WASHINGTON – A new report on U.S. advanced manufacturing calls for a national strategy that includes a mix of tax reforms, R&D funding to foster innovation and greater investment in technical education to spur “a sustainable resurgence in advanced manufacturing” in the U.S.
The report by a presidential advisory committee on advanced manufacturing released on Tuesday (July 17) includes a list of 16 recommendations covering innovation, building up the pool of manufacturing workers and their skills along with a series of tax and trade reforms designed to spur investment in advanced manufacturing. It also cited the importance of electronics manufacturing for maintaining U.S. global competitiveness as well as national security.
The panel said its recommendations “are aimed at reinventing manufacturing in a way that ensures U.S. competitiveness, feeds into the nation’s innovation economy and invigorates the domestic manufacturing base.”
MIT President Susan Hockfield and Andrew Liveris, CEO of Dow Chemical, co-chaired the committee that produced the manufacturing report. Industry members included Intel CEO Paul Otellini.
The manufacturing report stressed the importance of a robust electronics manufacturing sector for supporting U.S. national security. Citing the growing number of counterfeit chips found in U.S. weapons, the panel noted that a strong manufacturing sector “ensures the integrity of [military and commercial] goods, especially electronics and other mission critical items.”
Among the manufacturing sectors seen as critical to advancing U.S. competitiveness are industrial robotics, nanomanufacturing and flexible electronics manufacturing. “Technologies for flexible electronics manufacturing will be major differentiators in the next generation of consumer and computing devices,” the report concluded. “Some of these devices are expected to be among the fastest growing product categories over the next decade.”
The tech industry must work more closely with university researchers and community colleges to develop and deploy new manufacturing technologies and to ensure a steady supply of qualified workers to run advanced manufacturing lines, the panel concluded. To that end, it recommended establishing a “National Network of Manufacturing Innovation Institutes” that would assist in moving products from the research stage to production, the risky period of business development frequently referred to as the “valley of death.”
The problem is particularly acute for electronics manufacturers. Rahul Razdan a former executive in charge of strategy at electronics manufacturing giant Flextronics, noted that “it is exceedingly difficult for primary services cultures to shift to a product mode, and that has indeed been the case for EMS companies.”
Another driver, Razdan added, "is the ability for late-stage customization. That is, the later one can commit to manufacturing the more ability there is for efficiency, minimization of market risk and inventory exposure."
Among the proposed tax reforms was a recommendation designed to remove barriers to greater industry-university partnerships for advanced manufacturing. The panel recommended that companies receive a waiver from tax restrictions related to private industry use of tax-payer supported university buildings constructed with tax-exempt bonds.
Closing the so-called skills mismatch between industry and the U.S. workforce also must be addressed through greater emphasis on technical training by the nation’s community colleges. “The future of manufacturing will be radically different from its past,” the report warned. “The status quo curricula, teaching methods and silos must be replaced with a collaborative, innovative, life-long learning culture.”
Funding these manufacturing initiatives remains perhaps the biggest hurdle. A bill aimed at advancing manufacturing R&D and education was introduced last week (July 9) in the House by Rep. Eddie Bernice Johnson (D-Texas), but the breath of congressional support for the initiative remains unclear.
More analysis on the manufacturing report from EMS expert Rahul Razdan:
On the manufacturing report, it is a large high level report, and I think heads in the right direction. However, the high level dynamics seem pretty straightforward...that is:
1. For the US to be competitive in manufacturing, the items manufactured need to have minimal dependence on labor costs. In all the situations, where labor costs are significant, other locals will have a significant cost advantage.
2. To enable the minimal dependence on labor, one needs to add automation. For a highly automated process, the US can be quite competitive because it also has the advantage of a large local market.
3. Another driver in this picture is the ability for late-stage customization. That is, the later one can commit to manufacturing the more ability there is for efficiency, minimization of market risk, and inventory exposure. Example: soda-water.
If one looks at the above dynamics, it would seem that a focus on
1. Research around automation and late stage customization
2. Talent sourcing for the far fewer (but highly paid) people to develop/deploy/maintain these processes
3. Capital Availability to fund the investment for research and plants
My sense is that the report is saying the above, but at a very high level without specifics.
