[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]





                         BUILDING A NETWORK FOR
                        MANUFACTURING INNOVATION

=======================================================================

                                HEARING

                               BEFORE THE

                SUBCOMMITTEE ON RESEARCH AND TECHNOLOGY

              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           DECEMBER 12, 2013

                               __________

                           Serial No. 113-59

                               __________

 Printed for the use of the Committee on Science, Space, and Technology



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       Available via the World Wide Web: http://science.house.gov





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              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

                   HON. LAMAR S. SMITH, Texas, Chair
DANA ROHRABACHER, California         EDDIE BERNICE JOHNSON, Texas
RALPH M. HALL, Texas                 ZOE LOFGREN, California
F. JAMES SENSENBRENNER, JR.,         DANIEL LIPINSKI, Illinois
    Wisconsin                        DONNA F. EDWARDS, Maryland
FRANK D. LUCAS, Oklahoma             FREDERICA S. WILSON, Florida
RANDY NEUGEBAUER, Texas              SUZANNE BONAMICI, Oregon
MICHAEL T. McCAUL, Texas             ERIC SWALWELL, California
PAUL C. BROUN, Georgia               DAN MAFFEI, New York
STEVEN M. PALAZZO, Mississippi       ALAN GRAYSON, Florida
MO BROOKS, Alabama                   JOSEPH KENNEDY III, Massachusetts
RANDY HULTGREN, Illinois             SCOTT PETERS, California
LARRY BUCSHON, Indiana               DEREK KILMER, Washington
STEVE STOCKMAN, Texas                AMI BERA, California
BILL POSEY, Florida                  ELIZABETH ESTY, Connecticut
CYNTHIA LUMMIS, Wyoming              MARC VEASEY, Texas
DAVID SCHWEIKERT, Arizona            JULIA BROWNLEY, California
THOMAS MASSIE, Kentucky              MARK TAKANO, California
KEVIN CRAMER, North Dakota           ROBIN KELLY, Illinois
JIM BRIDENSTINE, Oklahoma
RANDY WEBER, Texas
CHRIS COLLINS, New York
VACANCY
                                 ------                                

                Subcommittee on Research and Technology

                   HON. LARRY BUCSHON, Indiana, Chair
STEVEN M. PALAZZO, Mississippi       DANIEL LIPINSKI, Illinois
MO BROOKS, Alabama                   FEDERICA WILSON, Florida
RANDY HULTGREN, Illinois             ZOE LOFGREN, California
STEVE STOCKMAN, Texas                SCOTT PETERS, California
CYNTHIA LUMMIS, Wyoming              AMI BERA, California
DAVID SCHWEIKERT, Arizona            DEREK KILMER, Washington
THOMAS MASSIE, Kentucky              ELIZABETH ESTY, Connecticut
JIM BRIDENSTINE, Oklahoma            ROBIN KELLY, Illinois
CHRIS COLLINS, New York              EDDIE BERNICE JOHNSON, Texas
LAMAR S. SMITH, Texas

















                            C O N T E N T S

                           December 12, 2013

                                                                   Page
Witness List.....................................................     2

Hearing Charter..................................................     3

                           Opening Statements

Statement by Representative Larry Bucshon, Chairman, Subcommittee 
  on Research and Technology, Committee on Science, Space, and 
  Technology, U.S. House of Representatives......................     8
    Written Statement............................................     9

Statement by Representative Daniel Lipinski, Ranking Minority 
  Member, Subcommittee on Research and Technology, Committee on 
  Science, Space, and Technology, U.S. House of Representatives..    10
    Written Statement............................................    11

Statement by Representative Eddie Bernice Johnson, Ranking 
  Member, Committee on Science, Space, and Technology, U.S. House 
  of Representatives.............................................    13
    Written Statement............................................    13

                               Witnesses:

                                Panel I

Mr. Jonathan Davis, Global Vice President of Advocacy, SEMI
    Oral Statement...............................................    15
    Written Statement............................................    18

Dr. Richard A. Aubrecht, Vice Chairman of the Board, Vice 
  President, Strategy & Technology, Moog Inc.
    Oral Statement...............................................    22
    Written Statement............................................    24

Dr. Stephan Biller, Chief Scientist Manufacturing Technology, GE 
  Global Research
    Oral Statement...............................................    28
    Written Statement............................................    30


Dr. Stan A. Veuger, Resident Scholar, American Enterprise 
  Institute for Public Policy Research
    Oral Statement...............................................    38
    Written Statement............................................    40

                                Panel II

The Honorable Tom Reed, Member, U.S. House of Representatives
    Oral Statement...............................................    68
    Written Statement............................................    66

The Honorable Joseph P. Kennedy, III, Member, U.S. House of 
  Representatives
    Oral Statement...............................................    70
    Written Statement............................................    72

             Appendix I: Additional Material for the Record

Submitted letters for the record by The Honorable Joseph P. 
  Kennedy, III, Member, U.S. House of Representatives............    78

Submitted statement of Representative Lamar S. Smith, Chairman, 
  Committee on Science, Space, and Technology....................   116

Discussion draft.................................................    88

 
            BUILDING A NETWORK FOR MANUFACTURING INNOVATION

                              ----------                              


                      THURSDAY, DECEMBER 12, 2013

                  House of Representatives,
                    Subcommittee on Research and Technology
               Committee on Science, Space, and Technology,
                                                   Washington, D.C.

    The Subcommittee met, pursuant to call, at 10:05 a.m., in 
Room 2318 of the Rayburn House Office Building, Hon. Larry 
Bucshon [Chairman of the Subcommittee] presiding.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Chairman Bucshon. Good morning. The Subcommittee on 
Research and Technology will come to order. We are going to 
have a little bit of a change of order today, because, on our 
first panel, Congressman Tom Reed is in a markup in another 
Committee that, he is delayed, and couldn't testify first, so 
we are going to go to our second panel.
    So I would like to welcome everyone to today's hearing, 
titled ``Building A Network For Manufacturing Innovation.'' In 
front of you are packets containing the written testimony, 
biographies, and truth in testimony disclosures for today's 
witnesses. I will recognize myself for five minutes for an 
opening statement.
    I am pleased to call to order this morning's hearing to 
examine the need for a manufacturing innovation network, and to 
review H.R. 2996, the Revitalization American Manufacturing 
Innovation Act of 2013, authored by Representative Tom Reed of 
New York and Representative Joe Kennedy of Massachusetts. I am 
pleased that Congressman Reed and Congressman Kennedy will be 
joining us later today as witnesses to discuss their proposed 
legislation.
    Nationally, manufacturing supports 17.2 million jobs, with 
12 million Americans, or roughly nine percent of the workforce, 
employed directly in manufacturing. Manufacturing represents 
approximately 11 percent of the American economy, and has the 
greatest multiplier effect of any major sector in the American 
economy. According to the Bureau of Economic Analysis, each 
dollar spent in manufacturing generates an additional $1.35 in 
spending. In Indiana, there are nearly 10,000 manufacturers, 
employing more than a half a million workers, which represents 
1/6 of Indiana's workforce. Not surprisingly, my state ranks 
first in manufacturing employment, and second in manufacturing 
as a gross state product.
    The 8th District of Indiana is home to many of these 
manufacturers, and I have seen the work being done firsthand at 
manufacturers like Berry Plastics, Toyota Motor Corporation, 
and ALCOA. Along with the many manufacturers in our district, 
universities like Vincennes University, University of 
Evansville, and University of Southern Indiana offer degrees 
related to advanced manufacturing, and work closely with these 
entities to develop a talented, well trained workforce.
    H.R. 2996 would establish a 600 million dollar new program 
based on the President's Fiscal Year 2013 and Fiscal Year 2014 
budget request for the National Network for Manufacturing 
Innovation. H.R. 2996 would establish a network for 
manufacturing innovation, building a public-private partnership 
through Centers for Manufacturing Innovation.
    Nearly half of the government spending in 2012 was spent 
automatically on mandatory entitlement programs. And, here in 
Washington, D.C., we are having an ongoing discussion about 
reining in the spending on the mandatory programs in order to 
prevent budget cuts to government programs, such as research 
and development, that also may affect such proposals as H.R. 
2996.
    I look forward to hearing from all of our witnesses, and 
their thoughts about the proposed legislation, and I thank them 
for joining us today.
    [The prepared statement of Mr. Bucshon follows:]

Prepared Statement of Subcommittee on Research and Technology Chairman 
                             Larry Bucshon

    I am pleased to call to order this morning's hearing to examine the 
need for a manufacturing innovation network and to review H.R. 2996, 
the Revitalize American Manufacturing and Innovation Act of 2013, 
authored by Representative Tom Reed of New York and Representative Joe 
Kennedy of Massachusetts.
    I am pleased Congressman Reed and Congressman Kennedy are joining 
us today as witnesses to discuss their proposed legislation.
    Nationally, manufacturing supports 17.2 million jobs--with 12 
million Americans, or roughly nine percent of the workforce, employed 
directly in manufacturing. Manufacturing represents approximately 11 
percent of the American economy, and has the greatest multiplier effect 
of any major sector in the American economy. According to the Bureau of 
Economic Analysis, each dollar spent in manufacturing generates an 
additional $1.35 in spending.
    In Indiana, there are nearly 10,000 manufacturers employing more 
than half a million workers, which represents one sixth of Indiana's 
workforce. Not surprisingly, my state ranks first in manufacturing 
employment and second in manufacturing as a gross state product.
    The 8th district of Indiana is home to many of these manufacturers 
and I have seen the work being done firsthand at manufactures like 
Berry Plastics, Toyota Motor and Alcoa. Along with the many 
manufacturers in our district, universities like Vincennes University, 
the University of Evansville and the University of Southern Indiana 
offer degrees related to advanced manufacturing and work closely with 
these entities to develop a talented and well-trained workforce.
    H.R. 2996 would establish a $600 million new program, based on the 
President's FY13 and FY14 budget request for the National Network for 
Manufacturing Innovation (NNNMI). H.R. 2996 would establish a network 
for manufacturing innovation building public-private partnerships 
through Centers for Manufacturing Innovation.
    Nearly half of government spending in 2012 was spent automatically 
on mandatory entitlement programs. Many in Washington D.C. refuse to 
discuss and enact real reforms that will rein in spending on mandatory 
spending programs in order to prevent budget cuts to government 
programs such as research and development on the discretionary side, 
affecting programs like the proposal in H.R. 2996.
    I look forward to hearing from all of our witnesses on their 
thoughts about the proposed legislation, and I thank them for joining 
us here today.
    Chairman Bucshon. Now I will recognize the Ranking Member, 
gentleman from Illinois, Mr. Lipinski, for his opening 
statement.
    Mr. Lipinski. Thank you, Mr. Chairman. Thank you for 
holding this hearing, and I think that--I want someone to count 
up the hearings. I believe we--hard to believe anyone has had 
more hearings than we have had in the Subcommittee, but that is 
great, because we are looking at a lot of very important issues 
to the country, such as this one on manufacturing. I am looking 
forward to hearing from Mr. Reed and Mr. Kennedy about their 
bill. And, prior to that, hearing from our expert witnesses 
here in front of us, who are going to testify as the 
Subcommittee continues its examination of what we can do to 
revitalize America's manufacturing sector.
    The legislation we are discussing today is based in large 
part on the proposed National Network for Manufacturing 
Innovation, or NNMI. I have been a strong supporter of the NNMI 
concept, and I am proud to be a co-sponsor of H.R. 2996. 
Although we have heard time and time again about the crucial 
link between economic growth and a vibrant U.S. manufacturing 
sector, I think these facts bear repeating. At 60 percent of 
all exports, manufacturing is the largest contributor to U.S. 
trade. Manufacturing employs more than 11 million Americans in 
jobs providing above-average pay and benefits. The sector adds 
approximately $1.6 trillion to our Gross Domestic Product. 
According to the Bureau of Economic Analysis, manufacturing has 
a larger multiplier effect than any other major economic 
activity. One dollar spent in manufacturing generates $1.35 in 
additional economic activity. And, finally, manufacturing 
accounts for nearly 70 percent of private sector research and 
development.
    Behind all these facts and figures is a strong link between 
manufacturing and innovation. And let's be honest, our Nation's 
competitive edge is slipping. We have to take note of countries 
such as Korea, Japan, and Germany that have a larger share of 
the advanced manufacturing sector than the United States. These 
nations, and others, are investing heavily in manufacturing and 
innovation, and they are doing so in a much more comprehensive 
way than we are. It is not as if the Federal Government isn't 
doing any good work in the areas I mentioned, but if we want to 
create the environment that will produce the high paying jobs 
of the future, and help this country keep its competitive edge, 
then we need to do more to support and expand advanced 
manufacturing.
    The legislation we are discussing today has the potential 
to do just that. The manufacturing institutes created under the 
proposal can serve as centers of manufacturing excellence, 
accelerating innovation in the transition of cutting edge 
manufacturing technologies and processes to the marketplace. 
They can also serve as a nexus for addressing our manufacturing 
talent shortage. I think it is important for our manufacturing 
workforce, from scientists and engineers, to production workers 
and technicians, to have access to and experience with new, 
innovative technologies.
    H.R. 2996 is modeled after the successful Fraunhofer 
Institutes in Germany. Many experts believe Germany has been 
able to withstand a global financial crisis in large part due 
to its focus on innovative technologies as a key driver of 
economic growth. The Fraunhofer Institutes are widely 
considered to be a central and key component of the country's 
high tech strategy. Based on Germany's success, a number of 
countries, including Britain and France, have adapted the 
Fraunhofer model to improve the competitiveness of their 
manufacturers. And, in fact, sources ranging from a recent 
National Research Council report, to groups like the National 
Association of Manufacturers, have called for the establishment 
of a similar network of public-private manufacturing centers in 
the United States.
    Simply put, made in America equals American jobs and a 
strong economy. Now, when our position as a global leader in 
science and technology is being threatened, we can't afford to 
lose our capacity to create the breakthrough technologies of 
tomorrow. Mr. Chairman, we must adopt smart policies and 
encourage innovation, and investment in manufacturing. I 
believe H.R. 2996 is a smart policy. I look forward to working 
with you, and all of my colleagues, to advance legislation like 
this to help keep American manufacturing strong.
    Thank you, Mr. Chairman. I yield back the balance of my 
time.
    [The prepared statement of Mr. Lipinski follows:]

