Advanced Technologies Initiative Manufacturing & Innovation
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Advanced Technologies Initiative Manufacturing & Innovation ii | © 2015. For information, contact Deloitte Touche Tohmatsu Limited. | Advanced Technologies Initiative: Manufacturing & Innovation Deloitte and Council on Competitiveness Table of contents Contents Introduction | 2 Section one: Importance of advanced industries and assessing America’s competitive standing | 7 Section two: Innovation - The ecosystem approach | 19 Section three: Most promising advanced manufacturing technologies - A deep dive look | 37 Section four: Opportunities and challenges faced by US businesses | 53 Summary and conclusions | 67 Endnotes | 71 Authors | 81 Deloitte and Council on Competitiveness Advanced Technologies Initiative: Manufacturing & Innovation | © 2015. For information, contact Deloitte Touche Tohmatsu Limited. | 1 Introduction Background Research description Call to action Nations have long striven to advance to the next A key component of Deloitte Touche Tohmatsu Limited Though the United States remains a global technology technology frontier and raise their economic well-being. (Deloitte) and the Council on Competitiveness’s leader, retaining its innovation leadership has become a In today’s highly dynamic environment, advanced (Council) multi-year Manufacturing Competitiveness paramount, long-term concern. While it still ranks first technologies have become even more essential in Initiative, this study emanates from a year-long effort in total absolute R&D spending, its R&D intensity (R&D improving economic competitiveness and national to understand and identify current and future trends as a percent of Gross Domestic Product (GDP)) has been prosperity. As a result, many nations, including the in the United States and global scientific research and largely stagnant, with smaller economies like South United States (US), have invested heavily in establishing development (R&D). To this end, Deloitte and the Korea eclipsing the United States in this category.* In national innovation ecosystems which connect people, Council interviewed nearly three dozen chief technology addition, R&D spending by the US federal government resources, policies and organizations to collectively officers (CTOs), chief research officers (CROs), chief has not kept pace with US GDP growth.** translate new ideas via advanced technologies into executive officers (CEOs), and company presidents commercialized products and services. from various manufacturing sectors, as well as nearly a This relative lack of government funding for R&D dozen directors of US national laboratories and research may place constraints on basic and applied research A new global competitive environment has emerged facilities. In addition to identifying and exploring that could threaten America’s long-term economic in which America’s technology and innovation challenges facing US manufacturing and national labs, prosperity. Thus, the United States requires a long- leadership faces fresh and persistent challenges. Thus, the initiative was designed to help identify the most term strategy that, when aligned with short-term it is imperative to analyze America’s relative position promising advanced technologies in development within priorities, can foster the innovation ecosystem and help within the global innovation environment, and identify the United States. The interviewed executives and lab encourage the flow of required investments, growth in and assess the myriad of challenges that threaten its directors were also asked about technologies considered innovation capacity, the development of scientific talent, competitive standing. most critical to their company’s competitiveness as and the creation of high-value jobs. well as high-level recommendations for reinvigorating America’s industrial base. * See Section 1 for more details. ** See Section 2 for more details. 2 | © 2015. For information, contact Deloitte Touche Tohmatsu Limited. | Advanced Technologies Initiative: Manufacturing & Innovation Deloitte and Council on Competitiveness Introduction Advanced Technologies Initiative: Report and next steps The Advanced Technologies Initiative provides interviewed, in large, agreed advanced industries, technology system. Of the most prominent challenges important insights on US and global innovation trends, propelled by advanced technologies, play a key role facing both US businesses and national labs, is the issue and highlights the challenges faced by businesses in enhancing economic prosperity through higher of the skills gap - the talent shortage - which garnered in maintaining or improving their technology productivity and employee compensation, and increased the most attention, followed by the competitive threat competitiveness. In addition, Deloitte and the high-tech exports. They noted these advanced industries posed by competitive nations like China. Council have consolidated the interviewees’ thoughts are strongly linked to the entire innovation ecosystem, and perspectives to develop a set of high-priority which also consists of universities, research institutions, Finally, the report outlines key short- and long-term recommendations detailing immediate and long- other supporting industries, and the government. As measures executives identified as critical to revitalizing term critical needs to improve the national innovation well, while noting that businesses are the key sponsors and sustaining the US industrial base, a key driver ecosystem vital to sustaining US competitiveness. The of a majority of the R&D work in an innovation of prosperity and economic strength. Executives study aims to increase attention and discussion on the ecosystem, executives also stressed governments play consistently noted success hinges on the ability of current US science and technology system and pinpoint an equally important role in innovation by devising the public and private sectors to work together and deficits to address its vitality. An ancillary aim is to spur supportive policies, providing tax incentives, and engage in open, honest, ongoing, productive dialogue an ongoing national dialogue among stakeholders on funding basic and applied research. A majority agreed about creating an environment in the United States advanced technologies, industries, and foci of research a nation’s R&D competitiveness rests on the smooth that promotes competitive R&D work and advanced from a systematic, versus siloed, perspective. functioning of its innovation ecosystem, which, in manufacturing. In particular, industry executives turn, is dependent upon various initiatives and factors expressed the need for greater access to R&D work The report captures the voices and opinions of both promoted by both businesses and government. conducted at national labs and better engagement government and industry leaders on US and global mechanisms with government-run research institutions. R&D, as well as innovation, trends. In addition, the The report also highlights how other increasingly study provides an overview of advanced manufacturing competitive nations like China have dramatically Deloitte and the Council see this report as a foundation industries – from market size, and growth potential increased R&D spending to more closely align with for ongoing dialogue with key stakeholders, such as of various emerging technologies, to their overall investments made by developed countries like the industry, government, labor, academia, and national impact – as well as critical success factors that underpin United States. Executives agreed the gap between US labs. The insights and recommendations developed here national innovation ecosystems, and the vital role that innovation capabilities and those of certain emerging can further foster and enable an ecosystem in which both corporations and government play in fostering a nations is rapidly narrowing, and the United States research institutions and industry work together for thriving science and technology system. The executives needs to revamp many aspects of its science and mutual benefit and the betterment of society. Deloitte and Council on Competitiveness Advanced Technologies Initiative: Manufacturing & Innovation | © 2015. For information, contact Deloitte Touche Tohmatsu Limited. | 3 Introduction Highlights from the Advanced Technologies Initiative The linkages between national prosperity and Global R&D trends and America’s relative position Opportunities for US industry advanced technologies, manufacturing and the • Although the United States currently enjoys a leadership • A host of promising long-term global trends will help innovation ecosystem position, the gap in terms of R&D competitiveness is provide opportunities for US companies to spur growth • The US manufacturing industry, increasingly propelled narrowing rapidly as countries, such as China, have been and innovation, including: an expanding middle class by advanced technologies, comprises a large portion of aggressive in attracting and nurturing STEM (Science, and rapid urbanization across Asia, increased global the economy, and drives economic prosperity through Technology, Engineering, and Math) talent, building demand for commercial aircraft, the rapid technological higher levels of productivity, output, high value exports domestic R&D capabilities, and offering attractive R&D advances in the auto industry (e.g., autonomous and higher income jobs than other industries. incentives to foreign companies. In fact, some experts vehicles), increased output in the US chemicals and are projecting China