As 2023 comes to a close, the American Products team takes a look back on some of the biggest challenges and trends of the year, as well as what our customers can expect to see in 2024.
2023 Trends
Although American Products had a record year, we saw the telecommunications industry slow significantly for a variety of reasons.
For one, federal interest rates rose to their highest levels in years, which prompted many companies to hold off on any more capital investments. Because telecom projects rely so much on upfront cash-heavy investments, many organizations couldn’t justify the return on investment (ROI) for the projects. This is a significant change from previous years when telecom industries were getting federal funding through federal stimulus programs, including the Rural Digital Opportunity Fund (RDOF).
The second contributing factor was cabinet inventory. Prior to 2023, lead times at enclosure manufacturers, including American Products, were fairly long, often causing telecom organizations to wait weeks and/or months for their enclosures. In response, many organizations placed large orders at once. But when fed rates rose and federal funding ran out, they were left with many, sometimes millions of dollars’ worth, cabinets in inventory. As we near the end of 2023, most companies have reduced their inventory levels significantly.
Lastly, some customers postponed projects where they might be the third or lower provider in the area. They couldn’t rely on the revenue down the road to justify the upfront costs. With new federal telecom funding expected in 2024, many of those organizations are likely to restart these delayed projects then.
The telecom industry was in a lull in 2023, but the energy transition industry was the opposite. Cryptocurrency, renewable energy like solar farms, electric vehicle (EV) popularity and artificial intelligence (AI) all rose significantly in popularity and general use. This prompted a need for more power distribution enclosure solutions to help power them.
At American Products, we were excited to see both lead times and material prices pretty much level out. We did see some longer lead times continue for some power equipment, but the rest returned to normal levels.
2024 Expectations
In 2024, federal funding for telecommunications is expected to become available via the Broadband Equity Access and Deployment (BEAD) Program and Inflation Reduction Act. Both will provide a large sum of federal funds to telecom organizations and energy companies alike. As that funding becomes available, companies will start to build out their shovel-ready projects, i.e., those they planned for in 2023 but put on hold until funding came.
This increase in projects will definitely impact the lead times at enclosure manufacturers. Therefore, it’s ideal for companies to start working with their enclosure OEMs sooner, rather than later, to avoid having to wait too long for cabinets. In preparation of the increase in demand, American Products has made large capital investments in our facility to handle the increased orders in a timely fashion.
We also expect the AI, EV and solar energy sectors to drive more interest in power distribution enclosures. Once again, this will continue driving long lead times as well, especially as a number of OEMs work with both telecom and energy customers.
Finally, we also believe there will continue to be an increase in small cell enclosure orders as cellular providers fill the gaps in their coverage areas with more systems.
Build America, Buy America (BABA)
BABA is a key component of the BEAD Program and Inflation Reduction Act. It requires that the majority of iron, steel, manufactured products and construction materials used in federally funded projects for infrastructure must be produced in the United States. By complying, companies can receive significant tax incentives on their projects.
At American Products, we build every single cabinet and shelter in our lineup in America’s Heartland. Even more so, we source our materials and components as much as possible from other United States manufacturers and suppliers. Therefore, American Products-built enclosures can help telecom and energy organizations meet the BABA requirements and receive those associated incentives.
American Products produces top-quality enclosure solutions to protect network equipment, fiber connections and more. If you’re interested in learning how we can help you have a successful 2024, please contact our enclosure specialists at 417.736.2135.