Machine Shops

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 17,300 machine shops in the US process various materials, such as metal, plastic, or composites, to produce custom parts. Companies may specialize in a particular process (such as lathing) or an industry (such as automotive). Most projects are low-volume and require high precision. The industry consists of small- to medium-sized businesses – no large companies dominate.

Dependence on Manufacturing Sector

Demand for goods produced by machine shops is cyclical and highly dependent on the state of the manufacturing industry.

Dependence on Skilled Labor

Operating machine shop equipment requires a blend of technical knowledge and experience.

Industry size & Structure

A typical machine shop operates out of a single location, employs about 15 workers, and generates about $2.3 million annually.

    • The machine shop industry comprises about 17,300 companies that employ 267,000 workers and generate $39.6 billion annually.
    • Customer industries include aerospace, automotive, transportation, consumer electronics, and various equipment manufacturers (farm, medical, recreational).
    • The industry consists of small- to medium-sized businesses - no large companies dominate.
    • Nearly a third (32.2%) of US machine shops are in California, Texas, Ohio, and Michigan.
                            Industry Forecast
                            Machine Shops Industry Growth
                            Source: Vertical IQ and Inforum

                            Recent Developments

                            Oct 18, 2024 - Machine Tool Orders Rise but Lag 2023
                            • Manufacturers’ new orders for machine tools rose to $360.8 million in August, up 22.7% from July but 12.0% behind the August 2023 new-order volume, according to the latest US Manufacturing Technology Orders (USMTO) report from the Association for Manufacturing Technology. August new orders brought the eight-month total for US machine tool orders to $2.86 billion, 11.5% less than the same period last year. The report noted that contract machine shops (aka job shops), the largest cohort of machine tool buyers, increased both the number and value of machines ordered for the first time since March. That’s a sign that production could continue to grow since job shops typically absorb elevated capacity needs from OEMs, according to AMT. The USMTO report is an indicator of future manufacturing activity because it quantifies machining operations’ investments in preparation for new production.
                            • Producer prices for machine shops increased 0.7% in July compared to a year ago after rising 5.7% in the previous July-versus-July annual comparison, according to the latest US Bureau of Labor Statistics data. Employment by the industry declined 2.4% year over year in July, extending a mostly downward trend from its post-pandemic high in June 2023, BLS data show. While machine shops trimmed headcounts amid cooling demand from customers in the manufacturing sector, wages rose 4% YoY in July to $27.05 per hour, BLS data show.
                            • The National Association of Manufacturers has launched a campaign to extend the pro-growth tax policies in the 2017 Tax Cuts and Jobs Act, set to expire at the end of 2025, according to a press release. The campaign seeks to preserve 2017's tax reform to avoid economic damage to the manufacturing sector. Should Congress fail to extend the Act, NAM says manufacturers would face tax increases that would cost jobs and stifle growth and innovation. Notably, small manufacturers organized as pass-through businesses that pay tax at the individual tax rates face increases in their income taxes and a loss of tax reform’s 20% pass-through deduction. Investments in manufacturing growth will be delayed without action to restore immediate R&D expensing, accelerated depreciation for capital equipment purchases, and a pro-growth interest deductibility standard. According to NAM, some 94% of manufacturers believe Congress should act to prevent these tax increases.
                            • Artificial Intelligence is set to increase productivity at machine shops in the same way that robotics has, Modern Machine Shop (MMS) reports. When properly used, AI will help revolutionize the machining industry and bring tools to make machine shops perform better, MMS asserted in a recent article. Specifically, AI will help with tool selection, determining the best milling and turning tools for a particular job, speeding and optimizing CNC programming; and monitoring and tuning the machining process to minimize vibration, according to MMS, adding that these three areas are only the tip of the iceberg of the things that AI can potentially improve in machine shops to streamline processes for greater productivity and profitability.
                            Get A Demo

                            Vertical IQ’s Industry Intelligence Platform

                            See for yourself why over 60,000 users trust Vertical IQ for their industry research and call preparation needs. Our easy-to-digest industry insights save call preparation time and help differentiate you from the competition.

                            Build valuable, lasting relationships by having smarter conversations -
                            check out Vertical IQ today.

                            Request A Demo