November 15, 2011 Innovation in Manufacturing: Driving Growth and Competitiveness Dr. Robert D. Atkinson President Information Technology and Innovation Foundation Presentation at Rockwell Automation Manufacturing Perspectives Chicago, Illinois
November 15, 2011
Innovation in Manufacturing: Driving Growth and Competitiveness
Dr. Robert D. Atkinson President Information Technology and Innovation Foundation
Presentation at Rockwell Automation Manufacturing Perspectives Chicago, Illinois
The Information Technology and Innovation Foundation (ITIF) is a Washington, D.C.-based think tank at the cutting edge of designing innovation policies and exploring how advances in technology will create new opportunities to boost economic growth and improve quality of life. ITIF focuses on:
National economic competitiveness; Innovation processes, policy, and metrics E-transformation (e.g., health, commerce, e-government) IT and economic productivity Science and technology policy Innovation and trade policy
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Today’s Presentation
3
2
Key Trends in IT Evolution and Intersection with Manufacturing
Where Are We in U.S. Manufacturing? 1
Why is IT Driving Manufacturing Innovation?
3
4
Why Innovation is Key to Manufacturing Renewal
5 What Should Washington Do?
6 Why Hasn’t Washington Done More?
Had U.S. manufacturing grown at the same rate as the overall
economy over the past decade, the economy would have as many as 8 million more jobs. Manufacturing jobs pay 9% more than jobs in the overall
economy. Manufacturing accounts for 57% of U.S. exports. A 10%
increase in sales due to exports produces twice as many jobs as a 10% increase in domestic demand.
Manufacturing is a Key Driver of U.S. Economic Growth
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U.S. Manufacturing Job Growth Was the Worst of A Sample of OECD Nations
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
United States
Canada
Australia
Japan
France
Germany
Italy
Netherlands
Sweden
United Kingdom (1)
U.S. Manufacturing Jobs Fell Precipitously in the Last Decade
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0
5000
10000
15000
20000
25000
But Not Principally Because of Productivity
7
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
56 % - 1990s
61 % - 2000s
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Real Manufacturing Value-Added As Share of GDP
Source: Bureau of Economic Analysis
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
1987 88 89 1990 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 2009
Manuf
9
Source: Bureau of Economic Analysis
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Manuf
Nondurables
Real Manufacturing Value-Added As Share of GDP
10
Source: Bureau of Economic Analysis
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Manuf
Durables
Nondurables
Real Manufacturing Value-Added As Share of GDP
11
Source: Bureau of Economic Analysis
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Manuf
Durables
Nondurables
Computers
Real Manufacturing Value-Added As Share of GDP
12
Source: Bureau of Economic Analysis
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Manuf
Durables
Durables - computers
Nondurables
Computers
Real Manufacturing Value-Added As Share of GDP
13
Source: Bureau of Economic Analysis
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Manuf
Manuf -computersDurables
Durables -computersNondurables
Computers
Real Manufacturing Value-Added As Share of GDP
Today’s Presentation
3
2
Key Trends in IT Evolution and Intersection with Manufacturing
Where Are We in U.S. Manufacturing? 1
Why is IT Driving Manufacturing Innovation
14
4
Why Innovation is Key to Manufacturing Renewal
5 What Should Washington Do?
6 Why Hasn’t Washington Done More?
We Are Competing With Developing Nations for Cost-Based Manufacturing
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150
131
111 100
86 86
58 50
27 26 19
4
0
20
40
60
80
100
120
140
1602008 Hourly Compensation Costs in Manufacturing (U.S. = 100)
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Easier to Compete in High-Tech Manufacturing
0
10
20
30
40
50
60
70
80
90
100
Australia Canada Germany Japan Korea United Kingdom United States
Low-technology Medium-low technology Medium-high technology High-technology
Source: Stephen Ezell and Robert Atkinson (2011), International Benchmarking of Countries' Policies and Programs Supporting SME Manufacturers. Washington: DC: Information Technology and Innovation Foundation, September. Data from OECD, “Industry and Services STAN Database: “Value-added shares relative to manufacturing,” http://stats.oecd.org/index.aspx?r=228903
Today’s Presentation
3
2
Key Trends in IT Evolution and Intersection with Manufacturing
Where Are We in U.S. Manufacturing? 1
Why is IT Driving Manufacturing Innovation?
