We’ve been thinking about the manufacturing sector in Australia in the wrong way. The general perception is that it’s in a terminal decline, which will be realised when the last of the big car companies shuts down in a few years’ time. Depending on who you talk to, globalisation and cheaper labour elsewhere or a lack of support from Australian governments (or both) have seen the local manufacturing sector enter a death spiral.
In fact, that’s far from true—Australian manufacturing is in a state of transition, but it’s certainly not down and out. A study by the Australian Workforce and Productivity Agency (PDF) shows that manufacturing averaged 1.9% annual growth from 1993–2008, although there’s been a slight decline since then. Manufacturing just didn’t grow as quickly as other sectors, and has seen its relative importance decline from 13.2% of GDP in 1975 to below 7% now.
But there are good reasons to think that we’re actually pretty well placed to take advantage of the transformation that technologies like additive manufacturing (3-D printing) are already bringing to the world of manufacturing. Some 60% of employment in Australian manufacturing is in small to medium enterprises (SMEs, employing fewer than 200 people). Those are the sorts of firms where the greatest agility is possible—a quality that’ll serve them well as new manufacturing techniques that favour decentralised and/or specialised production begin to dominate the landscape.
The potential impact of 3-D printing hasn’t been widely appreciated yet. And I have to put my hand up and plead guilty—I was aware of the broad principles, but a visit to ASPI the week before last by reps from the Australian 3D Manufacturing Association was a real eye opener. I hadn’t appreciated that it had already profoundly changed some specialist areas. As just one example, the hearing aid industry now uses 3-D printing extensively, and can produce a more customer-specific product on shorter timescales than was possible before. General Electric has printed a working jet engine and NASA has made rocket injectors (see the photo above).
The implications for the entire production chain, from initial component manufacturing to the shipping of end products aren’t entirely clear (and investment markets are struggling to understand them), but there’s clearly a lot of streamlining possible. Complex items with moving parts can be printed already ‘assembled’ and it’s possible that even large consumer items, including cars, might one day be manufactured locally from downloaded plans rather than shipped around the world. If so, producing software designs for items for remote manufacture will become a high-value part of the supply chain.
It’s interesting to contemplate what that means for the defence industry. Perhaps not surprisingly, that specialist sector is a microcosm of manufacturing more broadly. There are some large and highly visible sub-sectors that are struggling and probably won’t survive in anything like their current form without significant government support, much like the car industry. And there are lots of SMEs doing good work and finding niches in which they offer real value.
Naval shipbuilding is an obvious example of the endangered large monolithic manufacturers, with a significant consolidation/contraction already underway as work winds down around the country with the delivery of the LHDs to Navy and as the air warfare destroyer project limps to a conclusion. That said, WA-based shipbuilder Austal has not only managed to survive building naval and constabulary vessels, but has established a successful export business and expanded its operations into two other countries in the process. There’s no trick to that success: Austal identified an area where it has a comparative advantage in designing and building large aluminium vessels, and worked hard to exploit it.
The AWPA report pulls the various threads together when it observes that:
… the closing of Ford’s, GM Holden’s and Toyota’s manufacturing operations does sound a warning about the need for Australian manufacturing to focus on high‑end innovative products and services where we have a competitive advantage.
A couple of examples of the work that Australian industry has done in the F-35 Joint Strike Fighter program show what the future might look like. A team of Melbourne-based aerospace engineers were part of a global design workforce that helped produce the drawings for the F-35. Those are skills that translate easily into a 3-D printing world, producing drawings for objects to be manufactured almost anywhere. Similarly, Australian manufacturers with specialist skills are producing F-35 parts (note the comment about the growing Australian aerospace industry). In the future, such firms mightn’t export items as much as manufacture specialist components for local use that are currently imported, simply because it’ll be more efficient to do so.
High-value manufacturing involves advanced techniques like 3-D printing and composite materials, systems integration and identifying opportunities to participate in international supply chains. We need to update our thinking to realise that producing large objects through ‘metal bashing’, such as ship hulls, is increasingly the low value-add end of manufacturing. Tomorrow’s high value might not involve producing solid objects at all—at least in any way we’d recognise today.