Industry Outlook November 2015

Manufacturing Matters in Canada  A $620 billion industry  12% of GDP (18% in 2004)  1.7 million direct employees (2.2 million in 2004)  The largest payroll of any business sector  Two-thirds of Canada’s goods & services exports  80% of private sector R&D  85% of patents commercialized in Canada  Every $1 of output generates $3.50 in total economic activity ($3.05 in 2004)  The business of providing customer solutions combining the production of goods, new technologies, and services

Manufacturing Sales in Canada

Canadian Export Performance

Economic Challenges & Opportunities  Opportunities  US economic recovery  Canadian dollar ($ $0.78 US)  Challenges  Financial turbulence  Slower growth in China and other “emerging markets”  Low/no growth in other major economies  Low commodity prices  Slow growth at home  Consumers  Housing  Governments  Business Investment

Manufacturing Sales by Province June 2015

Manufacturing Sales by Sector

Manufacturing Sales by Sector June 2015

Manufacturing Sales by Sector June 2015

Long Term Trends More demanding customers looking for solutions More demanding stakeholders – governments, investors, public More intense competition Infrastructure investment Social challenges = business opportunities – Health, ageing, climate, environment, food, water, energy Accelerating pace of technological change

A Revolution in Manufacturing Technology Industry 4.0 – Cyber-physical systems Advanced visualization, modeling, and artificial intelligence Digital, reconfigurable, and integrated automation, sensors, visual systems enabling product/process monitoring & control Internet of Things – “Internet of Value” Big data & quantum computing 3-D printing/Additive manufacturing Micromachining New materials – Lightweight, bio-nano-based, printable electronics & smart materials New energy – Generation, storage, propulsion

New Business Models Focus on customized solutions, not products Software and service-driven specialization New and rapidly reconfigurable design Shorter innovation cycles for more complex products with enhanced functionality Focus on efficient, sustainable use of resources throughout product life cycles Immediate response – rapid commercialization Enhanced flexibility Globally dispersed production Dynamic, real-time, globally integrated value creation networks

Strategic Priorities Leadership Specialized, customized solutions Analytics Technology adoption & management Lean People Risk management Collaboration Money

Critical Policy Issues Tax policies that facilitate rapid technological change Business growth & new investment Investments that enhance commercialization – Procurement, technology demonstration, & risk reduction Data security & global IP regimes Open markets (products, services, investment, people) Seem-less → Seamless borders Education & skills for Industry 4.0 workforce Access to reliable, cost competitive infrastructure (transportation, energy, innovation, IT & Telecom)