17
4
Why Innovation is Key to Manufacturing Renewal
5 What Should Washington Do?
6 Why Hasn’t Washington Done More?
Transistor Growth in Intel Computer Processor Chips
Because Moore’s Law Has Not Slowed Down
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1) $5.50 2) $55 3) $550 4) $5,500
How much would 5 GBs of storage have cost using 1995 technology?
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1) $5.50 2) $55 3) $550 4) $5,500
5 GBs cost $1.5 billion in 1960.
How much would 5 GBs of storage have cost using 1995 technology?
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ICT Doubling (or Halving) Times Total bits shipped 1.1 years
Microprocessor Cost per Transistor Cycle 1.1 years
Magnetic Data Storage 1.3 years
Dynamic Random Access Memory (RAM) 1.5 years Average Transistor Price 1.6 years
Processor Performance in MIPS 1.8 years
Modem Speeds 1.9 years
Transistors in Intel Microprocessors 2.0 years
Microprocessor Clock Speed 2.7 years
The capacity of the network backbone has increased by 18 million % in the past decade. By 2020, average network speeds
are likely to be 3 million times greater than they were in 1990.
Rapid Growth in Bandwidth Capacity
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But Not All Due to Computing
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Solving a complex linear programming model: 1988: 82 years 2003: 1 minute
An increase in efficiency of 43
million. Of this, a factor of roughly 1,000 was due to increased processor speed, whereas a factor of roughly 43,000 was due to improvements in algorithms.
Source: Ed Lazowski, University of Washington, Computer Science Dept.
Today’s Presentation
3
2
Key Trends in IT Evolution and Intersection with Manufacturing
Where Are We in U.S. Manufacturing? 1
Why is IT Driving Manufacturing Innovation?
24
4
Why Innovation is Key to Manufacturing Renewal
5 What Should Washington Do?
6 Why Hasn’t Washington Done More?
U.S. Manufacturing Has Lagged Behind in Using IT
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.00
.02
.04
.06
.08
.10
.12
.14Ratio of Industry IT Spending to Value Added, 2009
But Manufacturing is About Atoms and Bits A part is information.
What its characteristics are
is information.
Where it is information.
What its condition is information.
New IT Capabilities are Enabling Smart Manufacturing • Smart sensing and
instrumentation • Faster, more reliable networks
• IT-enabled micro-controllers
• Design and visualization
software
• High performance modeling and simulation programs
• Machine vision
A Shift to the Cloud
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In 2011 44% of manufacturing companies were either implementing or evaluating cloud deployments; and 22% already have implemented. (Source: IDC)
Near Infinite Internet Addresses
IPV6 can provide multiple IP addresses to every grain of sand on the planet
Today’s Presentation
3
2
Key Trends in IT Evolution and Intersection with Manufacturing
Where Are We in U.S. Manufacturing? 1
Why is IT Driving Manufacturing Innovation
30
4
Why Innovation is Key to Manufacturing Renewal
5 What Should Washington Do?
6 Why Hasn’t Washington Done More?
Get the 4 T’s Right
Flickr: marzzelo
Flickr: Alan Miles NYC Flickr: Nedral
Tech Talent
Trade Tax
Today’s Presentation
3
2
Key Trends in IT Evolution and Intersection with Manufacturing
Where Are We in U.S. Manufacturing? 1
Why is IT Driving Manufacturing Innovation
32
4
Why Innovation is Key to Manufacturing Renewal
5 What Should Washington Do?
6 Why Hasn’t Washington Done More?
Economists Don’t “Get Manufacturing”
“America’s role is to feed a global economy that’s increasingly based on knowledge and services rather than on making stuff.” (Larry Summers)
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Economists Don’t “Get Manufacturing”
“Any economist can tell you that this decline (in manufacturing) is not necessarily a cause for concern…We have become an ideas economy.” (Kevin Hassett, American Enterprise Institute)
“The notion that nations compete is incorrect… countries are not to any important degree in competition with each other.” (Paul Krugman)
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Nor Competitiveness
“Potato chips, computer chips, what’s the difference.” (Bush I economic advisor, Michael Boskin)
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Nor Competitiveness
Robert Atkinson [email protected]
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Blog: www.innovationpolicy.org
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Website: www.itif.org
Twitter: @robatkinsonitif
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