73% of Industrial Companies Have a Reindustrialization Strategy — What That Means for R&D Location Decisions
Capgemini’s Research Institute published its third annual reindustrialization report in May 2026, and the headline number is striking: 73% of large industrial organizations have a reindustrialization strategy in place or under development. In 2024, that figure was substantially lower. The shift is structural, not cyclical.
But here is the detail that most commentary on this report has not focused on: reindustrialization is not primarily a manufacturing footprint decision. It is a technology and R&D investment decision. Where production moves follows where R&D and technology development moves. And the factors driving R&D location decisions in 2026 are fundamentally different from what they were in 2020.
What Reindustrialization Actually Means in 2026
The Capgemini data is specific about what is driving the reindustrialization strategies. The primary factors: supply chain resilience, technology access, government incentives, and geopolitical risk reduction. Cost efficiency, which dominated location decisions for the previous three decades, has dropped significantly in relative importance.
The US-Europe dynamic is distinct. In the US, 48% of organizations have invested in reshoring in 2026, compared with 30% in 2025. Federal policies — immediate expensing of domestic R&D, 100% bonus depreciation for capital investments, the BIOSECURE Act, FDA PreCheck for domestic pharmaceutical manufacturing — have created a tangible incentive structure. Non-US organizations (from Europe, Japan, Korea, Taiwan) are also scaling US investments to secure market access.
In Europe, the picture is different. Higher energy prices, labor costs, and fragmented regulation are pushing European organizations toward friendshoring — concentrating in politically stable, allied-nation supply chains rather than pure reshoring to home markets. The share of European organizations pursuing reshoring rose to 42% (from 34% the previous year), while nearshoring declined from 55% to 39%.
New global manufacturing hubs are emerging in this context: India, Vietnam, Mexico, and Canada are receiving increased manufacturing investment from organizations rebalancing away from China-concentrated supply chains without full reshoring to home markets.
The R&D Location Implications
Manufacturing location and R&D location are more tightly coupled than most R&D strategy frameworks acknowledge. The reasons are practical and have become more acute as manufacturing technology becomes more sophisticated.
Process development requires production proximity. The R&D work that translates laboratory discoveries into manufacturable products — process engineering, scale-up, yield optimization, quality system development — requires direct access to production equipment and production data. R&D functions that are geographically separated from manufacturing facilities systematically underperform on this translation work. As manufacturing reshores, the process development R&D that supports it has to follow or accept structural disadvantage.
AI-augmented manufacturing requires embedded AI R&D. The Capgemini report identifies AI, digital twins, automation, robotics, IIoT, and edge computing as the critical technology enablers of reindustrialization — but notes that talent shortages are limiting scale. The AI R&D that optimizes manufacturing processes, builds predictive maintenance systems, and develops the digital twin architectures that modern greenfield factories require is most effective when it is physically co-located with the manufacturing it serves.
This creates a specific problem for organizations whose AI and advanced manufacturing R&D is concentrated in a few global centers of excellence while manufacturing is being redistributed. The center-of-excellence model was appropriate for a phase when AI was being deployed as a centralized capability. It is less appropriate for a phase when AI is embedded in distributed manufacturing processes that require local optimization and iteration.
Technology access is location-specific. Semiconductor fabs, aerospace manufacturing clusters, pharmaceutical manufacturing infrastructure, specialty materials processors — these are not uniformly distributed. The organizations investing in R&D locations close to the manufacturing technology capabilities they need are building access advantages that remote R&D cannot replicate.
The Three R&D Location Patterns Emerging
1. Domestic R&D Investment Following Manufacturing Reshoring
US pharmaceutical companies are relocating both manufacturing and formulation R&D to the US, driven by the BIOSECURE Act and FDA PreCheck incentives. Life sciences manufacturing that was in China or India is moving; the process development and regulatory R&D that supported it is following. The US government’s immediate expensing of domestic R&D makes the economics more attractive.
Similar dynamics are playing out in semiconductor-adjacent manufacturing, automotive components (driven by IRA domestic content requirements), and aerospace (driven by defense supply chain requirements). The R&D that supports these manufacturing sectors is being pulled toward the same domestic locations.
2. R&D Hub Expansion in New Manufacturing Geographies
Organizations expanding manufacturing in India, Vietnam, Mexico, and Canada as China alternatives are also building local R&D capability to support those manufacturing operations. This is typically not full-scale R&D center establishment — it is applied engineering and process development capability that can adapt global technology to local manufacturing conditions, troubleshoot production problems, and develop the process improvements that drive productivity in the local facility.
The talent availability in these locations for this type of work is variable and improving. India in particular has developed a substantial manufacturing engineering talent base that supports R&D-adjacent functions. The challenge is building the connection between this local applied engineering capability and the core R&D function — preventing the local talent from becoming permanently junior and ensuring that their proximity to manufacturing generates knowledge flows back to the central R&D organization.
3. Decoupling of Exploratory R&D from Applied Engineering
The most sophisticated organizations are separating their R&D location strategy by research stage. Exploratory research — basic materials science, fundamental AI research, next-generation platform development — remains concentrated in locations with access to world-class research universities and talent markets. Applied engineering and process development is following manufacturing to new locations.
This decoupling is rational but creates organizational challenges: the translation from exploratory research to applied engineering requires communication and coordination across locations that are further apart and less culturally aligned than the traditional model assumed. Organizations that have implemented this decoupled model without investing in the coordination mechanisms are finding that the geographic distance amplifies the organizational distance between research and development.
What R&D Leaders Need to Decide Now
First: review your R&D geographic footprint against your manufacturing location strategy. This review should be specific: which R&D functions are most tightly coupled to manufacturing, and are those functions co-located with the manufacturing they serve? Where manufacturing is moving (reshoring to US, friendshoring in Europe, expansion in India/Vietnam/Mexico), is R&D following with sufficient proximity for the manufacturing support work to be effective?
Second: assess the IP implications of your location choices. R&D location and IP creation location are linked. The legal frameworks for IP protection, the tax treatment of R&D expenditure, and the export control implications of moving technology between locations all vary by geography. The Deloitte 2026 analysis of tariff impacts is explicit: R&D locations connected with IP management hold the key answers to supply chain strategy. Organizations that have not recently reviewed their R&D location decisions through an IP strategy lens are making location decisions with incomplete information.
Third: identify the government incentive programs your R&D investments qualify for. The US domestic R&D expensing provision, European Competitiveness Framework funding, national innovation programs in key manufacturing countries — these are substantial and underutilized. Industrial organizations that systematically identify which of their R&D investments qualify for public co-funding are funding a meaningful portion of their R&D portfolio with government resources. Those that do not engage with these programs are leaving that funding on the table.
Reindustrialization is a manufacturing trend with R&D strategy implications that most R&D functions have not yet fully internalized. The 73% of organizations that have reindustrialization strategies are realigning their manufacturing. The question for R&D leadership is whether their function’s geographic footprint is aligned with where the manufacturing it serves is going.
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