     Prepared Statement of Subcommittee on Research and Technology
                Ranking Minority Member Daniel Lipinski

    Thank you Mr. Chairman for holding this hearing. I am happy that we 
have Mr. Reed and Mr. Kennedy with us today to talk about their bill, 
and I look forward to hearing from them and all of our witnesses who 
are here to testify as the Subcommittee continues its examination of 
American manufacturing and efforts to revitalize this critical sector. 
The legislation we are discussing today is based in large part on the 
proposed National Network for Manufacturing Innovation or NNMI. I have 
been a strong supporter of the NNMI concept and I'm proud to cosponsor 
H.R. 2996.
    Although we've heard time and time again about the crucial link 
between economic growth and a vibrant U.S. manufacturing sector, I 
think these facts bear repeating:
    At 60 percent of all exports, manufacturing is the largest 
contributor to U.S. trade. Manufacturing employs more than 11 million 
Americans in jobs providing above average pay and benefits. The sector 
adds approximately $1.6 trillion to our gross domestic product. 
According to the Bureau of Economic Analysis, manufacturing has a 
larger multiplier effect than any other major economic activity--$1 
spent in manufacturing generates $1.35 in additional economic activity. 
And finally, manufacturing accounts for nearly 70 percent of private 
sector research and development.
    Behind all of these facts and figures is the strong link between 
manufacturing and innovation. And let's be honest, our nation's 
competitive edge is slipping. We have to take note of countries such as 
Korea, Japan, and Germany that have a larger share of the advanced 
manufacturing sector than the United States. These nations and others 
are investing heavily in manufacturing and innovation and they are 
doing so in a much more comprehensive way than we are.
    It's not as if the federal government isn't doing any good work in 
the areas I mentioned, but if we want to create the environment that 
will produce the high-paying jobs of the future and help this country 
keep its competitive edge, then we need to do more to support and 
expand advanced manufacturing.
    The legislation we are discussing today has the potential to do 
just that. The manufacturing institutes created under the proposal can 
serve as centers of manufacturing excellence, accelerating innovation 
and the transition of cutting-edge manufacturing technologies and 
processes to the marketplace. They can also serve as the nexus for 
addressing our manufacturing talent shortage. I think it is important 
for our manufacturing workforce--from scientists and engineers to 
production workers and technicians--to have access to and experience 
with new, innovative technologies.
    As I understand it, H.R. 2996 is modeled after the successful 
Fraunhofer Institutes in Germany. Many experts believe Germany has been 
able to withstand the global financial crisis in large part due to its 
focus on innovative technologies as a key driver of economic growth. 
The Fraunhofer Institutes are widely considered to be a central and key 
component of the country's high-tech strategy.
    Based on Germany's success, a number of countries, including 
Britain and France have adapted the Fraunhofer model to improve the 
competitiveness of their manufacturers. And in fact, sources ranging 
from a recent National Research Council report to groups like the 
National Association of Manufacturers have called for the establishment 
of a similar network of public-private manufacturing centers in the 
United States.
    Simply put, ``Made in America'' equals American jobs and a strong 
economy. Now when our position as a global leader in science and 
technology is being threatened, we can't afford to lose our capacity to 
create the breakthrough technologies of tomorrow.
    Mr. Chairman, we must adopt smart policies that encourage 
innovation and investment in manufacturing. I believe H.R. 2996 is a 
smart policy. I look forward to working with you and all of my 
colleagues to advance legislation like this that will help keep 
American manufacturing strong.
    Thank you, Mr. Chairman and I yield back the balance of my time.
    Chairman Bucshon. Thank you, Mr. Lipinski. I now would like 
to recognize the Ranking Member of the Full Committee, Ms. 
Johnson, for her opening statement.
    Ms. Johnson. Thank you very much, Mr. Chairman. I would 
like to compliment and praise my colleagues, Mr. Kennedy and 
Mr. Reed, for their bipartisan work to advance the legislation 
we are considering this morning. The purpose of H.R. 2996 is 
conveyed in the legislation's title, the Revitalize American 
Manufacturing and Innovation Act. I am supportive of this 
legislation, and its purpose to revitalize American 
manufacturing, because I strongly believe that if the United 
States is to remain competitive in the long term, we need to 
ensure that American companies maintain their capacity to 
manufacture innovative products right here at home.
    The key to maintaining this capacity is through strategic 
investments in advanced manufacturing research, development, 
and education. While the United States is struggling to sustain 
its competitive edge, other countries are focusing their full 
attention on manufacturing, they are implementing the policies 
and programs necessary to build the 21st century economies now. 
We simply cannot afford to stand on the sideline and watch our 
competitors pass us by. A vibrant manufacturing sector is just 
too important.
    That is why, earlier this year, I introduced the Advancing 
Innovative Manufacturing Act of 2013, or the AIM Act. My 
legislation also brings the public and private sectors together 
to tackle the research needs of the industry. Additionally, the 
AIM Act focuses on ensuring that small and medium sized 
manufacturers have the tools they need to innovate.
    Because the decline of U.S. manufacturing is a threat to 
the middle class jobs in our economy, the Democratic discussion 
draft of the America Competes Reauthorization Act includes a 
number of manufacturing related provisions. In fact, the 
proposal we are considering today is a part of that discussion 
draft. We need our manufacturing sector to be the most 
sophisticated in the world, using transformative technologies 
and manufacturing processes. By doing this, we can maintain our 
global leadership.
    And I am hopeful that, as this Committee considers the 
reauthorization of NSF, NIST, and DOE's Office of Science, we 
can come together across the aisle to include policies that 
will stimulate American manufacturing and American jobs. Mr. 
Chairman, on a daily basis, many times we hear about spending 
so much on Medicaid, spending so much on other aid programs. 
Well, Mr. Chairman, until we pass legislation of this sort, we 
will be increasing those rolls, rather than eliminating them. I 
hope that this legislation can move forward. And I thank you, 
and yield back the balance of my time.
    [The prepared statement of Ms. Johnson follows:]

          Prepared Statement of Full Committee Ranking Member
                         Eddie Bernice Johnson

    Thank you, Mr. Chairman. I'd like to praise my colleagues, Mr. 
Kennedy and Mr. Reed for their bipartisan work to advance the 
legislation we are considering this morning. The purpose of H.R. 2996 
is conveyed in the legislation's title, the Revitalize American 
Manufacturing and Innovation Act.
    I am supportive of the legislation and its purpose to revitalize 
American manufacturing because I strongly believe that if the United 
States is to remain competitive in the long-term, we need to ensure 
that American companies maintain their capacity to manufacture 
innovative products here at home.
    The key to maintaining this capacity is through strategic 
investments in advanced manufacturing research, development, and 
education.
    While the United States is struggling to sustain its competitive 
edge other countries are focusing their full attention on 
manufacturing. They are implementing the policies and programs 
necessary to build 21st century economies now. We simply cannot afford 
to stand on the sideline and watch our competitors pass us by. A 
vibrant manufacturing sector is just too important.
    That is why, earlier this year I introduced the Advancing 
Innovative Manufacturing Act of 2013--or the AIM Act. My legislation 
also brings the public and private sectors together to tackle the 
research needs of industry. Additionally, the AIM act focuses on 
ensuring small and medium-sized manufacturers have the tools they need 
to innovate.
    Because the decline of U.S. manufacturing is a threat to middle 
class jobs and our economy, the Democratic discussion draft of the 
America Competes Reauthorization Act includes a number of 
manufacturing-related provisions. In fact, the proposal we are 
considering today is a part of that discussion draft.
    We need our manufacturing sector to be the most sophisticated in 
the world, using transformative technologies and manufacturing 
processes. By doing this, we can maintain our global leadership. I am 
hopeful that as this Committee considers the reauthorization of NSF, 
NIST, and DOE's Office of Science we can come together across the aisle 
to include policies that will stimulate American manufacturing and 
American jobs.
    Thank you, Mr. Chairman and I yield back the balance of my time.
    Chairman Bucshon. Thank you, Ms. Johnson. If there are 
Members who wish to submit additional opening statements, your 
statements will be added to the record at this point.
    I am now going to introduce our panel of witnesses, and 
then we will hear their testimony. Our first witness is Mr. 
Jonathan Davis, Global Vice President of Advocacy for SEMI, the 
global industry association serving 2,000 member companies in 
the nano and micro electronics manufacturing supply chains. 
Prior to this, Mr. Davis served as the head of the 
Semiconductor IC Business Unit. Mr. Davis earned a five year 
architecture degree from Kansas State University College of 
Architecture, and designed and studied at the University of 
Missouri at Columbia School of Journalism.
    Our second witness is Dr. Richard Aubrecht, Vice Chairman 
of the Board, and Vice President for Strategy and Technology at 
Moog, Incorporated. Dr. Aubrecht began his career at Moog in 
1969 as a design and development engineer. Dr. Aubrecht studied 
at the Sibley School of Mechanical Engineering at Cornell 
University from 1962 to 1969, where he earned his Bachelor's, 
Master's, and Doctorate degrees.
    Our third witness is Dr. Stephan Biller, Chief Scientist 
for Manufacturing Technologies at GE Global Research. He is 
responsible for GE's global advanced manufacturing strategy, 
and the development of GE's smart manufacturing initiative 
across GE businesses. Dr. Biller received a degree in 
electrical engineering from the RWTH Aachen in Germany, and a 
Doctorate in Industrial Engineering and Management Science from 
Northwestern University, and an MBA from the University of 
Michigan.
    And our final witness is Dr. Stanley Veuger, Resident 
Scholar at the American Enterprise Institute for Public Policy 
Research. His academic research focuses on political economy 
and applied microeconomics. Before joining AEI, Dr. Veuger was 
a teaching fellow at the Harvard Kennedy School, Harvard 
College, and the Universitat Pompeu Fabra. He is a graduate of 
Altrec University and Erasmus University at Rotterdam, and 
holds a Masters in Economics from the Universitat Popeu Fabra--
that is hard to say--as well as a Master's and Doctorate in 
Economics from Harvard University.
    Welcome to all of our witnesses. As you should know, the 
spoken testimony is limited to five minutes, after which 
Members of the Committee have five minutes each to ask 
questions. Your written testimony will be introduced into the 
record of the hearing.
    I now recognize our first witness, Mr. Davis, for five 
minutes for his testimony.

