NEW YORK -- The 2013 edition of the Chem Show is now well
into its second day, and the networking, deal-making and
information sharing at New York Citys Javits Center is in
full swing. A part of this years show is the day
long AIChE Northeast Manufacturing Conference. One of the
standout presentations from the gathering was given by Sam
Samdani from McKinsey and Co. Dr. Samdani spoke about
five ideas that could be game changers for the US economy as a
whole and the US chemical industry specifically.
Working with data from a recent McKinsey
Global Institute report, Dr. Samdani told attendees that there
are five ideas out there that are game changers. These
ideas were selected based up on their ability to substantially
raise productivity, gross domestic product (GDP) and job growth
by 2020, all the while having an impact across multiple
sectors. The game changers are:
- Shale energy
- Knowledge intensive manufacturing (value-facturing as Dr.
Samdani calls it)
- Big data analytics
- Infrastructure investment, productivity
- Talent and workforce development via education and
Projected numbers. Dr. Samdani and his McKinsey
cohorts see shale energy having a $380 to $690 billion impact
on the US economy by 2020. This number would be 3.7% of projected 2020 US GDP. For knowledge
intensive manufacturing, which includes automotive, aerospace
and semiconductors the projected GDP impact was between $200
billion and $590 billion, a possible 3.1% of total US
Moving on to big data analytics, the dollar spread looks
like a $155 billion to $325 billion proposition (1.7% GDP
impact). Infrastructure investment (270 billion to $320
billion, 1.7% GDP impact) and workforce development ($165
billion to $265 billion, 1.4% GDP impact) rounded out the
Dr. Samdani noted that for workforce development to have its
desired GDP impact, the US Congress would need to pass
Energy. Shale gas production in North America has
grown by 51% annually since 2007, lowering the price by
two-thirds and causing US natural gas prices to be
significantly below those in the UK and Japan. This means that
downstream chemical and petrochemical companies can
capitalize on cheaper feedstocks in the US, providing them
competitive advantage. Dr. Samdani also pointed out that the US
output of light tight oil (LTO) is growing even faster than
shale gas output did in its early stages. He sadi that the US
has the potential to be bigger than Saudi Arabia in oil
production. Bolstering things on the projected GDP side of the coin, Dr.
Samdani said shale energy could provide up to 1.7 million new
jobs by 2020.
Knowledge and big data. Interestingly, Dr. Samdani
said that the US is one of the only advanced economies to run a
trade deficit in knowledge intensive manufacturing. The US
trade deficit in knowledge intensive -manufacturing has grown
from approximately zero in the mid-1990s to$217 billion in
2012. One possible solution to stemming this tide would
be utilizing big data analytics to create value for companies
in multiple ways, especially but raising productivity across
sectors to US competitiveness. Examples include advanced labor
scheduling, predictive customer sales models, design-to-value,
predictive hiring models and fraud detection in payment
While various sectors differ in their ability to use and
obtain value from big data analytics, Dr. Samdani said that
manufacturing could see great benefits, as could government,
retail, trade, finance and insurance.
Infrastructure and education. The McKinsey report
argues that he US must raise infrastructure spending by 1
percentage point of GDP to meet its future needs. Relative to
other leading industrialized countries in the world, the US is
not investing enough infrastructure. As one example, Australia
and Japan are actually investing more than needed for
infrastructure. Meanwhile, productivity improvements can reduce
the cost of infrastructure projects by up to 29%, Dr. Samdani
Another troubling statistic in the presentation was that the
US no longer leads the world in tertiary education attainment.
The US is third in post-secondary education in world,
behind Israel and Russia, in the 55 to 64 age group. The
numbers look even worse in the 25-34 year olds age group, with
the US in fifth place. Further, the proportion of US
degrees awarded in STEM is very low compared to other
countries. Mexico, Taiwan, Korea and China all vastly exceed
the US in STEM degrees. Another problem is that in primary and
secondary schools, US student achievement in international
tests falls below the OECD average. The US is currently 31st.
However, pushing against this trend is the information
that some states are actually doing quite well, including
Texas, Massachusetts, and New Jersey.
Implications. Our planet has had essentially the
same number of atoms during the time of the abacus as today,
but now we have many more exotic molecules in the form of
The chemical industry at large is the custodian of the
most comprehensive advanced materials portfolio enabling
technological advances, Dr. Samdani said.
He went on to note that to understand impact of shale, you
have to look at the hydrocarbon chain. For instance, the ethanol (C1) value chain is
Think of methane vs. coal, he said. There
is going to be some shifting going on as it relates to US shale
gas. There will be an impact on the ethylene chain. China is
looking at methanol to olefins (MTO) technology. That will have huge
impact on different parts of the chain in different parts of
the world. Now, MTO is very capital intensive, but China can do
it because they have some CAPEX advantages.
Dr. Samdani suggested that business leaders need to capture
immediate opportunities. He said they need to create new
capabilities via new technology and training.
They should explore partnership opportunities, across
value chains or even horizontally, he said. Also,
they should spearhead local initiatives for economic
development that can be a pipeline of talent.
For policy makers, Dr. Samdani strongly
suggested they need to prioritize game changers.
They should take a tailored approach to sector policy, he said.
The government should be a facilitator and establish ground
rules to reduce uncertainty in regulatory environments. Legislators and
regulators need to support innovation and experimentation.
Shale gas opportunities offer strong benefits to US petrochemicals and some moderate
upsides to US specialty chemicals, Dr. Samdani said.
Photo caption: Joseph Kurian, W.L.
Gore and Associates, and Sam Samdani, McKinsey
Dr. Kurian hosted the session where Dr. Samdani offered his