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
Recent Developments
Jul 18, 2024 - Producer Prices Extend Steady Climb
- Producer prices for machine shops ticked up 1.7% in May compared to a year ago after posting a gain of 6.1% in the previous annual comparison, according to the latest US Bureau of Labor Statistics data. While May’s producer price index was a new high for the industry, the rate of increase has slowed considerably since the third quarter of 2022. Employment by machine shops fell 1.7% in May year over year, while average industry wages rose 2.5% over the same period to $26.67 per hour – a nickel shy of their peak in December, BLS data show.
- In June, the National Association of Manufacturers 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.
- According to newly released Census Bureau figures, US capital expenditures for robotic equipment totaled $12,960 million (not statistically different than 2021) and accounted for 1.1% of total equipment expenditures in 2022. The manufacturing sector was the largest investor, accounting for over half (56.2%) of all robotic equipment expenditures that year. Amid a stubborn labor shortage, machine shops are relying increasingly on automation, including robots, for some tasks, and combining robots with CNC machines to achieve greater productivity. Collaborative robots or “cobots” are becoming increasingly popular in machine shops because they’re well suited for handling repetitive machine-tending tasks formerly performed by humans.
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