                TESTIMONY OF Mr. JONATHAN DAVIS,

            GLOBAL VICE PRESIDENT OF ADVOCACY, SEMI

    Mr. Davis. Chairman Bucshon, Ranking Member Lipinski, and 
Members of the Committee, thank you for allowing me to be here 
to testify before you today on the need to strengthen advanced 
manufacturing in the United States through public-private 
partnerships, like the ones authorized in H.R. 2996, the 
Revitalize American Manufacturing and Innovation Act.
    SEMI is a global industry association with about 500 U.S. 
member companies that serve the semiconductor manufacturing 
supply chain. Semiconductors are small integrated circuits, or 
ICs, more commonly known as computer chips, but today these 
chips power far more than computers. They are the essential 
enabling technology for all electronics and electronic systems. 
Computers, cell phones, tablets, TVs, automobiles, medical 
devices, and components in systems for national defense and 
security.
    SEMI represents a manufacturing supply chain that is 
heavily dependent on innovation and commercialization to 
perpetuate an incredibly advanced pace of technological 
development. On average, SEMI North American member companies 
re-invest 10 to 15 percent of their annual revenues into 
research and development each and every year. The cost to 
commercialize technology continues to increase as we compete 
with global competitors supported by foreign government 
investment. Governments around the world understand the 
strategic value of complete manufacturing supply chains. Many 
are supporting efforts to assist homegrown manufacturers to 
compete with U.S. companies, while also providing powerful 
incentives for U.S. manufacturers to move offshore.
    In the case of semiconductor manufacturing equipment, we 
see intense efforts by foreign governments to commercialize 
next-generation technology outside of the United States. In 
Europe, they have launched the 10/100/20 strategy that will 
supply 10 billion Euros from the EU to leverage large 
investments by industry, with a goal of 20 percent market 
share. In China, the twelfth five-Year Plan from 2011 to 2015 
from the Central Government calls for $600 billion for seven 
priority technology areas, two of which include semiconductor 
related equipment. Taiwan and Korea also have robust funding 
support in efforts to strengthen their local supply chains for 
their important national industries. This localization effort 
often results in direct pressure on U.S. technology providers 
to relocate to their regions. Often, for both financial, or 
customer relations reasons, the pressure to relocate overseas 
is formidable.
    We understand that the U.S. faces its own budgetary fiscal 
challenges related to discretionary and non-discretionary 
funding. Mandatory funding continues to grow, while non-
discretionary funding becomes smaller, and that model simply 
isn't sustainable. It is our hope that Congress will find the 
correct balance between discretionary and non-discretionary 
programs so that worthy policy objectives, such as H.R. 2996, 
can be debated, and we hope implemented.
    We believe that 2996, the Revitalize American Manufacturing 
and Innovation Act, provides the needed leadership by the 
United States government to compete with foreign governments, 
and to strengthen and grow strategically important 
manufacturing industry. This legislation provides public-
private partnership model that we believe will strengthen the 
supply chains of numerous strategic manufacturing industries.
    The legislation doesn't help one company, or one 
university. It enables an entire vertical supply chain for 
specific manufacturing industries. We believe that is the 
proper role for the Federal Government to take, assist an 
entire industry, with everyone, including academia, state and 
local governments, and industry putting skin in the game. 2996 
authorizes the creation of Centers for Manufacturing 
Innovation. Each center will focus on a specific technology for 
the commercialization of manufactured goods. Such a model 
allows for pre-competitive research, or pilot scale 
manufacturing product development.
    As I said earlier, SEMI member companies' cost to 
commercialize the next generation of technology into then 
manufactured product is extremely expensive. Having a shared 
manufacturing pilot line for all companies, including large and 
small, that are part of the supply chain saves resources for 
everyone. It is especially important for small and medium 
suppliers, who cannot afford the high cost to commercialize 
technology. The legislation is technology neutral. The 
government cannot require specific technologies. Rather, they 
will be competed through a merit based solicitation process.
    One of the technologies our member companies produce are 
light emitting diodes, and I see mine is red now, so I will 
refer you to my written testimony, and be happy to answer 
questions.
    [The prepared statement of Mr. Davis follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
    Chairman Bucshon. Thank you, Mr. Davis.
    I will now recognize our next witness, Dr. Aubrecht, for 
his testimony, five minutes.

             TESTIMONY OF DR. RICHARD A. AUBRECHT,

                  VICE CHAIRMAN OF THE BOARD,

                        VICE PRESIDENT,

                STRATEGY & TECHNOLOGY, MOOG INC.

    Dr. Aubrecht. Thank you very much for this opportunity to 
testify. Let me start by giving a little background on Moog. We 
are headquartered in Buffalo, New York. We have been in 
business for about 60 years. We were actually a spin-out of 
Cornell University to begin with. Our primary products and 
technologies relate to precision motion control. We supply 
flight controls for aircraft. We have all the flight controls 
on the F-35. We have the same position with Boeing on the 787, 
and with Airbus. This is the first time Airbus has ever gone 
outside Europe for that sort of control system. And just 
recently we won the same kind of a program at Embraer in 
Brazil.
    We are a global company, about $2-1/2 billion in sales, 
13,000 employees. We are a manufacturing company. We have had a 
history of 60 years of being on the leading edge of the 
technology, but what enables that is to be a leading edge 
manufacturer. It is not just a matter of being able to design 
things. You have got to be able to make things. And so, with 
our global perspective--I travel all over the world. We have 
locations in 30 countries around the world, 15 manufacturing 
locations around the world, seven locations in the United 
States, and so I am very aware of the competitive nature of 
international manufacturing. And what we--a lot of what we sell 
overseas we make overseas, but we also export a lot from our 
facilities here in the United States.
    I am in full agreement with the premise outlined in the 
Dear Colleague letter. Manufacturing is very important in the 
U.S. economy, and it also is highly dependent upon the skilled 
technicians, and machinists, and electronic technicians that 
put our products together every day. Currently we are facing a 
significant increase in our need for training. We had a great 
growth period in the 1970s and '80s. A lot of these people are 
retiring over the next ten years, so we have significant need 
at this point in time for improved training.
    I believe the question we should be asking today is not do 
we need more training, but how to more effectively provide 
training. This Act is about productivity, and about innovation, 
and I would suggest to think about how you can be more 
productive and innovative in training. Recently, in the last 
five or six years or so, there have been--what are called 
massive open online courses have been developed. There are 100 
universities that have joined consortia, such as Udacity, and--
ExEd is the other one, and they are redoing the model for 
providing education. And it seems to me that you could take 
that model and use that for providing a lot of the basic 
training that you need for manufacturing technicians of all 
kinds, machinists, electronic technicians, software 
programmers. It can be done online. That is the whole premise 
of that sort of training.
    The reason for doing it is that you can get the very best 
lecturers to put the courses together, and then provide them 
asynchronously to people all over the country. So you have got 
an ability to be able to deliver wherever it is. We have some 
of our facilities in Murphy, North Carolina. There are no 
training facilities in Murphy, North Carolina. This would 
enable us to be able to provide courses to these sort of people 
all over. The other is it is asynchronous, so people can do it 
on their time. You don't have to show up at 7:00 on Tuesday and 
Thursday evening, and drive 100 miles to go to the course.
    So, to me, the Federal Government could play a very key 
role in seeding that sort of capability, work with people like 
Coursera and ExEd that have put these programs together. They 
have the technology already worked out to provide the courses. 
What is needed is somebody to pull that together and provide 
the seed funding. There is also, it seems to me, a number of 
natural partners for all of that. There are--the companies who 
manufacture the equipment, they already have training programs 
in place, but they are all in place programs. You have to 
travel to wherever their training centers are, very expensive 
to do that. The other are--part of what is mentioned in the 
material for the Act is talking about supply chain management. 
There are two associations of people and supply chain managers. 
They already have training and certificate programs. You could 
work with them and provide their kind of training online all 
over the country.
    So it seems to me, when you think about innovation, you 
want to think about, how is it we can provide more training at 
a much lower cost? The universities that have gone into this 
already have seen that their--the cost per student goes down by 
an order of magnitude. It is down less than ten percent of what 
it costs to do it in place. And the other countries that I 
travel to aren't even thinking about this at this point, even 
at the university level. So if the United States wanted to gain 
a significant advantage in training for manufacturing, this 
would be one way of doing, use it--use the online capabilities 
that are already there.
    In summary, I think the government could very effectively 
take that sort of a role, and provide the necessary risk 
capital, is the way I think of it, to be able to get some sort 
of thing going. It is not going to happen unless somebody like 
that steps in and does it. The industry will support it once it 
is there, but you have to have somebody who takes and pulls it 
together. And, as I say, there are natural partners. You don't 
have to start from ground zero.
    So thank you very much.
    [The prepared statement of Dr. Aubrecht follows:]


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    Chairman Bucshon. Thank you, Dr. Aubrecht.
    I will recognize now Dr. Biller for five minutes for his 
testimony.

