So before we get into the technical details

of manufacturing processes, I'd like

to tell you how significant manufacturing is to our world.
Here, we see growth in gross domestic product
per person in Western Europe over roughly the past 1,000
years.
And clearly, it's increased tremendously
for multiple reasons.
But along the time scale, we can see
that innovations in manufacturing--
the invention of new manufacturing processes--
has been critical to this growth-- for example,
the invention of the Gutenberg printing press in the year
1400 or so, Bessemer's invention of a cost-effective
way of steel manufacturing around the year 1900,
and of course, the Wright brothers'
invention of mechanized flight, which has then required
many innovations in materials and manufacturing
to enable global air travel that influences how we do business
and where and how we make things today.
Now, in those past 100 years, we've
also seen great growth in automation.
Henry Ford is famous for inventing
the automotive assembly line about the year 1917.
And here, you see workers in a Ford manufacturing
plant assembling components of automotive wheels.
And if you walk in today to an automotive plant,
such as Tesla's plant, which is the most automated, the most
robotic in the world, you, of course,
still see a lot of people.
But you also see a lot of robots.
And the automation that has been invented
has enabled more cost-effective, more complex, processes.
Now, around the world, global manufacturing accounts
for $10.5 trillion in value added.
That means the value added to a product
by manufacturing-- taking a raw material
and transforming it into something like a Lego brick
or into the housing of an iPhone-- manufacturing
is growing about 5% per year.
And manufacturing represents 15% of
global gross domestic product.
That $10.5 trillion is $10 million million US.
And certainly, many things are manufactured.
And this chart shows roughly the distribution
of types of things.
About 20% of global manufacturing
is what are called energy or resources-intensive
commodities-- extraction and refinement
of raw materials-- paper, petroleum, things like that.
About 10% is advanced technology-- computers,
semiconductors, things like electronics
that go in smartphones.
It's about 10% labor-intensive tradables-- apparel
and textiles and furniture and toys.
And the bulk is things that are consumed regionally,
like food and beverages and plastics-- that there's
an advantage to make them locally because they're,
for example, heavy and difficult to ship, as well as kinds
of goods that are used around the world,
including consumer appliances and cars and chemicals
and pharmaceuticals.
So what influences where things are made--
where manufacturing is done?
Well, of course, there are several factors.
And three important factors are, of course,
the cost distribution among the components
of what it costs to make something--
the capital, the cost of the machines,
the energy cost, the cost of labor
and the amount of labor it requires,
and the logistics-- what it takes
to get the product from where it's made to where it's used.
And when we discuss manufacturing costs,
we'll be able to break things down like that.
The second factor I list is what I
call R&D intensity, or intensity of research and development--
how much innovative content you have in a product.
And what I mean is that if a product requires
new materials or a new process to manufacture it effectively,
that can affect where you make it because the people who
do the research and invent the new process need generally
to be close to the manufacturing to take it to scale efficiently
and effectively.
And also, the business and trade regulations are important.
So how countries come to agreement
of how they can sell goods and ship goods to one
another influences where manufacturing occurs.
So if we look broadly at labor-intensive products--
manufactured goods that require a lot of manual labor--
as you might expect, a significant fraction--
the largest fraction-- are made in areas
of the world such as China and Southeast Asia, where
the cost of labor is less than other parts of the world,
such as Western Europe and the United States.
And this has changed significantly
over the past 10, 20 years, and is continuing
to change, especially as the cost of labor increases
in places like China and remains lower
in neighboring countries, such as those in Southeast Asia--
India, Malaysia, and so on.
If you look at innovation-intensive products--
what I said before are products that contain new materials--
new technologies, manufacturing is more distributed.
And here, the United States and China, for example,
have roughly equal shares.
Now, when we think to the future,
manufacturing is clearly important to so many things
I've already mentioned.
But it's going to become more important simply
because our population is growing.
According to this study from 2013, over the next 15 years,
another 1.8 billion-- that's about a third
of the world's population-- is going
to enter the global consuming class.
And beyond that, worldwide consumption-- things
that people buy and use-- is going
to double to $64 trillion.
What this means to me is, of course,
that the world is growing, and the world
is going to need more stuff everywhere.
So we have to manufacture more.
And that requires us to understand the fundamentals
of manufacturing processes.
And also, the world is a fixed size.
It has a fixed amount of natural resources.
And while manufacturing creates wealth and improves human life
in many ways, we must innovate in the most sustainable ways
that we can.
So not only do we know how to make things and make
them better and more useful to our lives,
but we also want to take into account issues
of sustainability and responsibility
so we can guarantee the health of our planet
for a long time in the future.