Chapter 6 | Industry, Technology, and the Global Marketplace

Highlights

Knowledge- and technology-intensive (KTI) industries are a major part of the global economy.

• Fifteen KTI industries, consisting of five knowledge-intensive services industries, five high-technology manufacturing industries, and five medium-high-technology industries, represented nearly one-third of world gross domestic product (GDP) in 2016.
• The commercial knowledge-intensive services—business, financial, and information—have the highest share of GDP (15%). The public knowledge-intensive services—education and health care—have a 9% share; these are publicly regulated or provided and remain relatively more location bound than the commercial knowledge-intensive services.
• The medium-high-technology manufacturing industries—motor vehicles and parts, electrical machinery, machinery and equipment, chemicals excluding pharmaceuticals, and railroad and other transportation equipment—are the third largest (4%).
• The high-technology manufacturing industries—aircraft and spacecraft; communications and semiconductors; computers; pharmaceuticals; and testing, measuring, and control instruments—account for a 2% share of world GDP.
• The United States has the highest KTI share of GDP (38%) of any large economy closely followed by Japan (36%). The KTI share for the European Union (EU) is considerably lower.
• China has the largest KTI share of any large developing economy (35%), and its KTI share is comparable to those of large, developed economies. The KTI shares in other large developing economies are significantly lower than China’s.

The United States had the largest global share of commercial KI services in 2016.

• The United States accounted for 31% of global commercial KI services (business, financial, and information), followed by the EU (21%).
• China is the world’s third largest provider of commercial KI services (17% global share). Despite a recent slowdown in its rapid pace of growth, China continues to grow far faster than the United States and other large developed economies.
• In high-technology manufacturing, the United States is the largest global producer (31% global share). The U.S. global share has remained stable for the last decade. China is the second largest global producer (24%). Rapid growth of China’s industries more than doubled China’s global share over the last decade. China surpassed Japan in 2008 and the EU in 2012.
• China is the world’s dominant producer in medium-high-technology industries (32% global share). China’s global share nearly tripled over the last decade, and it surpassed the United States in the late-2000s and the EU in the early-2010s.

U.S. KTI industries have had a stronger recovery from the global recession than those in the EU and Japan, as evidenced by output data starting in 2011.

• Value-added output of U.S. commercial knowledge-intensive services in 2016 was 26% higher than in 2011. Output in the EU and Japan declined.
• U.S. high-technology manufacturing industries grew 16% between 2011 and 2016. The EU’s output grew slightly, and Japan’s output was stagnant.
• Value-added output of U.S. medium-high-technology manufacturing industries was 17% higher in 2016 than in 2011. Output in the EU declined and Japan remained flat.

KTI industries play an important role in the U.S. economy and in U.S. business R&D.

• U.S. commercial KI services industries employ 17% of workers in all industries and fund 29% of U.S. business R&D.
• U.S. high-technology manufacturing industries employ 1.8 million workers and fund nearly half of U.S. business R&D.
• U.S. medium-high-technology industries employ 3.0 million workers and fund 11% of U.S. business R&D.
• U.S. KTI industries have had a strong recovery in their output, but gains in employment have been weaker. Employment in commercial KI services in 2016 was 1.2 million higher compared to 2007 prior to the recession. Although growing robustly following the global recession, employment in medium-high technology manufacturing industries remains slightly below its level prior to the global recession. Employment in high-technology manufacturing has remained stagnant and remains below its level prior to the global recession.

The United States is a major exporter of KTI services.