                TESTIMONY OF DR. STEPHAN BILLER,

           CHIEF SCIENTIST MANUFACTURING TECHNOLOGY,

                       GE GLOBAL RESEARCH

    Dr. Biller. Chairman Buchson, Ranking Member Lipinski, 
Members of the Committee, it is a privilege to share with you 
today GE's thoughts on the creation of the NNMI program, and 
the establishment of Centers of Manufacturing Innovation, or 
CMIs.
    GE Global Research was America's first industrial research 
lab, established in 1900. For more than 100 years, it has been 
the cornerstone of innovation for GE, and a proud contributor 
to the U.S. lab manufacturing revolution that helped shape and 
define the 20th century. Today we would like to share GE's 
thoughts on launching an NNNMI, and the critical role such an 
initiative can play in helping American companies be leaders in 
the next manufacturing revolution that is rapidly defining the 
21st century.
    Innovation has always been one of our nation's greatest 
assets, but if the United States is going to be a leader in 
manufacturing moving forward, the country needs to embrace new 
trends that are driving our ability to compete.
    Mr. Lipinski. Dr. Biller, could you pull the microphone 
closer?
    Dr. Biller. Is this better?
    Chairman Bucshon. That is much better.
    Dr. Biller. I am sorry. Okay. To become more competitively 
globally, government support for innovation has to become more 
targeted, involve more partners, and commit to longer time 
horizons that are closer to commercialization. Other developed 
high wage countries, such as Germany and Japan, have long taken 
such an approach, and found much success, considering their 
levels of manufacturing employment. Similarly, the launch of 
the NNMI would embrace this innovation model, and significantly 
improve the competitiveness of U.S. manufacturing.
    The success of the NNMI will depend on having a healthy 
ecosystem of centers of manufacturing innovations, or the 
CMI's, with participants from academia, government, and 
industry. We believe that it is paramount to U.S. manufacturing 
competitiveness that the CMIs help small and medium 
enterprises, the SMEs, introduce novel manufacturing technology 
into the U.S. manufacturing supply chain more rapidly. To 
provide these SMEs with the best possible framework to succeed, 
we recommend adapting a SEMATECH-like collaboration model that 
provides broad access to state-of-the-art equipment, draws 
leadership of CMIs from industry, and leverages CMIs as a 
training ground to develop an advanced manufacturing workforce. 
We believe the NNMI can provide the broad framework that 
strengthens the U.S. industrial base position as a global 
manufacturing leader.
    Last year GE was very pleased when the first innovation 
institute was established under the NNMI, in additive 
manufacturing, or NAMI, in Youngstown, Ohio, and is proud to be 
an industry partner. Already NAMI is beginning to show how big 
companies like GE can connect and work effectively with small 
and medium companies to push new advancements.
    In the same way that CMIs should draw upon the unique 
skills of academia, government, and industry, it is equally 
important for each of the CMIs' governing boards to draw its 
membership from academia, government, and industry. When it 
comes to day-to-day operations, however, the leaders for each 
institute, and a number of their staff, should be recruited 
from private industry, and have demonstrated experience in the 
insertion of advanced manufacturing technology into production. 
We believe that is really the key. This will ensure that 
industry sees the benefit of engagement with CMIs, and 
participants in these institutes, on a long term basis.
    Many large companies, like GE, have continued to use 
apprenticeship programs to build the skilled workforce of 
tomorrow. The skills gap, however, is not limited to producing 
a production workforce. The proportion of science and 
engineering workforce older than 50 has risen significantly in 
recent years as well. We must also place emphasis on 
replenishing the advanced manufacturing researchers that will 
be necessary to develop tomorrow's technology breakthroughs. 
The NNMI is really an ideal place to do that.
    Regarding the design of these CMIs for broad impact, GE 
would like to make the following recommendations. Each Center 
for Manufacturing Innovation should focus its effort on 
addressing the fundamental technical barriers that prevent 
manufacturers from broadly adopting specific technologies. To 
accomplish this, each CMI should adopt an inclusive SEMATECH-
like approach that includes participants from each part of the 
manufacturer's supply chain. The equipment within each of these 
CMIs should be made available to all companies so they can 
conduct manufacturing trials to reduce implementation risks, 
and improve the productivity and competitiveness of their 
manufacturing operations, very much like the Fraunhofer 
Institutes in Germany.
    At the same time, companies that provide advanced 
technology equipment to the CMIs should be allowed to count 
these in-kind contributions toward membership or participation 
fees. This will ensure that the CMIs will always have access to 
state-of-the-art equipment. The advisory boards that provide 
direction to the CMIs should be comprised of individuals from 
industry, government, academia, but the leadership teams should 
be recruited from industry, and should have experience in the 
insertion of advanced manufacturing technology. Additionally, 
the NNMIs should create a mechanism for collaboration, 
technology transfer, and the aspect of sharing.
    Finally, working with community college and universities, 
CMIs should provide internships to train the future advanced 
manufacturing workforce. Furthermore, mechanisms should be 
created to allow private sector employees to collaborate at the 
CMIs for long term assignments. The NNMIs represent, really, a 
significant opportunity for the United States to restore its 
manufacturing prowess and improve its competitiveness. GE is 
really committed to creating an industrial manufacturing 
ecosystem by working with other organizations to form these 
CMIs.
    Thank you, and I look forward for your questions.
    [The prepared statement of Dr. Biller follows:]


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    Chairman Bucshon. Thank you, Dr. Biller.
    I now recognize Dr. Veuger for five minutes for his 
testimony. Welcome.

                TESTIMONY OF DR. STAN A. VEUGER,

                       RESIDENT SCHOLAR,

               AMERICAN ENTERPRISE INSTITUTE FOR

                     PUBLIC POLICY RESEARCH

    Dr. Veuger. Thank you. Mr. Chairman, Mr. Ranking Member, I 
would like to thank you for the opportunity to testify today 
before the Committee. I am here to discuss the need for a 
manufacturing innovation network, as proposed in H.R. 2996. 
H.R. 2996 proposes to appropriate $600 million to--for 
establishing a network for manufacturing innovation consisting 
of Centers for Manufacturing Innovation. These centers are 
meant to address challenges in advanced manufacturing to retain 
or expand industrial production and jobs in the United States. 
They must do so in areas determined by the Secretary of 
Commerce to be of importance in attaining these goals, and they 
must feature representatives from multiple entities from a 
broad range of categories.
    The Secretary of Commerce's decision as to which Centers 
are worthy of federal funding will be--decides these overall 
goals on criteria including the involvement of small and medium 
sized manufacturing firms, as well as on how the Center for 
Manufacturing Innovation will strengthen and leverage the 
assets of a region.
    Now, according to the Bureau of Labor Statistics, the 
manufacturing sector employs some 12 million workers in the 
United States, down from almost 20 million in the late 1970s. 
It is about half a million more than at the end of 2009, but 
still about two million fewer than before the start of the 
Great Recession. These figures do not suggest what is commonly 
referred to as a true Renaissance of U.S. manufacturing, but a 
look at sales manufacturers' sales figures provides much more 
of an underpinning to such a view of U.S. manufacturing.
    According to the Census Bureau, manufacturing sales are 
indeed back where they were at their previous peak. After 
falling by about 25 percent during the recession, they had 
rebounded by July of this year. What this suggests, of course, 
that most of the recent resurgence of manufacturing in the 
United States has been highly capital intensive. That is, 
output is increasing without much new hiring. It has been true 
for decades. It is mostly a product of technological progress, 
and does not appear to be a trend that is about to reverse.
    It is also certainly not a phenomenon that is unique to the 
United States. Even Germany, touted for its positive trade 
balance--manufacturing products in H.R. 2996, have seen 
manufacturing employment as a share of total employment plummet 
over the past 40 years. These broad long term developments, 
driven by technological change more than domestic public 
policy, are important to consider when analyzing the state of 
manufacturing today. It seems unlikely manufacturing will 
regain its old central role in the labor market in our modern 
economy, and striving to reverse the trends highlighted before 
us is likely to be costly, and ultimately fruitless.
    Now, new spending initiatives, like the manufacturing 
innovation network proposed here, look even less attractive if 
we also consider the state of the Federal Government's 
finances. Over the past 40 years mandatory spending, 
particularly on entitlement programs such as Social Security 
and Medicare, has escalated rapidly. Less than 20 percent of 
the Federal budget now goes toward programs other than Social 
Security, Medicare, Medicaid, CHIP, other safety net programs, 
defense, and interest payments, and almost half of that--half 
of the remaining 20 percent pays for benefits for federal 
retres and veterans. This development puts immense pressure on 
discretionary spending programs, some of which are quite 
crucial to the nation's future. Instead of allocating funds to 
new manufacturing innovation initiatives, I prefer that current 
spending on scientific and medical research be maintained, that 
some of the more unfortunate sequestration cuts in those areas 
be reversed. More importantly, to preserve such important 
programs, Congress needs to commit to serious entitlement 
reform in order to keep entitlement spending from further 
crowding out all other spending.
    At the same time, setting the stage for enduring American 
competitiveness is certainly within the realm of the possible. 
By removing uncertainty about a country's fiscal policies, but 
providing tax and regulatory relief to both manufacturing and 
non-manufacturing firms, by training workers to be able to 
function in today's globalized economy, and by benefitting from 
the domestic oil and gas industry's newfound health, the United 
States can continue to be home to extraordinarily successful 
innovative firms in manufacturing and elsewhere.
    In sum, I believe that there is a variety of ways in which 
to address, or at least alleviate, some of the problems often 
attributed to the decline of manufacturing in the United 
States. None of these are cure-alls, but some of them--though 
possibly politically difficult are more genuinely beneficial 
than others, including corporate tax reform and entitlement 
reform. Thank you.
    [The prepared statement of Dr. Veuger follows:]


