17/12/2012: Don't write manufacturing off - part 2

In the previous post I reproduced the summary chart from McKinsey research paper on the future of manufacturing (linked in the post). Here is a more detailed version of the same:

Again, few points worth raising in Ireland's development context: given our openness to trade and limited domestic markets, as well as strong access to global labour markets, we should be prioritizing development that focuses on:

1. Trade intensity (with intensities at around and above 50%)
2. Value intensity (with intensities at around and above 30%)
3. R&D intensity (with intensities at least in double digits)
4. Labor intensity (with intensities at least in double digits)

From the above 4 criteria, equally weighted, our priorities (scores in brackets reflect sum of values across the above 4 criteria), we have:

• Computers and office machinery (155)
• Semiconductors and electronics (132)
• Medical, precision, and optical (123)
• Furniture, jewelry, toys, other (105)
• Other transport equipment (94)
• Textiles, apparel, leather (92)
• Machinery, equipment, appliances (82)
• Chemical (80)
• Motor vehicles and parts (77)
• Electrical Machinery (76)

Interesting view?

17/12/2012: Don't write manufacturing off

Here is an amazing (yep, amazing) report from McKinsey on the future of Manufacturing: http://www.mckinsey.com/insights/mgi/research/productivity_competitiveness_and_growth/the_future_of_manufacturing

And here is a really fascinating eye-opening chart from it:

What are the interesting bits in the above?

1. The US retained its position as number 1 manufacturing source in the world (note - with recent emergence of on-shoring trend for US manufacturing, this is likely to stay)
2. China moved - predictably - quite fast in the league table
3. India's performance has been relatively weaker than that of China - not surprising 
4. Russia - in 2000 only 21st in the world is now 11th
5. Brazil moved from 15th in 2000 to 6th
6. Indonesia moved from 20th in 2000 to 13th
7. Germany dropped from the 2nd in 1980 to the 4th
8. Italy rose from the 6th in 1980 to the 5th
9. France dropped from the 5th to the 8th
10. In 1980 and 1990, EU had 5 countries in the top 10, in 2000 - 4 countries and the same number in 2010 - a rate of relative decline
11. Big loser is Canada, rising from 10th in 1980 to 9th in 2000 and falling to 15th in 2010.

Here is another revealing chart, mapping 5 broad categories of manufacturing sectors based on specific inputs intensities:

Let's give it a thought. Ireland is a location most suited for R&D intensive and labour (skilled) intensive sectors, as we have neither sufficient capital, nor access to cheap energy (sorry, the renewables bugs - these are not cheap and not abundant). We also want to aim for high trade intensity and high value density. Which means priority sectors for us should be:

• Motor vehicles, trailers, parts
• Other transport equipment
• Electrical machinery
• Machinery, equipment, appliances

Tier 2 priorities (mostly driven by imported capital due to their high capital intensities) should be:

• Chemicals
• Computers and office machinery
• Semiconductors and electronics
• Medical, precision, and optical

Interestingly, and rather counter contrary to the perceived effects of the web-based economy, R&D intensive areas of the economy remain manufacturing:

These are just some of the fascinating insights. I will try blogging on the report some more in later posts.