Transcript IE285e, Lecture # 2 Revised 2004.ppt

Integrative Project in Modern
Production Methods (IE285e)
Lecture #2
05 September, 2005
05 September, 2005
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Production Methods, IE285e
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Topic:
• An overview of Armenian Industry and
Economy, World Industrial development
trends, how Armenia could benefit from
them: the rapid development of high tech in
the world; need for outsourcing of mature
technologies from the developed countries;
etc.
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Where are we?
•
One has to understand the current position
to find out the right direction to move…
• How to describe our position:
A. Geographic location
B. Natural resources
C. Economic relations
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The cost of blockade
• While the cost of blockade is considerable it
is not a major development constraint form
Armenia. The estimate of the blockade is
that it hurts Armenia less directly
(transportation costs, lost volumes of
exports) than indirectly (depressed
investor’s expectations, inflated internal
perceptions of risk, etc.).
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Geographic location
• 29000 square KM total,
and Artsakh
• Being a landlocked,
isolated country, the most
reliable transportation is
through air
• Unfriendly countries from
East and West, friends in
North and South
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Economic regime
• Economic regime between
1924 - 1991was based on PLANNED
ECONOMY, where the goal was the PLAN,
which was decided not by the enterprise.
• During the last decade Armenia moved to
MARKET ECONOMY, where the goal is the
MONEY (should be replaced by “net utility
to the society”) through honest competition
for a MARKET SHARE.
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How well are we prepared?
• How well are we prepared for the relatively new
economic relations? How well do we know the
markets?
• The main problem is in the upbringing and
societal mentality.
• Is there business ethics norms well implanted?
• Do we respect wealthy businesspeople, and vice
versa?
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Natural Resources
Mines
a) metallic;
b) non-metallic
Forests
Water Resources
Energy related: Fossil Fuel
Other, Renewables: Solar, Wind, Geothermal
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Mines, metallic
Material
Location
Remarks
A
Copper, Molybdenum
Qadjaran
The most tangible resources
B
Copper, Gold
Alaverdi
The most tangible resources
C
Gold, Tungsten, Tellur
Kapan
The most tangible resources
D
Gold, Silver (1:2 – 1:20)
Zod
The most tangible resources
E
Iron, Titanium,
Vanadium
Abovian, Hrazdan
2 billon tons, but difficult to
extract
F
Chromium, Manganese,
Mercury, Arsenicum, …
Shorja, Sarigyugh,
Amasya, …
Small quantities
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Mines, non-metallic: Stones!
Material
Location
Remarks
A
Tufa
Artik
Large quantities
B
Anipemza
Avan
Aragats
Toumanian
Large quantities
G
Pumice
Salt
Perlites
Clay - thermo
resistant
Dolomites
Marble
H
Bentonite Clays Sarigyugh
Medium
I
Granite
6 million cubic meters
C
D
E
F
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Large quantities
Large quantities
Medium
15 million tons
Ijevan
Khor Virap, Bjni 1.2 million cubic meters
Pambak
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Future value of mineral deposits
• Note that the mineral deposits have future
value, that can be expressed according to the
following formula:
[Future Value] = [Present Value] x [exp (kt)],
where k is a coefficient, and t is the time.
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Strategy
• For certain mineral deposits this formula may
yield an increase of the value up to 10 times per
decade (in the currency of a particular year).
• This means that the wisest economic solutions are
NOT related with export of raw materials, but in
production of the products that are as close, as
possible to the final products.
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High technologies
• Manufacturing of final products from the mineral
deposits increases the net utility for the society
much more than selling raw materials to others.
• This is especially true
in the case of high
tech implementation.
• Electronics manufacturing
comprises 1/3 of all
manufacturing in the world!
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Forests
• Armenia has only 12%
of its territory in forests
in North-east and South.
• During the “dark years”
there has been a
dramatic deforestation,
which, to a considerable
extent, continues now.
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Forests
•
•
•
•
•
•
Oak
Beech
Hornbeam
Ash
Maple
Many wild fruit trees
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•
•
•
•
•
•
γÕÝÇ
г׳ñ»ÝÇ
´áËÇ
гó»ÝÇ
ÂËÏÇ
´³½Ù³ÃÇí í³ÛñÇ
Ùñ·³ïáõ ͳé»ñ
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Water Resources
• General water resources:
scarce, 7.5 times less of average of
FSU
• Underground Water:
scarce, 4 billion tons annually, 38%
goes to usable springs.