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    Chairman Bucshon. Thank you, Dr. Veuger, for that 
testimony. I would like to thank all the witnesses for their 
testimony, and remind the Members that the Committee rules 
limit questioning for five minutes. The Chair, at this point, 
will open the round of questioning, and I recognize myself for 
five minutes.
    Dr. Aubrecht, I am interested since your company is so 
global, if you had two or three things that are really 
potentially disadvantaging the United States versus the rest of 
the world when it comes to manufacturing, what would those be?
    Dr. Aubrecht. Regulations would be the one that would head 
my list.
    Chairman Bucshon. And--or--what--I mean, what direction do 
you think the rest of world's going when it comes to these type 
of things, like regulation, taxation, or--let me just give you 
an example. There is a business in my district, a large 
company, that, when I talked to the CEO, and he told me what 
his offer was to move his company to a foreign country, it 
almost seemed like an offer you couldn't refuse, except for the 
fact that American manufacturers want to stay in America, and 
they want to employ U.S. citizens. But, on the face of it, it 
was--it seemed like a pretty difficult offer to refuse, 
although they did. What are the few things that you think that 
America can--that we should be doing that will make us be able 
to compete with offers like that, or from around the world, I 
mean, just in general? Other than regulation, as you said.
    Dr. Aubrecht. Well, the whole topic of the day is on 
innovation and manufacturing, and as I--focused on was the 
training aspect of the whole thing. Our assets walk out the 
door every night, and you need to maintain the capability of 
the people in the organization, from the design engineers, down 
to the people that are putting the product together on a daily 
basis. And in terms of productivity, our American workforce 
that we have in Buffalo is the best that we have anywhere in 
the world.
    At the same time, the Buffalo economy is not doing all that 
well. We put an ad in the paper or online for somebody, we get 
100 applicants for one spot. And--so I think the--our 
experience that way is not typical for a lot of American 
manufacturers. We are able to get the people and retain the 
people. We have less than one percent turnover in the company. 
But, as I say, we have people retiring, and now trying to find 
other younger people to come in and replace them, we are having 
to do a lot more training. We have had apprentice programs we 
have run with the community college. We have also become a much 
more global company. If you go back 20 years, 90 percent of our 
manufacturing was done in Buffalo, New York, and today we are 
down to maybe 25 percent because we made the acquisitions, we 
put facilities in other places in the United States, and we are 
finding the training capabilities in those places are not as 
good.
    The flipside of that is--you are--talking earlier about the 
Fraunhofer Institutes, I spent three years living in Stuttgart, 
and worked with the Fraunhofer Institutes there. That provides 
a great advantage. One of the real advantages that Germany has 
is not just that kind of a capability, but the training 
programs that they have that start in what you think of as 9th 
grade in the United States. People come out--we can hire people 
at 19 and put them in front of a half a million dollar machine 
tool, and they know what to do with it. And we can't do that 
here in the United States. That is the thing we need to improve 
on, is the skills to be able to actually execute. We have got 
great design engineers, great capability, but the question is, 
how well do you execute that?
    I would also suggest that one of the other things you ought 
to think about with this is about--they say we do about $2-1/2 
billion. 700 million of that is sales that ultimately end up to 
the U.S. Government. So our productivity is of great interest 
to you as well, in terms of how much do you get for your 
defense spending dollars. And so I would think that that would 
be another place that you ought to be thinking about it, is how 
is it you could link with other people who are customers in the 
government for the products we end up producing.
    Chairman Bucshon. Thank you. And I also serve on the 
Education and Workforce Committee, which this is a challenge 
that that Committee's working on, as--trying to figure out K 
through 12 education, and where--like you pointed out, where we 
can make some adjustments that when people finish high school, 
that they already have a significant amount of skill, if that 
is their area that they want to pursue, and have those options 
available to them at the high school level----
    Dr. Aubrecht. Um-hum.
    Chairman Bucshon. --and come out with up front better 
training. And I think we are going to start doing a better job 
of that. We have gotten a little bit behind, but I think we are 
going to catch up. So that definitely is important.
    I am going to--to all witnesses--I will start with Mr. 
Davis. We have held a number of hearings in the Subcommittee, 
and we are considering legislation to reauthorize funding for 
basic research at NSF, NIST, and the DOE Office of Science. As 
you know, we are facing difficult budget times, and what 
recommendations would you have for policymakers in prioritizing 
Federal spending on advanced manufacturing programs?
    Mr. Davis. Thank you, Congressman. Clearly, I think in the 
context of today's discussion, our industry views the research 
and development that is oriented towards commercialization, how 
we take innovation and make sure that those innovations propel 
economic growth, jobs, and prosperity in the United States.
    Chairman Bucshon. Dr. Veuger, do you want--any comments on 
that? And then I am going to be out of time. Am I out of time? 
I am out of time.
    I now yield to the Ranking Member, Mr. Lipinski, for his 
questioning. Thank you.
    Mr. Lipinski. Thank you. I want to thank all of our 
witnesses for their testimony. And, in--pointing out that this 
bill really proposes that this is going to be a public-private 
partnership led by industry, and I think that is very 
important, and that Mr. Davis had brought up that this will 
assist an entire industry. I think those are important things 
to understand about this bill.
    And, Dr. Aubrecht, certainly couldn't agree with you more 
on the need to do better with training, and I am glad to hear 
in Buffalo that the supply of workers, and qualified ready 
workers is there, but I certainly hear from manufacturers in 
Chicago that that is not necessarily the case, and I think we 
need to do more on that.
    But I wanted to ask Dr. Biller, as proposed in this 
legislation, the main purpose of the centers for manufacturing 
is to close the gap between R&D activities in deployment of 
technological innovation in domestic production of goods. I 
have--it has been--one of my biggest issues for me is to do 
what we can at the Federal level to help to close that gap. We 
have great R&D that goes on in this county, and, unfortunately, 
so much of it does not get deployed into innovation, and some 
of it that does isn't--is not done here.
    So, in your testimony, you mentioned that Federal 
Government support has to involve more partners, and be 
committed to longer time horizons. You also indicate that 
research collaborations need to continue to later stages of 
R&D, closer to commercialization. So I wanted to ask, does the 
legislation address the needs you have identified in your 
testimony, and why is it important that research supported by 
the centers get to the production level, or later stages of 
R&D?
    Dr. Biller. It is really all about getting over that Valley 
of Death we have been talking about between--for technology at 
readiness level four to seven, which is really what the 
Fraunhofer Institutes and the SEMATECH model essentially 
addressed. So it is important for companies like General 
Electric that we have access to that, but I think it is even 
more important that we create an ecosystem of small and medium 
enterprises that have access to that kind of technology, 
because they have neither the skills, nor the money, to develop 
technology through that Valley of Death.
    And, just as we have seen now in the additive manufacturing 
space, where the creation of an ecosystem allows us to draw 
upon an innovation capability from a much broader supply base, 
we need to think about how we are going to create that 
ecosystem of a much broader supply base with SMEs and 
traditional manufacturing, which is probably 99 percent of 
current manufacturing, and additive being maybe one or less.
    So, to us, to stay globally competitive, and particularly 
in the United States, it is very, very important that we get 
our small and medium enterprise through that Valley of Death, 
and give them access to advanced manufacturing technologies. 
And I think that is where the NNMIs can play a key role in 
accomplishing that. So that is why we are so supportive of this 
model. And, again, in Germany and Japan, you have SMEs being so 
successful, and being world leaders, because they have support, 
like the Fraunhofers, or the Japanese equivalent.
    Mr. Lipinski. Okay. And, sir, getting back to the public-
private partnerships, why are these so--and you have talked 
about a few things. Are there other things you could talk 
about, why these are so attractive to industry?
    Dr. Biller. If we think--if you think about, for example, 
the suggested DMDI Institute on digital manufacturing 
innovation, there the SMEs need to learn simulation 
capabilities, capabilities to design product in virtual--launch 
the factories in a virtual environment, thereby increasing 
innovation, decreasing cost. They have to integrate with the 
large companies in a digital space. They currently don't have 
the engineers trained to do that. They currently don't have the 
software available to them to do that. We need to think of 
these CMIs as a commons essentially, where we are going to 
train our SMEs, as well as develop technology, and give them 
access to that, so that they stay globally competitive. For us 
it is always, you know, the best thing is make what you sell, 
that--thereby you are the closest to your customer, your 
product engineers are together with your manufacturing 
engineers. And we need to think of manufacturing as a 
requirement for product innovation. That is why we think it is 
so important.
    Mr. Lipinski. And as manufacturing leaves this country, 
that is the great fear, that innovation will also leave the 
country, as the people who are doing innovation are moved over, 
or it is all done where the manufacturing's done outside the 
country, so--thank you. I yield back.
    Chairman Bucshon. Thank you. I now recognize Mr. Schweikert 
for five minutes for his line of questioning.
    Mr. Schweikert. Thank you, Mr. Chairman. I want to sort of 
back up, and maybe even move slightly more conceptually.
    Gentlemen, if you were to lay out in front of me and say, 
here is where we are finding innovation, creativity, sort of 
break through concepts as much as technology, and I don't mean 
it geographically, I mean it organizationally, are you finding 
it coming out of the universities? Are you finding it coming 
out of small manufacturers? Are you finding it when a half a 
dozen engineers from Intel go off and start their own business? 
Where is that ecosystem of the--sort of the cutting edge ideas? 
Where is it coming from? Mr. Davis, start there.
    Mr. Davis. So if I could say all of the above, and I think 
that is one of the attractive elements of this legislation, is 
it tries to leverage the synergies between private enterprise, 
universities, state and federal governments, small and medium 
sized enterprises.
    Mr. Schweikert. Well, but--back to the--very precise in the 
question. Where do you see the innovation actually happening?
    Mr. Davis. So innovation and invention are two different 
things, in my mind. I think invention happens in fundamental 
research in universities, where basic breakthroughs occur. 
Innovation becomes the application of----
    Mr. Schweikert. The adoption of?
    Mr. Davis. Yeah, the adoption and application of those 
inventions in commercial ways. So I think, from an industry 
association perspective, we see innovation happening with 
companies----
    Mr. Schweikert. Okay.
    Mr. Davis. --ideas to market.
    Mr. Schweikert. Doctor?
    Dr. Aubrecht. For us it is primarily our design engineers. 
Our fundamental business model is to get very close to our 
customers, and find out what their problem is. This is a 
classic Clayton Christensen, find out what your problem--
customer's problem is, and go solve it. And it is that 
interface with our customers, and that dialogue that happens 
between the--our--design engineers for our customers and our 
engineers, that is where the innovation happens. When we were 
doing the 787 program, we had 25 of our engineers working in 
Boeing's Seattle facility for about four years to design our 
flight controls right into the aircraft. There is a tremendous 
amount of innovation that came out of that. The experience that 
our people get doing that is what is led us to do the next 
generation for other aircraft, then.
    Mr. Schweikert. Okay. So your smart people went on site 
with your customer?
    Dr. Aubrecht. Exactly, and that is where we see the most 
sources of the innovation, is working with your end customer, 
and understanding what their problem is, and having your people 
work with them. It is the same with manufacturing. It is 
getting our manufacturing people to work with--sometimes it is 
universities, sometimes it is the equipment manufacturers--
talking to the equipment manufacturer about--your machine is 
doing this great, however, if you did this with it--and, again, 
it is the same sort of----
    Mr. Schweikert. Well, that is the translation of the 
knowledge that is been gained. I am sort of trying to 
understand where those ideas are germinating.
    Dr. Aubrecht. It is the same kind of conversation.
    Mr. Schweikert. Okay. Dr. Biller?
    Dr. Biller. I agree wholeheartedly with Dr. Aubrecht. It 
happens in the factories, when our researchers go to those 
factories, try to figure out where the pinpoints--what are the 
problems? For us, our factories are the customers. And then, 
conversely, when we go into our supply chain, we help our SMEs 
and our business partners in the same way. We are trying to 
find out what the problem is, go after the problem. Innovation 
really happens for manufacturing on the plant floor, with smart 
people, including academics, including people from government 
labs, including people from industrial research labs.
    Mr. Schweikert. Okay. Doctor? This is easy. I can just sort 
of go, Doctor, Doctor----
    Dr. Veuger. I think I would agree with the all of the above 
answer that I think all of the previous speakers have given. 
And I think that is what makes it hard to justify the federal 
government giving preference to certain processes, certain 
groups, certain places over others, and to, you know, to place, 
admittedly, a large part of the economy, but still one sector 
of one industry over others.
    Mr. Schweikert. Can--actually, can you elaborate on that? 
Because it is touching on--one of my concerns is often, when a 
piece of legislation like this, that is very well meaning, 
does--because of the financial incentives and mechanics built 
into that, do you start to silo where innovation actually 
starts to be developed because of the financial incentives 
there. So, Doctor, please continue there.
    Dr. Veuger. I mean, I would--I mean, it seems clear that a 
bill like this, in a way, subsidizes innovation in 
manufacturing over all other innovation and R&D. I mean, that 
may be something you want to do for some reason, but it is--I 
mean, it is certainly true that there is an element of 
prioritization there.
    Mr. Schweikert. Okay. And, with that, Mr. Chairman, I am 
out of time. Thank you.
    Chairman Bucshon. Thank you. I now recognize Dr. Bera----
    Mr. Bera. Great. Thank you----
    Chairman Bucshon. --five minutes.
    Mr. Bera. Thank you, Mr. Chairman, and, you know, I want to 
thank my colleague, Mr. Kennedy, for bringing this important 
piece of legislation to the forefront. It is incredibly timely 
that we are talking about how we revive the manufacturing 
sector, and how we create jobs. I had a town hall with my 
constituents back in Sacramento County last night, a telephone 
town hall, and in that I heard from a number of folks that, you 
know, are consistently looking for jobs. I heard from one young 
veteran who returned, all she wants is to find a job. She is 
not asking for Unemployment benefits or anything, she just 
wants to find a job. I also heard from a desperate couple that 
is been out of work for two years, and they are incredibly 
worried about Unemployment benefits being cut off, but they are 