As an aside, with success, the above will drive more manufacturing capacity/capability, but it is not clear to me it will have a meaningful impact on employment. It would seem that services would still be the driver around employment.
Good summary in your comment above.
One thing I am still not clear on is the number 3.
What do you mean by "the later one can commit to manufacturing the more ability there is for efficiency, minimization of market risk, and inventory exposure"?
Do you mean...if a company A -- which is in the business of selling soda --gets involved in manufacturing at later in the process, the company can make the last-minute changes in the soda color, flavor, etc. that may reflect better the new trend and preferences seen in the market?
That may be so, but that doesn't seem to apply well for the electronics products.
But when I come to think of it, Steve Jobs demanded the last minute change on the iPhone screen from plastic to a glass screen... so, even though Apple wasn't directly involved in manufacturing, it had enough clout to force Foxconn to make that change.
@Junko: "Steve Jobs demanded the last minute change on the iPhone screen from plastic to a glass screen... so, even though Apple wasn't directly involved in manufacturing, it had enough clout to force Foxconn to make that change."
Which brings up a related point. Foxconn was doing (and still does) manual assembly. It was a change they *could* make, as it was substituting a part made from one material to a part made from another.
An issue with robotic manufacture will be flexibility: what can the robots put together, and how quickly can they be reconfigured to put together something else?
In the mentioned case, changing a robot line to use a glass part instead of a plastic one would probably not be difficult. Changing it to build a tablet instead of a smartphone might be another matter.
I would like to see more detailed job descriptions of these "qualified workers to run advanced manufacturing lines" that require some sort of new investment in technical education.
George, you mentioned a high level of automation and minimal dependence on labor. No argument there. So, what technical skills exactly do the few (and ever decreasing number of) manufacturing workers need to have to work in such an automated environment?
On the other hand, you mentioned the few but highly paid people needed to "deveop/deploy/maintain these processes." Those sound like engineers, not manufacturing workers.
I don't mean to undervalue what a skilled manufacturing worker does -- far from it. If you tell me we have a shortage of skilled machinists, I understand what that means. If you tell me that in the future, the machinist will be replaced by a machine, I again ask, what sort of skills are required of the worker who watches over the machine?
@Frank: "So, what technical skills exactly do the few (and ever decreasing number of) manufacturing workers need to have to work in such an automated environment?"
I can think of two basic types offhand: programmers writing the code that directs the robotic assembly, and techs to maintains the robotic gear, because things with moving parts break.
Neither of these is necessarily a degreed engineer, but technical training will be required.
The machinist won't be replaced by the machine. Robotics can do machining, once they've been programmed, but you won't program a robot to machine a prototype or make a quick replacement for a broken part you need replaced *now*.
@Maxmin: "But where's the money coming from to invest such endeavor? From the bankrupt government?"
There's an awful lot of money floating around looking for a good place to be invested. The point to initiatives like this isn't to provide the investment: it's to set up conditions where private investment is more likely to happen.
I agree. That's where the added value resides. Actually some of this work is done remotely by Indian technicians in some industries. There is a limit on how much you can outsource in this field though.
I think DMcCunney is correct. Here's a hypothetical to further address Frank's question: If, say, Google decided it wanted to expand U.S.-based design and manufacturer of its wireless home media player, it would certainly need design engineers to generate new versions of the device and manufacturing engineers to oversee plant operations. Presumably there would be some detailed assembly work that would require certain skills. If Google found it could not find workers with these skills, it would be up to Google and others seeking to bring manufacturing back home to either train workers or work with community colleges to quickly adjust their curricula to teach the skills Google needs. All this won't solve our employment problems, but we will begin "making stuff" again, and that alone is worth the effort since knowing how to make something means you learn how to make it better and cheaper. That's how you move from low to medium volumes, which seems to be the sweet spot for U.S. EMS companies.
A lot of that potential investment money is sitting offshore, and we have to find "sticks and carrots" to get companies like Apple to bring some of it back and invest in manufacturing and people. Let's start with wages at Apple Stores.