Embed Size (px)
DESCRIPTION
Economic Development Manufacturing Maryland
Citation preview
McKinsey Global Institute
MEDA 2014 Fall Conference October 2014
Advancing manufacturing in Maryland: What matters
1
Maryland’s manufacturing base is diverse–but relatively small compared to the rest of the US
SOURCE: US Census; Brookings Institution; McKinsey Global Institute analysis
8.2
12.4
4.0
5.8
Share of
employment
Share of
GDP
MD US
Manufacturing in the US
versus in Maryland
Percent
692.0
-14.4
Ongoing recovery in
the US vs. Maryland
Thousands of jobs in
manufacturing sector
Salisbury
High tech
Aerospace
Electrical goods
Appliances
Baltimore
Diversified mfg
Computers and
electronic
products
Cumberland
Resource-intensive
Furniture
Apparel
Wood products
Hagerstown
Resource-intensive
Leather goods
Textile mills
Beverages
Washington DC
Diversified mfg
Biotech and life
sciences
Computers and
electronic
products
Major manufacturing clusters in the state
2
Maryland’s employment gains are not in traditional manufacturing industries
SOURCE: US Cluster Mapping Project, Institute for Strategy and Competitiveness, HBS; McKinsey Global Institute analysis
0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
-0.8 -0.7 -0.6 -0.5 -0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4
Change in employment since 1995 Percent
Share of US employment Percent
IT services
Insurance
Logistics
Publishing
Electrical equipment
Biopharmaceuticals
Apparel
Fabricated metals
Furniture
Paper products
Chemical products
Automotive
Upstream metals
Plastics
Construction products
Food processing
Aerospace
Capital goods
Communication equipment and services
Hospitality
Finance
Education
Business services
Employment size in MD
3
Manufacturing
matters—but not
just for jobs
4
Manufacturing matters—but as a driver of competitiveness
SOURCE: McKinsey Global Institute analysis of various US state, federal and European data sources
Direct economic contributions
Productivity gains are
passed on to
consumers as lower
prices
Technology innovation
results in spillover
effects
Provides solutions
to societal
challenges such as
reducing energy and
resource consumption
Indirect contributions
Exports 70% 61%
R&D spending 77% 67%
Productivity growth 37% 30%
90%
N/A
24%
Value added 16% 12% 6%
Employment 14% 8% 4%
Value-added growth 20% 12%
Employment growth -24% -22%
6%
-16%
5
0
5
10
15
20
25
30
35
40
0 5,000 10,000 15,000 20,000 25,000 30,000
Manufacturing employment % of total employment
GDP per capita 1990 PPP-adjusted dollars
United States
United Kingdom
Taiwan
South Korea
Mexico
Japan
India
Germany
Canada
Brazil
Employment follows inverted U-shape as an economy prospers
SOURCE: McKinsey Global Institute analysis
6
Local and regional
demand matters
7
US manufacturing employment trends
SOURCE: US Bureau of Labor Statistics; McKinsey Global Institute analysis
US manufacturing employment
Million
12
11
15
13
9
14
16
17
10
18
20
19
2014
Sept
2010 2000 1990 1980
January
-1.5
-0.5 -5.8
+0.7
8
-3
-2
-1
0
1
2
3
4
5
6
7
Productivity
Real value added
2010 05 2000 95 90 85 1980
US manufacturing value added and productivity growth
5-year moving average of annual growth, 1980–2010
Demand growth did not match productivity in the last decade
SOURCE: US Bureau of Economic Analysis; US Bureau of Labor Statistics; McKinsey Global Institute analysis
9
Four demand-driven industries are driving recent US job growth
SOURCE: US Bureau of Labor Statistics; McKinsey Global Institute analysis
Gross and net job gains in US manufacturing in the recovery
Thousand jobs, Jan 2010 to Sep 2014
2638
96102
4552
54156
204
239
693
Net
gains
Other Electr-
onics
Printing,
textiles
Gross
gains
853
Other Rubber
and
plastics
Food,
bever-
age
Primary
metals
Mach-
inery
Fabri-
cated
metals
Autos,
other
transport
35% of 2010 employment
80% of new jobs since 2010
10
105
100
95
90
85
80
75
70
65
60
55
50
0
14
51
58
63
68
73
80
12 11 10 13 09 08 07 06 05 04 03 02 01 00 99 1998
Diverse industries with very different employment trajectories
SOURCE: US Bureau of Labor Statistics; McKinsey Global Institute analysis
Manufacturing employment by industry group in the United States, 1998–2013
Index: 100 = January 1998
Energy-/resource-
intensive commodities
Labor-intensive
tradables
Global technologies
Manufacturing
overall
Global innovation
for local markets
