrid global sourcing strategy, the US can balance cost-efficiency and domestic capacity—ensuring long-term supply chain resilience for essential medical devices.