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ENERGY
Fossil Fuel
• Extremely scarce: more or less
considerable are low quality gray coal
mines located in between Gumri and
Spitak
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Renewables: SOLAR
• Solar Energy delivers around 1700 kWh
annually to any square meter of Armenia’s
surface.
• A square with a base equal to 6 km
will provide all needed power for
the country.
• Is ecologically clean, but needs
technological advances for
decreasing the costs.
• Currently around $6000/kW
installed for photovoltaics (PV).
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Renewables:
SOLAR
• Solar hot water costs are
around $600/kW!
• Solar hot water may give
a solution to more than
50% of the energy needs.
• In summer it will give up
to 80% of consumed
energy, in winter …
• All solar options have
strong seasonal pattern
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Renewables: SOLAR
• Monthly Solar Energy Flow
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Yearly dynamics of solar energy flow
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Renewables: Wind
• Around $750/kW installed: compare to Solar
PV ($6000 per installed 1 kW of power).
• They have a slight environmental impact due
to low frequency noise.
• Total usable potential in Armenia is estimated
as at least 400 – 500 MW
• Wind energy resources are under estimation.
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Renewables: Wind
Gegharkuniq, Sevan Zod
Aragatsotn, Aparan
80 MW
200 MW
Syuniq, Vorotan Pass – distributed
15MW
Poushkin Pass
30MW
Shirak Marz, the Karakhach Pass
TOTAL
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100 MW
up to 500 MW
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Renewables: Geothermal Energy
• There is an estimation of up to 400 MW of
geothermal energy potential in Armenia, most
of it in Southern regions (Lahmeyer Energy
Consultants, 1994).
• The technology is not yet well developed,
especially for Armenian conditions. Costs are
in the range of $1000 per installed kW.
• Is it safe? Wouldn’t it instigate earthquakes?
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Other Renewables
• Small Hydropower: Around $350/kW
installed. Relatively easy to install. Total
potential estimated: 50 – 100 MW.
• Biomass: requires huge amounts of green
biomass, which might be the case in e.g.
Brazil, but perhaps not in Armenia.
However, small biogas installations might
be used in villages - a niche application.
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Armenian economic history
highlights: Status at 1913
Percentage of
Percentage of
Population involved GNP
Agriculture
85%
60%
Industry
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3%
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Status at 1913. Largest cities:
• Alexandrapol: 51.3 thousand,
• Erivan: 30 thousand inhabitants.
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Armenian economic history
highlights: Production at 1913
Agriculture
Cotton
Wool
Rice
Vineyards
Industry
Copper
Cognac
Wine
Soap
(grapes)
Preserves
Beer
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Energy
10 Hydropower
plants,
3.1 MW total
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Armenian economic history
highlights: Status in 1988, energy
Type
Hydro
Fossil
Nuclear
Total
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MW
1017
1760
815
3592
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Armenian economic history highlights:
Status in 1985, PRODUCTION
Machinery item
Volume, items
AC generators, 0.25 – 100 kW capacity
AC generators, more than 100 kW capacity
AC motors, 0.25 – 100 kW capacity
AC motors, more than 100 kW capacity
Mobile power plants
66,300
1500
98,360
1300
23,300
Power transformers, for millions of kW of power
7.2
Welding equipment
1369
Electric bulbs (fluorescent and incandescent), million
185.9
Copper wire, tons
20,800
Cable, power cable and flexible cable, km
12,700
Pumps
94,000
Compressors
5723
Clocks manufactured
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4,763,000
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Main Industry
Branches in 1988
• Chemical industry
• Machinery (including
electro technical and
electronics),
• 5th place in the volumes of
manufactured machinery
items, among the USSR
republics
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Main Industry Branches in 1988
•
•
•
•
Electronics
Metal processing
Metallurgy
Woodworking and
paper production
• Construction
materials
• Glass and porcelain
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• Light industry (including
shoe industry, the 15%
of total national volume
of production).
• Food industry
• Publishing industry
• Chemistry and Drug
manufacturing
• Agro industry
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Armenian economic history
highlights, 1988
• There were 1744 conveyer belts, and
403 automated conveyer belts in 1985
• Total 2147 operations with conveyer
belt layout!
