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Industry Outlook

November 2015

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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

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Manufacturing Sales in Canada

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 201635

40

45

50

55

60

Billi

ons

of D

olla

rs p

er M

onth

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Canadian Export Performance

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20012 2013 2014 2015 201625

30

35

40

45

50

Billi

ons

of D

olla

rs p

er M

onth

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Economic Challenges & Opportunities Opportunities

US economic recovery Canadian dollar ($0.72 - $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

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Manufacturing Sales by ProvinceJune 2015

Canada NL PEI NS NB QU ON MB SK AB BC-16

-14

-12

-10

-8

-6

-4

-2

0

2

4

-3.1-4.4

-14.1

-3.2

-13.5

1.4

-1.9 -2.5

-8.6

-13.8

1.2

Year

-ove

r-Yea

r Per

cent

Cha

nge

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Manufacturing Sales by SectorFood15%

Beverage & Tobacco2%

Textiles1%

Clothing0%

Leather Products0%

Paper4%

Printing1%

Petroleum Products14%

Chemicals8%

Plastics & Rubber4%

Wood Products4%

Non-Metallic Mineral Products2%

Primary Metals8%

Fabricated Metal Products6%

Machinery6%

Computers & Electronics2%

Electrical Equipment2%

Transportation Equipment18%

Furniture2%

Miscellaneous2%

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Manufacturing Sales by SectorJune 2015

Food

Beverage & Tobacco

Textiles

Clothing

Leather Products

Paper

Printing

Petroleum Products

Chemicals

Plastics & Rubber

Wood Products

Non-Metallic Mineral Products

Total Manufacturing

-35 -30 -25 -20 -15 -10 -5 0 5 10 15

-3.2

2.3

3.5

-12.0

-5.5

8.5

0.9

-28.2

-3.4

3.2

0.4

2.1

-3.1

Year-over-Year Percent Change

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Manufacturing Sales by SectorJune 2015

Primary Metals

Fabricated Metal Products

Machinery

Computers & Electronics

Electrical Equipment

Transportation Equipment

(Auto Assembly)

(Auto Parts)

(Aerospace)

(Other)

Furniture

Miscellaneous

Total Manufacturing

-10 -5 0 5 10 15 20 25 30

-4.3

-7.3

-0.3

10.5

3.2

9.4

7.9

3.8

25.3

16.0

-0.3

4.6

-3.1

Year-over-Year Percent Change

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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

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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

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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

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

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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)