Patrick W. McGibbon VIEWPOINTS INDUSTRY LEADER OPINION & ANALYSIS Global Manufacturing Scene Filled with Opportunities v T
he optimism among manufacturers about the future is awesome. Friends and business associates have shared anecdotes and reports that point to a promising end
to 2016 and growth in manufacturing on a broader base in 2017 and beyond. That doesn’t mean that manufacturing is blossoming in every country or market across the globe. Some countries like Brazil are dealing with both economic and political challenges which led to a nearly 30% decline in its machine tool market over the past three years and 2016 doesn’t look like the end of that trend. Some industries like oil and gas exploration appear to be improving marginally but at a place where prices would have to rise by 50% before there could be signifi cant justifi cation for additional capital spend- ing. These are the outliers. In general, there is good news about improving conditions in most markets. Take the China issue. China’s economy is growing at about 6.5% this year. Analysts and reports note that the country’s overinvestment in some sectors has created a drag not only on its own economy but global growth as well. China is restruc- turing its economy to address these points therefore creating opportunities. Coastal areas are heavily developed to produce manufactured products for primarily industrial purposes. How- ever, Chinese consumers are clearly a growing force that needs to be harnessed. Just recently, a group of machine tool industry executives toured Chongqing, a city in the interior of China that is about 1000 miles from Beijing, Shanghai or Hong Kong. The activity in that city was phenomenal. The diverse manufacturing sector there has an orientation with motor vehicles and consum- er electronics representing 36% of the manufacturing operations in the city of 30 million people (one in every three laptops in the world is made there). The city and its manufacturing sector are growing and spreading. With the restructuring of China’s econo- my to address consumerism, Chongqing, and other interior cities like it, are poised for explosive growth. Also, while the analysts are correct about the slowdown in China’s manufacturing investment growth, one statistic stands out in a recent Oxford Economics report I read—China accounts for more than 40% of all new investment in durable-goods producing industries. Mexico is another great example. When Mexico and manu- facturing are mentioned together most people think of auto-
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mobile plants and maquiladoras. That may have been the case 10–15 years ago but it isn’t any longer. Mexico’s manufacturing sector accounts for more than a third of its country’s GDP. You can compare that to 10–12% in the United States or 37–43% in China. AMT members who recently participated in an AMT-led trade mission to Mexico reported that they were surprised by how much more sophisticated manufacturing has become in the country over the past 20 years. Today, aerospace parts and medical equipment that are required to meet tough FAA and FDA standards are being made in large quantities in Mexico. Aerospace in Mexico has grown from a few tens of millions of dollars to billions and the medical equipment industry in Mexico is following closely behind. One participant noted that other high- tech industries are seeing signifi cant growth in Mexico.
In any market there are always opportunities.
China and Mexico are not the only countries that have indus- trial segments that are growing. The auto industry is probably the strongest industrial sector globally and the reasons vary from country to country. In the US, the auto industry is working to ad- just to the impact lower fuel prices have had on the demand for mid-size SUVs and trucks. In India, the auto industry continues to grow at double-digit rates based on the demand generated domestically and in nearby export markets eager for the Indian- sized vehicles for their crowded, smaller streets. Globally, the aerospace industry will likely be about the same size in 2016 as it was in 2015 but that doesn’t mean there are not winners and losers at the country level. The EU has benefi tted from growth in aerospace activity in its region due to increased orders for Airbus products. In Brazil, the aerospace industry is one of the brighter spots in manufacturing due to the increase in short-haul routes for regional jets that marry up well with Brazilian products. Economic uneasiness generally results in a pause in capacity ex- pansions and the erratic surges and drops in demand for many industries have increased the reliance of durable manufacturers on contract machining for reserve capacity. The point here is that in any market there are always opportunities.
Vice President, Strategic Analytics AMT - The Association for Manufacturing Technology
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