the proprietary knowledge resides.5 Plugging the flow of information can hinder U.S. companies in their efforts to follow recent developments.

The superalloy industry has evolved to the point that production facilities are now divisions or subsidiaries of larger companies. In the event of an economic slowdown or if their customer base continues to move offshore, companies that are still independent are likely to suffer financially. The use of offsets6 by superalloy customers—notable for deals involving companies such as GE, Pratt & Whitney, and Boeing—can result in offshore operations being established by U.S. companies in order to win contracts for their own products. These overseas operation could be in direct competition with U.S. operations. Much alloy development is now being done in foreign-government-supported laboratories overseas. Process improvement continues to be done on a limited basis in the United States and is the key to commercial U.S. success for the time being. However, as new alloys are developed elsewhere and U.S. process knowledge diffuses offshore, that competitive edge will disappear. As the manufacturing end of the industry moves overseas there is a risk that the ideas for research, which in the past largely came from working with customers, will move with it. The result may be a drying up of research ideas in American companies.

In conclusion, it is clear that U.S. superalloy R&D declined significantly over the past decade, while Chinese and Japanese superalloy R&D is increasing. U.S. companies that are diversifying into offshore manufacturing will probably survive, and to the extent that they are privy to the knowledge generated in non-U.S. laboratories and plants, they will be able to stay competitive. The foreign superalloy industry is growing and is likely to develop technology that is equivalent to or better than the American technology.

5  

It is noteworthy that no Italians participated in the 2004 Seven Springs conference, yet Acceria Foroni is a major force in the superalloy industry.

6  

Offset obligations are incurred when an agency of a foreign government purchasing a military or commercial product requires that some reciprocal activity take place to help offset the import/ export imbalance in their country created by the purchase.



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