not asking for an extension. They need that extension, but they 
want a job. They have been looking for jobs.
    Now, Dr. Aubrecht, you touched on part of our challenge, 
this skills mismatch. There are plenty of jobs out there, but 
our workforce, our graduates, are not trained to meet those 
jobs, so we do have to double the effort to make sure we are 
addressing that skills mismatch. You know, another challenge 
is--maybe Mr. Davis touched on this, or all of you touched on 
it, is inconsistent Federal policy. I mean, we have not 
defined, you know, what our goal is, how we are going to make 
those investments, what kind of a regulatory framework we are 
going to do, so we can create that--those jobs, so we can make 
those investments, so our kids, our graduates, are able to fill 
those needs. In addition, we have seen dramatic reductions on 
our investment in R&D, and that creates another challenge for 
us.
    And then Mr. Lipinski touched on, you know, this issue of 
technology transfer, you know, how we quickly get these ideas 
out of our academic institutions, and out of R&D, into, you 
know, industry so we can commoditize them, and grow industries. 
That said, we do have some assets, and some natural advantages. 
I think, Dr. Veuger, you touched on this energy Renaissance 
that is coming. That will make our manufacturing base much more 
competitive.
    Dr. Biller, you touched on--I think the term you used was 
make it where you sell. And, you know, as I have been talking 
to some international multinationals, they are considering 
locating their manufacturing sector here in the United States 
because the advantages that they have in lower costs of labor, 
we are about to potentially outweigh those advantages, given 
they are selling to our market. You know, if they build it 
here, they don't have the cost of transport, and we have much 
lower energy costs, plus we do have the rule of law and so 
forth here. So there are some advantages there. We are still 
the most innovative economy.
    I haven't asked a question yet, but on that sector of 
investment in R&D, and on technology transfer, coming out of an 
academic background myself, and any of you can answer this 
question, what can we do to allow industry to partner much more 
closely with our academic institutions to make it easier to 
take those ideas to market as quickly as possible? Maybe Dr. 
Aubrecht?
    Dr. Aubrecht. Yeah. One of my other involvements--I am a 
trustee at Cornell. I have been a trustee there for about 25 
years, and one of my primary interests there has been 
technology transfer. And I have looked at models elsewhere 
around--some of my other trustee colleagues have looked at 
models elsewhere around the country. There was an experiment 
that was run in the California university system about ten 
years ago. Berkeley lives in the same neighborhood as Stanford. 
Stanford had a tremendous amount of industry sponsored 
research. Berkeley had relatively little, and it all had to do 
with licensing. And what Berkeley did was to run an experiment 
and allow the researchers to do royalty-free non-exclusive 
licenses. And, as a result of that, in a relatively short time 
period, Berkeley went from under $10 million to over $100 
million a year in industry sponsored research. And it seems to 
me it is the same sort of model.
    There are places where that doesn't work. If you think 
about medical research for drugs, drugs--a drug company is 
going to want to have an exclusive license, otherwise they are 
not going to put a billion dollars into developing a drug. But 
for a lot of other things, what they found is--they put 
together industry consortia--we are currently partnering with 
about six universities that have industry sponsored consortia, 
and a lot of those it is royalty-free non-exclusive licenses. 
It is a pre-competitive sort of research that ends up going on. 
And if you look at the research that the federal government 
sponsors, coming out of the NSF, or NIH, or whatever, it seems 
to me that more of that ought to be done with royalty-free non-
exclusive licenses.
    What happens is researchers get together, or the engineers 
are talking to each other, that is great. They can see the 
problem, they get it defined, and then they spend a year and a 
half with the attorneys trying to work out a contract. This is 
nuts. So do it royalty-free non-exclusive wherever possible. 
And it seems to me you could roll that into the legislation for 
NSF and NIH to say, we want royalty-free non-exclusive 
licenses. We want the scientists and engineers talking to each 
other, not the attorneys.
    Mr. Bera. Great. Sounds great.
    Chairman Bucshon. I would agree with Dr. Aubecht.
    Mr. Bera. Okay.
    Chairman Bucshon. I now recognize Mr. Collins for his 
questioning.
    Mr. Collins. Thank you, Mr. Chairman, and Dr. Aubrecht. 
Very good to see you again today. Moog is in my district, if 
you will, in East Aurora, but also they have their rocket 
facility up in Niagara Falls, which is also in my district, so 
I like to think at some point in time we may have more rocket 
scientists in the 27th Congressional District than in any other 
in the country.
    And I have toured your facility, so here is my question. 
And I am involved in manufacturing and in high tech businesses, 
and many case, it is the IP that makes you who you are.
    Dr. Aubrecht. Um-hum.
    Mr. Collins. So Moog, a multi-billion dollar corporation, 
does R&D all the time. You protect what you do with IP. That is 
what differentiates you, whether it is rocket engines, or a new 
fuel source, or whatever. And now we are talking about 
something like the antithesis to that, that you are going to 
sit down in an industry group, so this isn't going to be a Moog 
facility, and in that jointly develop technology where you 
don't have a competitive edge any longer. And I am--being, you 
know, I very much support this, I am co-sponsoring this 
legislation, but the naysayers might say, you know, help me 
through that loop of what you do now. You protect your IP at 
all costs, and now you are going to go try to leapfrog 
somewhere, and you don't have any IP. Help us through that a 
little bit.
    Dr. Aubrecht. So to me it is a question of, you know, you 
talked about technology readiness level. When you are down with 
the technology, one and two, three sort of level, that is pre-
competitive kind of stuff most of the time, and while you can 
generate some IP coming out of that, what is really important 
is the intellectual engagement of the scientists and the 
engineers at that point in time to see what is possible and 
with a lot of the innovation that happens today, it is not just 
in one field. Where we are innovating, where usually people are 
involved with five or six or seven disciplines, and the 
question is how you bring them together and provide a way that 
people can openly exchange their ideas.
    Mr. Collins. Can you give like an example, like something 
that somebody can grab hold of and say, okay, now I got it? You 
are a little bit conceptual there.
    Dr. Aubrecht. Okay. Aircraft flight controls. It is the 
computer, but it takes people who understand the software 
architecture, the digital programming for all of that, how it 
is going to function in the aircraft, you need to have the 
aerodynamicists involved, you have to have the structural 
engineers involved. They all need to come together and be able 
to say, here is what the fundamental problem is and then the 
people who have the specific technologies in digital hardware 
and digital software and systems engineering can go create a 
new product. And that is where the IP is created.
    So you can have--we have conversations with all sorts of 
people in those other disciplines out of pre-competitive. We 
are not telling them where we are going to head with it, but 
ultimately there are ideas that come out of that. We have this 
kind of relationship with MIT right now. It is all pre-
competitive sort of things that we are taking those ideas and 
learning how to implement them. To me it is the intellectual 
engagement that really drives all of that, and so with this 
sort of legislation what you'd like to do in these centers is 
to provide that sort of independent zone where people can trade 
ideas and talk about things before they are, before you create 
IP that you consider is going to be proprietary.
    Mr. Collins. And so one follow-up question. Since this is 
at max seven years of funding----
    Dr. Aubrecht. Uh-huh.
    Mr. Collins. --50/50 federal government and either industry 
or states, and then the money is gone. And from what I am 
hearing this isn't going to be a facility that is going to be 
making things, having sales, making profits, covering their own 
costs. So it is a cash burn operation, technology one, two, 
three. So what happens at the end? Does it go out of existence 
since it is not generating income and the money's gone? What 
happens after seven years. Anybody want to----
    Mr. Davis. I will take a shot at trying to answer both 
those questions. You had asked for an example of how companies 
might want to participate and preserve their IP. In my 
industry, a state-of-the-art, high-volume manufacturing 
facility for integrated circuits can cost 5 or $6 billion or 
more because of the high capital equipment costs.
    So if you are a small or medium-sized enterprise that is 
trying to develop a new process or introduce a new material or 
test a kind of component, it is very difficult to engage. The 
cost of entry is so high that it is very difficult.
    But a shared facility would enable multiple entities to use 
that facility to develop processes that could then be 
commercialized, differentiated, and have IP associated with it.
    So the pre-competitive sharing of facilities is a great 
asset.
    Mr. Collins. So in that situation because it is shared, 
could you envision that, you know, after the seven year 
timeframe industry would say they are almost like a trade 
association? We are going to assess a certain amount of dues to 
keep this going after year seven. It is working great. We see 
the value of it. Is that----
    Mr. Davis. Absolutely, Congressman. I think that is one 
example of a sustaining model that could very well work wherein 
an established facility then becomes essentially rented out for 
people that want to----
    Mr. Collins. Okay.
    Mr. Davis. --test processes.
    Mr. Collins. I can see that. My time is expired. Thank you 
very much.
    Chairman Buschon. You are welcome. In fact, at--in my 
district there is a battery innovation center outside of Great 
Naval Surface Warfare Center in Westgate, which is doing 
exactly what you are talking about where multiple people from 
different areas are talking about trying to innovate on the 
next generation of energy storage so to speak and batteries. 
And it is, I think it is going to be successful.
    With that I recognize Ms. Esty for five minutes.
    Ms. Esty. Thank you, Mr. Chairman. I want to thank you for 
holding this hearing and to my colleagues, Mr. Kennedy and Mr. 
Reed for introducing this legislation which I am looking 
forward to being a cosponsor of.
    I am from Connecticut, one of the homes of manufacturing, 
and these issues are of critical importance. I have companies 
such as Click Bond and Industrial Heater Corporation, who are 
engaged in this effort. These are small manufacturing 
companies, frequently family owned, who have held on through 
the recession by investing their family money to keep going. So 
this issue about workforce development is critically important.
    You have touched on and sort of referred to the importance 
on colocation, whether it is for innovation for small companies 
but also being near your customer, which seems to me is a very 
important issue of why if we are going to get the benefit of 
innovation in manufacturing, it needs to be done in the United 
States. That has important elements that not captured by flying 
our engineers to the plants in China because I have heard that 
from companies and why, in part, not just the energy dynamic 
changing but also the importance of having that close 
innovation happening right there on the plant floor.
    So, Dr. Biller, I would like you if you could expand a 
little bit more on the apprenticeship programs. I have 
introduced a piece of legislation, the First Step Act, to try 
to support apprenticeship and training programs, that critical 
piece between not quite ready workforce and the workforce I 
know we need on the plant floor that I hear from manufacturers 
that have openings right now even with the high unemployment 
rate in Connecticut.
    So can you talk about how these apprenticeship programs are 
working and what we could do at the Federal level to help scale 
those up and disseminate those?
    Dr. Biller. Yeah. So GE has partnered with about 190 
companies to establish the Get Skills to Work Program basically 
trying to get about 100,000 veterans into the workforce, and 
then we are working with community colleges and trying to 
define the skills we need within our, that applies to our GE, 
energy business, it applies to our business in Massachusetts on 
aviation. We have to define those skills specifically for these 
people that they can use them within the factories.
    If we want to scale this, and I think I read your 
legislation, I think it is a very good idea. We want to make 
sure that we get certification that is truly certification. So 
if I look at a piece of paper that says I am certified in X, Y, 
Z, I know what that means, and so it appears to me that a 
national institute could certify that and thereby giving 
employers the assurance that a person who has such a 
certificate can really do a certain job.
    So I think that will be the way to scale it, provide 
community colleges with a level of certification that they then 
implement.
    Ms. Esty. Thank you, because in part we have been 
approaching this as you probably know in Connecticut looking at 
veterans as well, trying to get certification on the military 
side that translates to civilian.
    Dr. Biller. Yes.
    Ms. Esty. And nationalized certification that allows 
transporting those skills from company to company and around 
the country and we'd love to follow up with any of you on that 
point because I do think that is a critical missing component 
that in our Federal system if you compare with say Germany or 
other countries that are nationalized, that that has hampered 
us in our mobility, in our ability to make sure our community 
colleges and other training facilities have, if it is welding, 
level one, everyone knows exactly what that means, so you as an 
employer know what that means. You know where your employee is 
starting because I think this is a critical component.
    Are there other pieces--something I would like some of you 
to mention, we had an earlier hearing this year where we talked 
about the basic importance of R&D and frankly, a consistent 
funding stream and really looking at these innovation corridors 
in Silicon Valley and 128 and Boston, which were really fueled 
by the Department of Defense, which had very large sums of 
money for a very long period of time that allowed the sort of 
free-flowing R&D from which other things could spin out but 
also had specific tasks assigned. And I know we are trying to 
do this around batteries right now, around energy storage. If 
any of you would like to comment on the importance of that, 
sort of consistency of funding streams on the basic level but 
then task specific to try to go from there.
    Dr. Biller. I think it is really critical that we look at 
consistent funding. Starting and stopping wastes at least a 
year every time you do it, and so, you know, in a five year 
program it wastes 20 percent of U.S. taxpayers' money if that 
is how you want to do it. So consistency is really critical.
    I want to come back to the previous question of Mr. 
Collins, who talked about how do we sustain this. I have been a 
member of the Center of Intelligent Maintenance for about 13 
years where we started with very little government funding and 
over time we have recruited many, many members, I think 50 or 
60 companies, each putting in $40,000 a year, and that became a 
very--so the government funding was maybe 1 or two percent of 
the total funding, and it was, again, a pre-competitive 
situation. We developed algorithms for maintenance, for 
machines, and for vehicles, and then we took that inside the 
companies and implemented that. It is the implementation in 
this case where really the competitiveness starts, not in the 
development of the actual algorithms and TRL one, two, three.
    Ms. Esty. Thank you very much.
    Chairman Buschon. I now recognize Mr. Hultgren for his line 
of questioning.
    Mr. Hultgren. Thank you, Mr. Chairman. Thank you all for 
being here. This is a very important conversation and 
discussion that we need to be having where we are talking about 
competitiveness for the United States, specifically in 
