Tim Shinbara | VP, Technology The State of the US Machine Tool Industry with Respect to Economic Health Tim Shinbara | VP, Technology

From Oxford Economics… Strong growth for MT orders on 2.8% economic growth Strong fundamentals supporting consumer spending and business investment Large aerospace backorders 7.3% business investment (CapEx) expected in 2018 (all manufacturing sectors)

Business Risk Housing market imbalance Political and policy disruptions Global growth and trade

From recent workshops… Supporting EO 13806 “Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States” Georgia Tech (1/25) Cincinnati (1/26) Key takeaways Critical components having significant negative impact on deliveries U.S. still has global significance in gear cutting, grinding, AM/3DP Lack of talent throughout the pipeline Perception is reality…manufacturing still not perceived well Export control process still insufficient in timeliness From recent workshops…

U.S. has… Gear cutting, grinding, optics (metrology) Early development in M&P SW-based solutions Advantages in Controller technology (as a % of market share) Domestic access to key materials (e.g. carbon composites) Robust manufacturing infrastructure for sustainability Disadvantages in Islands of excellence & existing point-solutions U.S. has…

US builders likely to miss opportunities Impacts to Delivery… Q1 2018… Build-to-demand have ~2 – 3 month lead- time 2018 – 2019… Build-to-order (or add’l demand) ~6 months (1st time since 1980’s) Critical path of key components Linear guides (~6 months – 1 year) Electronic components (2 – 3 months) E.g. Controls and drives Machine bases (weeks to months) 2018 demand estimated to be ~7% – 12% over a very strong 2017 US builders likely to miss opportunities

Status: Consumption, Employees, & CapEx Year Production Imports Exports Consumption # of Empl Total Capital Expenditures % of Consump. 2012 $5,604,539,000 $5,823,724,471 $2,156,508,383 $9,271,755,088 38,575 $145,656,000 15.7% 2013 $5,811,664,000 $5,212,262,677 $2,238,948,084 $8,784,978,593 38,650 $148,725,000 16.9% 2014 $6,171,134,000 $5,260,491,759 $2,154,162,212 $9,277,463,547 39,616 $231,914,000 24.9% 2015 $5,902,923,000 $4,919,027,720 $1,961,905,229 $8,860,045,491 40,933 $204,969,000 23.1% 2016 $5,181,487,000 $4,426,397,645 $1,660,136,823 $7,947,747,822 40,033 $166,032,000 20.8% Primary NAICS code: 333517 (Machine Tools) Source: Census Bureau, Bureau of Labor and Statistics, AMT – Association For Manufacturing Technology

Current Status: R&D as % of Revenues R&D: ~$266M R&D: ~$322M Source: Census Bureau, AMT – Association For Manufacturing Technology

US Locations of MT Companies 11 States have only 1 or no MT businesses 15 14 22 38 35 US Locations of MT Companies 150 49 7 95 96 33 155 20 15 17 10 7 12 44 20 Source: County Business Patterns (DSAT for MSFT, GeoNames, NavTeq)

Tim Shinbara tshinbara@amtonline.org