• However there were many typical
“soviet – style” problems…
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Armenian economic history highlights,
Science and Education, 1988
• The national academy of sciences (NAS)
had 34 research institutes and centers, a
publishing house, and 32 libraries. There
were also around 50 industrial research
institutes and centers.
Professional high schools
Higher education institutions, universities
65 schools, 48000 students in 156 specialties
13 schools, 59778 students, 156 specialties
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Problems at 1988
• Being Isolated from WORLD COMPETITION
• Thus, behind in quality, due to:
• Most technologies were outdated, by about
15 years!
• Management methods were not effective,
almost no incentives.
• Obvious strategic mistakes in Macro and
Microeconomics levels.
• Mistakes in setting directions for economy.
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World Industrial development
trends
• Increased competitiveness
• Narrow specialization of specialists and
companies, both in technology and business,
e.g. emerging of high tech insurance
companies, etc.
• Separation and outsourcing of the production
and businesses
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World Industrial development
trends
• While in developing countries:
businesses are taking advantage of
inexpensive workforce;
• In developed countries:
businesses are taking advantage of established
infrastructure and business environment, –
advanced technologies
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World Industrial development
trends
• The Technologies develop very fast in the
world.
• Moore's law: In computer business the
performance (number of transistors on a
processor chip) is doubled each 18
months!
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World Industrial development
trends
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World Technological Hierarchy
• “High End” technologies are the most
advanced and scientifically intensive
technologies.
• “Low End” technologies or “Mature”
technologies are still needed.
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Hierarchy in Chip Manufacturing
• In semiconductor industry technologies are
described by the width of the narrowest
element, e.g. of a transistor, that is possible
to achive on a semiconductor substrate.
• In parallel to the decrease in the smallest
element size, the size of a semiconductor
substrate, e.g. a silicon wafer is increasing.
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Hierarchy in Chip Manufacturing
•
•
•
•
•
•
•
•
5 micron technology, up to 2 inch – until 1980
1 micron technology , up to 3 inch – 1990
0.65 micron technology, up to 5 inch – 1994
0.35 micron technology, up to 6 inch – 1996
0.27 micron technology, up to 8 inch – 1998
0.17 micron technology, start design of 12 inch – 2000
0.1 micron technology, working on 12 inch – 2002
Sub 0.1 micron technology is on its way now.
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Hierarchy in Chip Manufacturing
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Hierarchy in Chip Manufacturing
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Hierarchy in Chip Manufacturing
• However, Moore predicts that
transistor miniaturization will
reach physical limits around the
year 2017.
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Hierarchy in Chip Manufacturing
Year of introduction
# of transistors in the processor
4004
1971
2,250
8008
1972
2,500
8080
1974
5,000
8086
1978
29,000
286
1982
120,000
386™ processor
1985
275,000
486™ DX processor
1989
1,180,000
Pentium® processor
1993
3,100,000
Pentium II processor
1997
7,500,000
Pentium III processor
1999
24,000,000
Pentium 4 processor
2000
42,000,000
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World Technological Hierarchy,
an example
•
•
•
•
•
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Toyota Camry Solara contains:
2 Pentium processors
3 processors 486 series
12 processors 386 series
More than 40 lower end processors
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Outsourcing!
• The same hierarchy applies in all
technology related markets.
• However different areas have different rates
of increase.
• The market for mature manufacturing is
huge!
• In many cases this market is still increasing!
Example of Digital vs. Film cameras.
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Outsourcing!
• All advanced brand name companies try
concentrate on high end manufacturing.
• They want to delegate the lower end
manufacturing to other companies.
• The best countries for outsourcing are the
developing countries, such as: Malaysia,
Taiwan, Singapore, Indonesia, Hong Kong .
• Recently also: China, Puerto Rico, Mexico.
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Business Outsourcing Diagram
Brand Name Company, e.g. Philips
(Advanced Technologies)
Technology Transfer
(mature technologies)
Company in
Developing country
(mature technologies)
Insurance
Insurance Company, e.g.
Comdisco
Materials supplier,
e.g. Applied
Materials
USED EQUIPMENT
MARKET
Outsourced business
Creation of a subsidiary
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