• The EU is the world’s largest exporter of commercial KI services, followed by the United States; both have substantial surpluses in this area.
• The EU’s commercial KI services exports grew 20% to reach more than $500 billion (33% global share) between 2011 and 2016.
• U.S. exports of commercial KI services grew faster than the EU’s over this period, reaching $288 billion (18% global share).
• China and India’s KTI exports grew rapidly, resulting in their global export shares reaching 6%–7% in 2016.
• China is the world’s largest exporter of high-technology products (24% global share), with a substantial surplus. However, intermediate inputs imported from other countries account for a large share of the value of China’s exports. China’s exports and trade surplus measured on a value-added basis are considerably lower.
• The EU is the world’s second largest exporter of high-technology products (17% global share). The United States is the third largest exporter (12%) closely followed by Taiwan. The United States is the world’s largest exporter of aircraft and spacecraft (43% global share).
• The U.S. trade deficit in high-technology goods is largely anchored in products in information and communications technologies—communications, computers, and semiconductors. The United States has a substantial trade surplus in aircraft and spacecraft.
• The EU is the world’s largest exporter of medium-high-technology goods (25% global share) and has a substantial surplus. China is the second largest global exporter (20% share) and has a substantial trade surplus, as does third-place Japan (11%).
• The United States is the fourth largest exporter and has a substantial deficit in medium-high-technology goods. The United States has a sizeable deficit in motor vehicles and parts ($98 billion), and deficits of $40–$52 billion in electrical machinery and appliances and machinery and equipment.

Global private investment in sustainable energy technologies in 2016 was $260 billion, largely in solar and wind. China attracted the most investment of any country.

• Early-stage private investment in sustainable energy technologies, consisting of venture capital and private equity investment, was $7.5 billion in 2016. The United States attracted the most venture capital and private equity of any country ($3.5 billion). China attracted $2.2 billion, a record high, and far higher than in 2015 ($0.5 billion).
• Energy smart and solar are the leading technologies for venture and capital and private equity investment with biofuels and wind receiving far smaller amounts. Energy smart covers a wide range of technologies, from digital energy applications to efficient lighting, electric vehicles, and the smart grid that maximize the energy efficiency of existing energy sources and networks
• Global private investment in later-stage financing—to build utility-scale power plants and installations of solar in residential and commercial buildings—was $252 billion in 2016. Two technologies—wind and solar—dominate investment, each with a share of about 40%.
• China leads the world in attracting later-stage commercial investment in sustainable energy technologies (33% global share), followed by the EU (25%) and the United States (18%).
• Investment in sustainable energy technologies fell 19% in 2016 compared to 2015, the deepest annual decline over the last decade. Investment in China and Japan fell sharply, reflecting, in part, cutbacks in government incentives supporting the deployment of renewable energy and a greater emphasis on utilizing the existing renewable energy capacity in each of these countries more effectively.
• U.S. investment in 2016 ($46 billion) was 8% lower than in 2015. Investment in the United States has fluctuated in a range of $34 billion to $51 billion between 2011 and 2016 because of policy uncertainty. Solar investment has been the main driver of U.S. investment between 2010 and 2015.

The United States was the largest investor ($3.8 billion) in 2014 in public research, development, and demonstration (RD&D) of sustainable energy technologies. The EU is the second largest investor ($3.6 billion), followed by Japan ($2.7 billion).

• Global expenditures on public RD&D of sustainable energy technologies was an estimated $12.0 billion in 2014. Nuclear was the largest area, receiving $3.5 billion. The next two largest areas were energy efficiency ($3.3 billion) and renewables ($3.0 billion).
• Between 2011 and 2014, global expenditures of public RD&D fell from $14 billion to $12 billion, with declines in nuclear, renewables, and carbon capture and storage.
• Despite a decline in U.S. investment between 2011 and 2014, the United States surpassed the EU to become the world’s largest investor in 2014. U.S. public RD&D investment in renewables and nuclear declined, while investment in energy efficiency increased.

The number of U.S. Patent and Trade Office patents granted in sustainable energy technologies doubled between 2009 and 2015. Six technologies—solar, hybrid and electric vehicles, smart grid, fuel cell, battery, capture and storage of carbon and other greenhouse gases—have led growth of these patents.

• U.S. inventors received the largest share of sustainable energy patents in 2016 (43%), followed by Japan (20%), and the EU (16%). Patenting by U.S. inventors has been led by four technologies—hybrid and electric vehicles, solar, smart grid, and energy storage.
• Patents granted to South Korea more than quadrupled between 2009 and 2016, led by growth in energy storage, solar, hybrid/electric, and battery technologies.