Regional processing
11
Suppliers matter–
not just large firms
12
Net exports, 2012
Nominal $ billion
-34
151
-246
-45
-195
-276
Total
1
-23
306
-27
-69
Health, education,
and public services
Services
Knowledge-intensive
manufacturing
Capital-intensive
manufacturing
Labor-intensive
manufacturing
Primary resources -321
7
98
-104
-499
280
425
-645 -133 207
Advanced economies run a large trade surplus in knowledge-intensive manufacturing but the United States is an exception
SOURCE: IHS Global Insight; McKinsey Global Institute analysis
13
The US trade deficit in knowledge-intensive manufacturing has grown since the mid-1990s
Net exports, 1980–2012
$ billion, real (2005)
-150
-200
-250
-300
0
-100
150
-50
100
50
2000
Chemicals, including pharmaceuticals
Medical, precision, and optical
Non-automotive transport equipment
2012 10 05 95 90 85 1980
All knowledge-intensive manufacturing
Motor vehicles, trailers, and parts
Semiconductors and electronics
Computers and office machinery
Machinery, equipment, and appliances
Electrical machinery
-0.2 -0.6 -0.1 -0.7 Overall trade balance
as a share of GDP -1.3 -2.0 -2.0
SOURCE: IHS Global Insight; McKinsey Global Institute analysis
14
What’s coming
next matters
15
Innovation used to be (and still is) dominated by large firms
SOURCE: Bureau of Economic Analysis; US Department of Commerce; NSF Science Resource Statistics, 2009;
McKinsey Global Institute analysis
All other
16
Govern-
ment 10
Multinationals
74
Aggregate US R&D spend in manufacturing
100% = approximately $300 billion
Larger capital requirements for
manufacturing R&D than for
software or Internet innovation
Longer cycle times in hardware
Limited access to advanced
technology platforms
Low VC activity in hardware vs.
software and Internet solutions
Small manufacturers embedded
in supply chains of large firms
Disadvantages for small firms
in manufacturing innovation
But new technologies
disrupt the status quo
16
Disruptive technologies can transform manufacturing
SOURCE: McKinsey Global Institute
Smarter, cheaper
robots
More flexibility in
labor vs.
automation
Less scope for
labor arbitrage
Internet of Things
New source of
value—from
“intelligence”
Importance of
software, services,
solutions
Additive
manufacturing
Faster to
prototype,
customize, go to
market
Shorter innovation
cycles
Advanced materials
Opportunity to
optimize design to
value
Ability to customize
performance and
products
17
Transformative impact of technology in manufacturing
Change in economies of
scale—variety of scale options
New source of value from
information-driven intelligence
Proliferation of product
variants, faster response
times, efficiency, and tailoring
BOTTOM LINE:
Democratization of innovation—
not just large firms any more
18
A new perspective on manufacturing: Next-shoring
Proximity to demand
Proximity to innovation
SOURCE: McKinsey Global Institute
Long-term
competitiveness
Healthy supplier
ecosystem
Local and
regional demand
Technology and
innovation
19
Five examples to revitalize manufacturing ecosystems
SOURCE: “5 things the U.S. could do to revitalize manufacturing”, WSJ, June 6 2014; McKinsey Global Institute
Productivity and Innovation Credit provides tax credits or payouts
for investments in IP, automation and IT, R&D, workforce training
Follow Singapore’s lead
Link up SMEs with large firms and education providers to support
workforce development, especially where firms don’t have scale
Model Germany’s business links
Help firms attract FDI, esp. from emerging economies looking to
invest but that need help navigating the manufacturing landscape
Tap new investors from China
Support direct exports through online platforms, aggregation, and
assistance with supply logistics, customs and market rules, etc.
Consider the eBay and Alibaba model
Create “technology access centers” to allow access to advanced
technology platforms for R&D, prototyping and even basic learning
Adopt Canada’s technology approach
ILLUSTRATIVE
20
@mckinsey_mgi
Download these and our other
reports at
www.mckinsey.com/mgi
An economy that works: Job
creation and America's future
(June 2011)
Disruptive technologies: Advances
that will transform life, business,
and the global economy
(May 2013)
Manufacturing the future: The next
era of global growth and innovation
(November 2012)
Next-shoring: A CEO’s guide
(January 2014)