manufacturing and especially in high tech manufacturing, and we 
need to do everything we can here in Congress to be working 
with you to be helping with that.
    So I know in my home state, Illinois, we have got 
statistics say 578,200 manufacturing jobs and 1.8 million jobs 
are tied in directly to manufacturing. A little over 12 percent 
of Illinois GDP is attributable to manufacturing, making it the 
largest share, and yet significant challenges manufacturing is 
facing right now. I know we have discussed in this Subcommittee 
over the last months the disconnect between many academic 
institutions and industry that often makes it more difficult to 
train our next generation's workforce.
    There are also obvious tax and regulatory issues U.S. 
industries face. I know I have heard excluding labor costs it 
is still 20 percent more expensive to manufacture in the United 
States compared to other trading partners.
    So my question, first, would address to all of you if you 
could make a comment. I know the goal of the proposed network 
is to aid high-tech manufacturing in the U.S., and I absolutely 
agree that we need to encourage this. Some might say, though, 
if any amount of Federal spending on science and technology, 
they question whether that would help manufacturing as much as 
significant regulatory and tax reform potentially would help 
manufacturing. I wonder if you could provide us with your 
thoughts on this, as well as how to create the optimal 
environment to support high tech manufacturing and job creation 
here in the U.S.
    I throw that out to any of you if you have thoughts. I know 
it is a big question.
    Mr. Davis. That is a big question, Congressman. Thank you 
for that. A month ago or so Speaker Boehner visited one of our 
member company facilities in Ohio, not in Silicon Valley. It 
was a subsidiary of a Silicon Valley company that made very 
highly-specialized components, which sort of speaks to the 
complex nature of supply chains. And it was very interesting 
when Speaker Boehner asked about how he sees priorities, 
mentioned that the application of research and development, 
that he understood that particularly from some of the 
enterprises in his district, and I think that is an essential 
point from an industry perspective is being able to harness the 
synergies of research and development, get over the Valley of 
Death, and commercialize. And that can happen in synergistic 
ways in Centers such as the ones defined by this legislation.
    Mr. Hultgren. Any other thoughts?
    Again, just boiling the question down. I mean, I absolutely 
agree and want, you know, basic talk all the time of 
encouraging research and developments and want to make sure we 
have got that commitment, but also what I hear from my 
manufacturers is they want to do that, but the biggest weight 
they feel is regulatory burden and tax burden. So--sorry for 
the feedback. Hopefully we will get that taken care of. But any 
thoughts on that? You know, again, we would like both, but to 
me what I am hearing is a prioritization on regulatory reform 
and tax reform. Would you agree, disagree?
    Dr. Biller. We would certainly agree that regulation 
reforms would greatly help in any state, Illinois, Michigan, 
New York. I think any state we--that would be certainly 
beneficial, but I also want to point out, you know, you make 
the point between research and development. So we are doing--we 
are the best country in the world in research. I don't think 
anybody would doubt that. We are not the best country in 
development, and so we are researching for the world and giving 
it away in TRL four to seven, and, you know, from an investment 
perspective we really need to go longer and maybe more focused 
and thereby we would reap for the Nation the benefits of the 
research we are doing in one to three. I am not for cutting 
research. I am just for let's think about how we prioritize 
that in a way that we are not doing research only. We also move 
through that Valley of Death and get to the development.
    Mr. Hultgren. Yeah. I think we all want that. Another thing 
I talk about all the time on the Committee is what, when times 
are tough and certainly they are right now, what can only 
federal government do, and that is where I think basic 
scientific research is something, and it is very difficult to 
put together a business plan that makes sense for basic 
scientific research. It is still tough for development, but it 
is a little easier if you have kind of the understanding of why 
something works to apply it and make our lives better for it.
    So that is--I would love to do both, I would love to have 
the resources we need for both, but I think that is the 
challenge, making sure we still are strong on the research side 
while also pushing as opportunity comes and resources come to 
find ways to work with industry to continue development. So I 
totally agree.
    My time is winding down. Real quick question, may I, 
Chairman? Mr. Davis, just quickly, you touched on some other 
foreign government subsidies for your industry that lure away 
American companies. I wonder if you can expound on what these 
incentives are but more importantly what impact they might have 
on the U.S. economy and if there is any national security 
implications of these supply chains moving overseas?
    Mr. Davis. Well, speaking primarily for the commercial 
aspect, I think what we see increasingly in foreign governments 
is a choice to compete and a decision to move from making stuff 
to designing stuff, to move up the value chain. China's five 
year plan is very specific in identifying, unambiguous in 
identifying key technology areas to make substantial 
investment. So I think some of the ways in which foreign 
governments appear to provide great clarity is being specific 
about the kinds of industries that they want to develop and 
cultivate. Certainly as industry migrates overseas and the 
research and development and the capacity to manufacture moves 
with it, there are certainly national security implications.
    Mr. Hultgren. Again, my time has expired. Thank you, 
Chairman. You wouldn't mind if we could follow up with 
questions we might have just to get a little bit more detail. I 
know our time is limited here today, but thank you so much. I 
appreciate you being here and all the information you have 
shared.
    Thank you, Chairman, for your generosity.
    Chairman Buschon. I now recognize Ms. Kelly for her 
questioning.
    Ms. Kelly. Thank you, Mr. Chair, and thank you for being 
here today. I am also from Illinois and represent the south 
side of Chicago and further south, and manufacturing is one of 
my biggest employers, but we are suffering in my area from 
unemployment higher than even the State of Illinois' average.
    You talk about in your testimony, Dr. Biller, the 
importance of small and medium-sized manufacturers and indicate 
that the Centers for Manufacturing Innovation proposed by the 
legislation can help small and medium enterprises introduce 
novel manufacturing technology into the U.S. supply chain more 
rapidly.
    What do you think are some of the specific challenges faced 
by some of the smaller manufacturers?
    Dr. Biller. Well, let's try and take the idea of creating a 
new product and a new product line in the virtual space, 
because that is really where the development is going, that 
people are creating something in a computer-aided design. Then 
they are moving through computer-aided manufacturing, computer-
aided engineering. Everything happens essentially in the 
computer. It is all digital.
    And so now our suppliers, especially the smaller ones, 
might lack, A, access to such tools because they are expensive, 
and B, access to engineers who can operate those tools, even if 
they had those tools. So for us it is really critical that 
those SMEs get trained in these skills and that they have 
access maybe on a, you know, buy-by-the-drink way through an 
institute way so that they can actually continue to be our 
suppliers or become our supplier. What we want at General 
Electric, we want to have as competitive a supply base as 
possible. It helps us, it helps the nation, helps the 
suppliers, it helps everybody. And so we think that is really 
critical that we get to such an environment where people have 
access to that, and if we don't allow SMEs to acquire such 
skills, then we will see what we have seen before, that 
companies will leave because they have such skills in other 
countries and let's make no mistake about it. You know, China, 
Germany, Japan, they are all helping the SMEs to get such 
suppliers. Fraunhofer have been in existence for, you know, 60 
or 70 years, continuously, basically serving as a transfer 
mechanism from one SME to the next by developing the 
technologies in these Federal institutes.
    So we think this is really required to continue to have an 
SME and maybe even to expand the SME base and hopefully help 
your district to get to a better employment level.
    Ms. Kelly. Right, because it is more of the small and 
medium-sized manufacturers that really hire the area residents 
and that, like has been said already, that people have a great 
concern about not being able to replace people when they retire 
because people don't have the skills.
    Dr. Biller. Yes.
    Ms. Kelly. Thank you.
    Chairman Buschon. Thank you. I now ask unanimous consent 
for Mr. Kennedy to participate.
    Without objection the Chair now recognizes Mr. Kennedy for 
five minutes.
    Mr. Kennedy. Mr. Chairman, thank you. I appreciate that. I 
appreciate the time today and your patience and generosity to 
add me on. I also want to thank you for holding this hearing 
and for--a big round of thanks to the Ranking Member as well, 
Mr. Lipinski, for all of his support, not just for the bill but 
for advanced manufacturing and the concept behind this bill for 
quite some time, sir, so thank you very, very much.
    Mr. Collins, thank you for your questions for making the 
time, and for your support of the legislation as well, and I 
saw Mr. Reed pop in. I know he is going to be here, back 
momentarily.
    To the witnesses, thank you very, very much for your time. 
Thank you for your testimony. I have, Mr. Chairman, with me a 
number of letters of support from some outside organizations 
that I wanted to submit for the record if I could, so I ask 
with unanimous consent----
    Chairman Buschon. Without objection.
    [The information appears in Appendix I]
    Mr. Kennedy. --to the record. Thank you very much, and they 
are from the Motor and Equipment Manufacturers' Association, 
the National Association of Manufacturers, the Information 
Technology and Innovation Foundation, which includes Alcoa, 
Ansys, Applied Materials, Autodesk, DuPont, National Modeling 
and Simulation Coalition, Owens Illinois, Rockwell Automation, 
TechSolve, Cal Berkeley, Cal Irvine, University of Southern 
California, One Voice representing the National Tooling and 
Machining Association, and the Precision Metal Forming 
Association, Precision Machine Products Association, DOW, and 
the Semiconductor Equipment and Materials International, 
otherwise known as SEMI. Mr. Davis, thank you very, very much.
    I wanted to speak briefly, you will be hearing from me in 
another couple of minutes, so I will try to keep it brief. A 
number of comments from I think the witnesses and from my 
colleagues here I think took the holistic view of the 
challenges facing the U.S. manufacturing industry from 
regulation taxes uncertainty, overall global, or excuse me, 
economic uncertainty here in the United States and globally, 
the training issue that has come up time and, again, sir, as 
well as energy costs and the potential innovation surrounding 
energy costs that could lead to at least a support for bringing 
some of the manufacturing processes back home.
    I wholeheartedly agree with all of those observations and 
critiques. This bill obviously attempts to try to get at a 
small part of this but I think a critical part nonetheless, and 
Mr. Biller, I was hoping to get you to elaborate a little bit 
seeing as GE is involved in one of these pilot programs in 
Youngstown, Ohio, that you already mentioned already the Ohio 
National Additive Manufacturing Innovation Institute focused on 
additive manufacturing otherwise known as perhaps more 
colloquially 3D printing.
    I just was hoping that you could discuss a little bit more 
about how big companies like GE can work effectively with 
smaller and medium-sized enterprises to fill that gap that you 
I think so eloquently described that Valley of Death that 
exists for so many companies out there. If you could just give 
us a little bit of an overview from your experience.
    Dr. Biller. Sure. So GE has been a founding member of the 
NAMII, the National Institute for Additive Manufacturing, 
Youngstown, Ohio. The great thing about this institute is I 
think we have close to 100 companies participating in this 
program and so this allows us to work closely with the 
suppliers. We can understand better what their capability is. 
We can help them understand what capability we are looking for 
when we are looking for a supplier. It allows us to grow our 
own capability, additive manufacturing for production is a 
fairly new field, so it will allow us to have access to people 
who are being trained in additive manufacturing as well as our 
suppliers who have access to people who are coming out of 
school or who have been employees at that center and typically 
the employees at these centers, they cycle through the center, 
they stay for two years and then they move on to go work in 
industry typically or in academia.
    And so creating that kind of environment where people can 
get together and say, here, this is as a Nation where we want 
to go in terms of additive manufacturing. We all agree that 
this pre-competitive, and here is where we can move the needle 
from it being, you know, very new technology and unestablished 
technology, technology where we don't understand the pure 
properties, where we don't understand how to produce this at a 
lower cost and so forth to a level where it becomes competitive 
and where we get a supply base and in fact, establish a supply 
base in additive manufacturing. It is a very new field, and so 
I think was really an ideal first CMI.
    Mr. Kennedy. Thank you, sir, and Mr. Davis, if I could, and 
I realize the time is brief, but you mentioned a little bit 
before some of the unique challenges I think in your comments 
about the speaker, about that SEMI--comes to grips with as you 
are trying to develop new products without being burdened by 
high costs and the high risks associated with that type of 
innovation and the costs associated with it.
    Could you discuss a little bit on how the semiconductor 
industry is impacted by these issues and some of the ways that 
hopefully a model like this will address it even though I am 10 
seconds overtime?
    Mr. Davis. Thank you for your leadership on this bill, 
Congressman, and thank you for the question.
    I think the essential thing facing manufacturers such as 
those in our association is how you maintain a pace of 
innovation, and innovation isn't something you fund once, buy, 
and then you have got it. It is an ongoing process that needs 
to be sustained within this country.
    By way of example, when I think about innovative products, 
things that have changed our economy and our competitiveness, 
you look at this thing, which I believe probably every person 
in this room has one of in their pockets. Every single element 
of this smart phone that makes it smart is a product of 
industry collaboration and public/private partnerships. 
Touchscreen displays, global positioning system, the internet, 
wireless connectivity, microchips. All those things were 
products of public/private partnership.
    So the vision and leadership that this country can take 
through acts such as this lay a foundation for future 
prosperity in this country in innovation, and I am not sure if 
that answered your question specifically but----
    Mr. Kennedy. Beautifully, sir. Thank you, and Mr. Chairman, 
thank you for your generosity. I am sorry to cut it short. 
Thank you very much.
    Chairman Buschon. The gentleman is welcome.
    At this point I would like to thank the witnesses for their 
interesting and valuable testimony. The witnesses are excused, 
and we will take a short break while we set up our second 
panel. Thank you, gentlemen, for your testimony. Appreciate it.
    [Recess.]
    Chairman Buschon. All right. We will reconvene for our 
second panel of very distinguished witnesses. Our first witness 
is the Honorable Tom Reed, the Representative from the 23rd 
District of New York and a Member of the Ways and Means 
Committee, and our second witness is the Honorable Joseph P. 
Kennedy III, Representative from Massachusetts, 4th 
Congressional District, and a Member of the Science Committee.
    As you know witnesses' testimony is limited to five 
minutes, and I will recognize Mr. Reed for his testimony.

