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Trends shaping 2027 Houston manufacturing – from companies on the front lines

GHMA members and others we’ve interviewed in 2026 communicate several recurring themes that promise to shape 2027. 

• Managing the data center ‘bubble’ — as local suppliers compete against imports

As in other data-center hubs, Texas manufacturers are working overtime to meet crazy demand for materials and components. Even then, Texas’ trade surplus has disappeared as a wave of imported products is offsetting what can’t be made here.

“I would say the data center world is really providing a big lift — especially the downstream suppliers in the data center world — like cooling solution manufacturers, racking component producers, and smaller parts and infrastructure suppliers. The rapid growth of data centers is creating a downstream surge in manufacturing demand.” From Top 3 Trends in Manufacturing Real Estate – Design and Build, Jordan Jenkins, ARCO Design & Build.

“Texas moved from a surplus early in the year to monthly deficits beginning in April, with June's deficit reaching about $1.3 billion. The main driver has been, ironically, the data center and high-tech boom, and the surge in imports of tech-related hardware.” From Balancing the trade deficit is a must for manufacturing. Here's how to do it, Bart Taylor, GHMA. 

Also from the article: “The (trade) deficit isn't just toys and shoes,” Fletcher’s co-author Marc Fasteau says. “The last I checked, we have a $297 billion deficit in advanced technology products. That's the stuff where we're supposed to be ahead,” he says. “That part of the deficit is also growing very rapidly. It was $200 billion when we were writing the book. Now it's $297 billion.”

• The push to diversify into new industry opportunities in South Texas

Data center work continues to drive new business — as companies assess capabilities and raise capital to meet demand or tap new opportunities. 

“I think there was a time when oil and gas was 70 or 80% of our business, but we’ve always been diversified…In the last few years, we’ve expanded to selling to mechanical contractors as we do a great deal more work in data centers, pharmaceuticals, and automotive. Data centers, in particular, are a big driver in our business right now.” Rakesh Agrawal, from AI agents and more: How tech DNA powers Piping Technology & Products.

“We do medical device work, some electronics work. The electrical-connector sector is strong. We’re also involved with data centers. So aerospace, electronic connectors, and data-center cooling systems, those are ones that are really strong for us today,” Cox says. Bill Cox, from How generational leadership and 140 CNCs power Cox Manufacturing.

“Stein… has eyes on the significant electronic ecosystem in Greater Houston. Foxconn’s major facility expansion has been an eye-opener, for one. I also mention SpaceX and the growing aerospace opportunity. “That’s an area we see as a real growth sector. Not just SpaceX, but everyone who wants to be a part of that industry, everybody who wants to sell something to SpaceX. I think the new space race is going to be a big part of the story of the steel industry,” he said. Sam Stein from How shifting demand, supply constraints, and a new tariff regime keep Houston steel buyers guessing. 

“But much like Houston, Allford and his company, ARC Specialties, is keeping one foot planted in the oilfield but the other in a new industry mix that includes nuclear power, additive, defense, data centers, drill-ship automation, and others.” Bart Taylor, from Renaissance Man: Dan Allford and ARC Specialties leads Houston manufacturing out of the oilfield and into the future.

• Houston manufacturing’s ‘true north’ is still the oilfield – and still a source of innovation and expertise

“I’m a chauvinist towards the oilfield. In the oilfield, we’re solving problems that are just immense. For example, the oil that they're finding now is so deep, the pressures and temperatures are so high that we literally don't have the materials and technologies to solve it. So every one of these wells is like a moonshot, where we have to come up with combinations of materials like my overlay systems,” he smiles. Dan Allford from Renaissance Man: Dan Allford and ARC Specialties leads Houston manufacturing out of the oilfield and into the future.

• Uncertain macroeconomic drivers – including tariffs — continue to weigh on business sentiment

“The future is so unpredictable. You know, you could have a crisis that nobody can really predict that can affect the whole economy. And we're seeing that our customers are not willing, in many cases, to make commitments too far out.” Jeff Applegate, from Texas Injection Molding’s rollup reality: ‘a good time for buyers and sellers’.

There's also a correlation today between higher costs and America’s more aggressive trade posture. One example that hits home in Greater Houston is the soaring cost of carbide used in the manufacture of drill bits and other industrial tools.

“To put it into perspective, one of the main powders utilized in the industry used to cost about $85 per kilogram and is now $500 to $600 a kilogram,” I was told. For large manufacturers, utilizing large volumes, it’s a massive increase. I asked if the situation is a result of the tariff-and-trade upheaval. “We believe it is,” was the response. “We think with carbide, it’s very much tied up in this ‘tit for tat’ between the US and China.” From Spike in material prices hits hard for Houston manufacturers, Bart Taylor, GHMA.

• Innovation is rampant in the backoffice

“If you're a manufacturer, one of the things you will struggle with is that either you’re priced out of certain ERP systems that provide a lot of value, or you’re left hanging with systems that just don’t give you a lot, right? It's hard to get a perfect fit with an ERP system,” Menon said. Ashe Menon, from ‘Let’s Make it Here’: Why oilfield icon NOV is rallying in support of Houston manufacturers

“For his part, Agrawal uses a personal "Chief of Staff" agent connected to 22 services — Gmail, Google Analytics, Google Chat, calendars, and others. ‘I kind of think about AI agents as a new productivity primitive. It's like a spreadsheet or a word processor, and I want us to hurry up and learn how to use word processors and spreadsheets so we can all be more productive.’”  Rakesh Agrawal, from AI agents and more: How tech DNA powers Piping Technology & Products.

• The push for a more transparent and interconnected manufacturing ecosystem

OEMs and product manufacturers coming to South Texas still face a somewhat diffuse ecosystem of suppliers.

