A November 2012 McKinsey Global Institute report “Manufacturing
the future: The next era of global growth and innovation” identifies the following global dynamics of manufacturing
 -

• 16% share of global GDP
• 70% share of global trade
• advanced economy manufacturing jobs have dwindled
  from 62 million in 2000 to 42 million in 2010
• 30-55% share of service jobs in manufacturing
• 19 cents service input for every dollar of
  manufacturing output
• 3 of 5 global manufacturing groups where China
  leads while 2 where United States leads
• $342 billion in advanced economies’ trade
  deficits in labour-intensive goods
• $726 billion advanced economies’ trade surplus
  in innovative goods

In
particular, the report points out that manufacturing contributes disproportionally to global exports, innovation
and productivity growth (Exhibit E2) – 

• 70% of exports (2010)
• 77% of private sector R & D (2008)
• 37% to productivity growth (1995-2005)
• 16% to value-added (2010) and 20% to value-added
  growth (2000-10)

But manufacturing employment in advanced economies registered minus 24% from 1996-2006, when it represented
only 14% of employment.

Download MGI- Manufacturing the future – Full report, Nov 2012

Five global manufacturing groups are identified – 

1. Global
innovation for local markets (34% of global value-added)

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

2. Regional
processing (28% of global value-added)

    Rubber and plastic products
    Fabricated metal products
    Food, beverage and tobacco
    Printing and publishing

3. Energy-Resource-intensive
commodities (22% of global value -added)

   Wood products
   Refined petroleum, coke, nuclear
   Paper and pulp
   Mineral-based products
   Basic metals

4. Global
technologies/ innovators (9% of global value-added)

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

5. Labour-intensive
tradables (7% of global value-added)

   Textiles, apparel. Leather
    Furniture, jewelry, toys, other

The
McKinsey study concludes that the distinction between manufacturing and
services is becoming blurred. The whole manufacturing process is becoming
granular, each input to be considered in a global matrix of total factor
performance “across the full range of factor inputs and other forces that
determine what it costs to build and sell products.” “An exciting era of global
manufacturing is ahead –driven by shifts in demand and by innovations in
materials, processes, information technology and operations.” “These
innovations include new materials such as carbon fibre components and
nanotechnology, advanced robotics and 3-D printing, and new information
technologies that can generate new forms of intelligence, such as big data and
the use of data-gathering sensors in production machinery and in logistics (the
so-called “Internet of Things”.

On
the indentified five manufacturing groupings, what the report has not stressed,
however, is that –

(a)  Products
and items in one group may be imbedded in another.  For example, wood, rubber and metals are an
integral part of motor vehicles and machinery and equipment are essential in
the energy-resource-intensive commodities group.

(b) Technology,
creativity, and brands run through and between the groupings so that advantages
in one group can be embedded in another group or groups.

(c) The global value chain without borders ensures that value migrates to where it can best be created, almost anywhere in the world. This translates into a breaking up of the finance, design, production and back-up services of a single product.

(d)  Therefore,
the reference to China leading in three groups and the United States in two
groups is at best relative.  For example, Lenovo, which has acquired IBM
computers, and Huawei Technologies are becoming China’s global leaders in their
own right in various computer sectors, while the largest profits in the textiles,
apparel and leather sectors, a grouping where China is supposed to lead, are
reaped by the world’s top luxury brands in advanced economies.

(e) The highest profit margins of manufacturing are captured by proprietary technologies, patents and brands. As China
has found to her own cost, “labour-intensive tradables” may be reaching their
sell-by dates. As a nation develops to a certain level, reaching the so-called "Lewis Curve Turning Point", rising wage and other rising input costs will become no
longer commensurate with the relative low prices of products fetched. As a
result, the country has to upgrade, innovate, and acquire patents and brands to
survive. This is exactly what China is trying to do. As the latest “World
Intellectual Property Indicators 2012” (11 December 2012) shows, China has now
become, for the first time in a century, the first developing country taking
the baton from Germany, Japan and the United States as the world’s top patent
filer. Click here

The
Mckinsey report, nevertheless, is instructive that in a rapidly changing and
increasingly inter-connected and inter-dependent world, businesses and policy
makers need to be agile and adaptive in honing new ideas, technologies, and
talent to stay globally competitive, as a new era of manufacturing emerges
that promises to know no rigid groupings and geographical or national borders.