              TESTIMONY OF THE HONORABLE TOM REED,

             MEMBER, U.S. HOUSE OF REPRESENTATIVES

    Hon. Reed. Thank you very much, Mr. Chairman, and Ranking 
Member Lipinski and Members of the Committee for the 
opportunity to weigh in and testify on this important 
legislation before you, and I do not anticipate taking the 
entire five minutes as I have submitted written testimony to 
the Committee.
    Again, I sincerely would like to thank you for bringing 
this legislation before the Committee today. I am proud to have 
introduced this legislation, the Revitalize America 
Manufacturing and Innovation Act with my good friend and good 
colleague, Congressman Joe Kennedy, from Massachusetts, a 
Member of this Committee, as well as working in a bicameral 
fashion with Senator Sherrod Brown of Ohio and Roy Blunt of 
Missouri on companion legislation in the Senate.
    I think this is an exciting piece of legislation that is 
going to advance manufacturing in America. As a co-chair of the 
House Manufacturing Caucus here in Congress, I am a firm 
believer that this legislation will take a step in the right 
direction to enhancing American manufacturing and partnering 
manufacturers together with academia, businesses and 
institutions across America and in a public/private manner to 
bring products from the lab into a commercialized setting. The 
bill also addresses the clear workforce development issues we 
face in America in regards to matching up the skill sets of 
advanced manufacturing. This bill in my opinion brings that 
public/private partnership mentality together for purposes of 
innovation, workforce development, and a firm commitment to a 
philosophy that I believe in, and that we are going to make it 
here to sell it there.
    I serve on the Ways and Means Committee and do a lot of 
work on the trade front. One statistic that really jumps out to 
me on this issue, and that is people need to realize that on 
the world economic stage, 95 percent of the world's consumers 
live outside of U.S. borders. That means we have to build it 
here, sell it there, and having this type of legislation will 
bring together those public/private partnerships that will 
encourage and empower U.S. manufacturing to be competitive and 
to really achieve that goal of making it here to sell it there.
    I come from a district of western New York as the Chairman 
knows. It is an exciting area of the world in the sense that 
Corning Incorporated is headquartered in my home town of 
Corning, New York, Corning Incorporated, and the makers of the 
glass many of us have in our iPads and our iPhones, and 
companies like Dresser-Rand, Cummins, and Lufkin. They are all 
posed to gain from this legislation and the concepts that we 
have here put forth.
    I was proud to work with the constituent company of G. W. 
List and the Finger Lakes Community College to partner those 
two institutions up on a pilot demonstration project where the 
community college was using the resources of that manufacturer 
and that manufacturer was using the resources of the community 
college to create a work training program that brought kids and 
young adults from a situation where they didn't have the skills 
to participate in that U.S. manufacturing setting, and at the 
end of that program were certified and moved right into an 
employment situation.
    That is what this legislation is trying to do in part on a 
national level, and we are proud to be partnering with that.
    With that I ask the Committee to weigh in favorably on this 
legislation, and I appreciate the effort that you have done in 
highlighting RAMI and the exciting opportunity that it 
represents working with a true good friend Joe Kennedy, on this 
legislation. It has been a joy, and it is been something that I 
think we can be proud of in a bipartisan, bicameral manner to 
advance U.S. manufacturing here in Congress.
    And with that I yield back.
    [The prepared statement of Mr. Reed follows:]


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    Chairman Buschon. Thank you. Now recognize Mr. Kennedy.

       TESTIMONY OF THE HONORABLE JOSEPH P. KENNEDY, III,

             MEMBER, U.S. HOUSE OF REPRESENTATIVES

    Mr. Kennedy. Thank you, Mr. Chairman. Thank you, again, to 
Ranking Member Lipinski, to Members of the Committee that are 
here. Thank you for the invitation to come and testify about 
the Revitalize American Manufacturing Innovation Act, otherwise 
known as RAMI, H.R. 2996, a bill that we have been working on 
very hard with my colleague, Mr. Reed, from New York, and I 
also want to thank, as I said a moment ago, Mr.--the Ranking 
Member, Mr. Lipinski, for his leadership on this issue for a 
long time, for his co-sponsorship as well as the Ranking Member 
of the full Committee, Ms. Johnson, and Mr. Collins as well for 
his co-sponsorship. I also wanted to recognize Senators Sherrod 
Brown and Roy Blunt for their introduction of companion 
legislation in the Senate.
    Back home in the Commonwealth machines are buzzing today. 
At Thermo Fisher Scientific in Franklin they are lacing 
together complex engineering processes to build air quality 
monitors that help keep our air clean around the country. At 
Johnson & Johnson in Raynham 3-D manufacturing models are 
becoming wax structures that ultimately give doctors the 
ability to conduct intricate spinal surgeries and create custom 
titanium joints for knee and hip replacements among many 
others. At General Dynamics in Taunton, cutting-edge 
technologies are being utilized to create lifesaving 
battlefield communication systems for our men and women in 
uniform.
    From the Berkshires to the Blackstone Valley, Massachusetts 
manufacturers are innovating at a breakthrough pace or excuse 
me, breathtaking pace and are carefully rebuilding what our 
sluggish economy needs most, stronger, more sustainable 
pathways to middle class jobs. In doing so they are promoting a 
model of economic development that is locally sourced and 
regionally driven. The Massachusetts story is not unique. 
Across the country innovation industries are transforming the 
American economy and giving our once-fading manufacturing 
industry new legs of innovation like advanced manufacturing, 
life sciences, information technology, and defense.
    For the past six months manufacturing activity has steadily 
expanded. In November it hit its fastest pace in two and a half 
years, and that growth is expected to continue. U.S. high tech 
manufacturing is the largest in the world, accounting for $390 
billion of global value added and high tech manufacturing in 
2010.
    However, the share of U.S. manufacturing in the--the U.S. 
share in the world market has declined from 34 percent in 1998, 
to 28 percent in 2010, and in 2011, the trade deficit of 
advanced products was up equal to 17 percent of total U.S. 
trade deficit.
    There is no doubt that manufacturing has suffered mightily 
in the past few decades, but the slow and steady improvement 
that we see today is positive. In a time of growing income 
inequality and a time of still-evaporating middle class jobs 
and decreased economic mobility, manufacturing can and must 
remain the cornerstone of the American economy.
    As policymakers if we want the success that we have seen in 
recent months to continue, then we must focus our efforts on 
better linking innovation and manufacturing sectors, 
understanding that the latter is critical as a vehicle for 
bringing the former to market.
    I am proud to be here to testify in support of this bill 
which Congressman Reed and I believe will help accomplish these 
important goals. The Revitalize American Manufacturing and 
Innovation Act focuses on building as MIT puts it, ``industrial 
ecosystems that bring together businesses, educators, 
innovators under one roof to pursue manufacturing processes 
that are relevant to the local economy.''
    Currently very few of these coordinated regional support 
systems exist for manufacturers, innovators, and entrepreneurs 
outside of places like Cambridge, Silicon Valley, parts of New 
York and Ohio, leaving independent businesses to fend for 
themselves. RAMI aims to fix that as Congressman Reed pointed 
out in his testimony.
    This bill uses some public funds to fuel the creation of 
these regional institutes, mandating that any partnership be 
wholly self-sufficient within seven years. Most importantly, 
RAMI sets a strong framework and then lets local stakeholders 
take the reins. This is locally-driven, public/private 
partnership that should be a model that is fueled so much 
success back home in Massachusetts where Governor Deval Patrick 
has created regional networks around science, technology, 
engineering, and mathematics, otherwise known as STEM 
education, and advanced a statewide manufacturing 
collaborative.
    These efforts have allowed Massachusetts to focus on the 
specific needs and strengths of different parts of our state 
and avoid a top-down, one-size-fits-all approach to economic 
development and job creation. As a result, precision 
manufacturing and advanced manufacturing businesses are 
steadily growing, bringing with them solid middle-class jobs 
that hold enormous promise for industrial communities that have 
long been the backbone of our economy.
    Advanced manufacturing jobs in Massachusetts have an 
average annual salary of $75,000, and economists forecast over 
100,000 jobs in this sector opening up over the next decade as 
older workers retire, not to mention the brand new ones that 
will come from any additional economic growth.
    Mr. Chairman, thank you very much for the opportunity to 
testify today. Thank you to the Committee for their 
consideration of this important piece of legislation, and I ask 
for all of you to look on it favorably as well.
    Thanks very much.
    [The prepared statement of Mr. Kennedy follows:]


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    Chairman Buschon. Thank you very much, gentlemen, for your 
testimony, and we heard today on the first panel a lot of great 
ideas going along with your bill, and as a Member of the 
Education and Workforce Committee, from that angle also about 
the future of American manufacturing and about workforce 
development and how that really is going to start, needs to be 
started in K-12 education and increase our pipeline so to 
speak, development into highly-technically trained people that 
are filling the 21st century jobs. As both of you know when you 
go into our factories today, the high-tech computer work is 
needed. Almost everything is robotic, even in small 
manufacturing facilities, and if we are going to continue to be 
competitive internationally, workforce development is very 
important, as well as also I think some of the larger issues 
that we also discussed related to regulation, taxation, and 
everything else that we can do.
    But I have a lot of confidence in America to compete. We 
always have, and we always will, and this is a critical area 
that we need to work on. So thank you again.
    With that, the record will remain open for two weeks for 
additional comments and written questions, and the witnesses 
are excused, and the hearing is adjourned. Thank you very much.
    Mr. Kennedy. Thank you, Mr. Chairman.
    [Whereupon, at 11:51 a.m., the Subcommittee was adjourned.]
                               Appendix I

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                   Additional Material for the Record



 Submitted letters for the record by The Honorable Joseph P. Kennedy, 
               III, Member, U.S. House of Representatives


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