“But if I’m sourcing a supplier, I’d rather be working with a trusted machine shop that lives in this ecosystem where I can say, ‘let me send you this work.’ And if I have a collection of machine shops, I’m part of the community we live in, that NOV lives in. Can you imagine the amount of time savings I would have if it’s an extension of my own manufacturing when a supplier is on the same network?” Ashe Menon, from ‘Let’s Make it Here’: Why oilfield icon NOV is rallying in support of Houston manufacturers

Bart Taylor is president of the Greater Houston Manufacturers Association. Reach him at [email protected].

6 Reasons to Lean Into Defense Work

By Bart Taylor, GHMA

The DoW push to rebuild the defense industrial base (DIB) hopes to reverse a trend that's left the DIB short of thousands of suppliers.

But things change. And the intentions of a newly rebranded defense establishment to rebuild the defense ecosystem (we wrote about it here) hold promise.

That said, what's different this time? How will DoW's new DIB strategy attract people and companies, and why should small manufacturers lean into defense?

I posed the question to Michael Gilroy, Vice President, Workforce for the Center for Regional Economic Competitiveness (CREC), who built the Defense Manufacturing Community Support Program and the Industry Resilience Program at the Office of the Secretary of Defense before moving to CREC.

Gilroy's optimistic about success. Here's why: (Following is my bulleted summary of the highlights from a very informative conversation.)

• The Threat

There's no confusion today about America's primary foe. “China is the pacing threat, and that isn't a controversial statement anymore,” Gilroy says. “I went to the Naval War College in 1998, and every year they play a war game called ‘Global.’ That year Global was a China scenario, a Taiwan Strait scenario. So this has been going on for 30 years.”

Much has changed — but what hasn't, according to many, is a focus on 2027. Gilroy mentioned the “Davidson Window,” coined after Admiral Philip Davidson told the Senate Armed Services Committee in March 2021 that China could move on Taiwan within six years, a forecast some believe later comments from Chinese President Xi Jinping have affirmed.

True or not, China 2027 is today providing clarity — and motivation for the DoW.

• Speed and leadership change

Gilroy points to two leaders who came up through business rather than government. Emil Michael was Chief Business Officer at Uber before becoming Under Secretary of War for Research and Engineering. Michael Cadenazzi, now Assistant Secretary of War for Industrial Base Policy, spent ten years as a Navy cryptologic warfare officer and then two decades launching small defense companies, selling two of them.

“Both of them measure a program by how fast it delivers and what it has delivered lately,” Gilroy says. “Suppliers should expect to get measured the same way. The man writing industrial base policy has made payroll in this sector.”

• Munitions as a motivator

“We gave the Ukrainians a great deal of our 155 mm artillery ammunition, and then here comes the Iran war, and now we have to replenish,” Gilroy observes. “Replenishment means orders, and munitions orders run down through castings, forgings, energetics, machining and packaging — which is where a lot of Gulf Coast shops already work. That's a demand signal you can plan against.”

It's also the demand that keeps 2027 in front of Pentagon planners.

• Funding. Lots of it.

Gilroy points to the head-spinning change since the administration took office — from deep budget cuts and survival mode to a war-footing posture flush with funding.

“The money didn't disappear, it got repositioned,” he says. “Most of it landed in the One Big Beautiful Bill Act, also called the Reconciliation Bill — about $152 billion for defense, and the Department has said it intends to obligate all of it in a single year. That money becomes real on October 1.”

“On top of that, the FY27 budget request the White House announced in January is $1.5 trillion. Congress won't appropriate all of it, but even a share of that is a lot of money.”

Gilroy doesn't see the pile diminishing, regardless of the midterm elections. “Even if control of the House changes, these programs can't be turned off immediately,” he says, estimating the current flush of defense funding lasting through 2031.

• New entrants tipping over convention

I wrote last time about the push in DoW to add a cadre of so-called “neo-primes” — including Saronic Technologies, whose $3.2 billion “Port Alpha” autonomous shipyard is headed for the Port of Brownsville. Gilroy mentioned the same. “Look at what's going on with companies that have never been in defense before, like Anduril and Saronic. They were nobody three years ago,” he says.

“Anduril went from a clean sheet to first flight of an autonomous fighter drone in 556 days, and that aircraft has since carried weapons. Saronic went from startup to vessels in active operations in about four years,” Gilroy explains. “That's the pace it moves at now. A program written on a twenty-year cycle isn't going to hit it, and that has more to do with how the programs were built than with the companies running them.”

If the plan is to lean on neo-primes to change the procurement culture, it's off to a good start.

• There seem to be more practical entry points for small manufacturers

Navigating Defense is still a challenge, but Gilroy's recommendations are straightforward. If you haven't, join the Defense Industrial Base Consortium. “DIBC is the big funnel,” he says. “It's organized around the critical subsectors — kinetic capabilities, microelectronics, strategic and critical materials, castings and forgings. You might say, ‘look, I don't need this, all I do is castings and forgings.' There's a door there too. Pick the one that fits, so you get notice of what's coming down the pike and you can collaborate with people who look like you.”

“Also, have your members join the National Defense Industrial Association — NDIA. You have a chapter in Houston. Go to those meetings so you can get some kind of advance intelligence. And then every year, go to the Defense Manufacturing Conference, which they usually run in November or December.”

There's more — a lot more. We'll dig deeper into potential routes for small manufacturers and other suppliers from Houston's rich industrial base, at the GHMA Lunch & Learn on DIB expansion at Greater Houston Partnership, Thursday Sept. 24.

REGISTER HERE.

Bart Taylor is president of the Greater Houston Manufacturers Association. Reach him at [email protected].