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IMPORTANT POLICY ISSUES 109 5 IMPORTANT POLICY ISSUES INTRODUCTION It is generally recognized that the advanced composites industry is a critical industry for the United States in terms of its strategic implications for the Department of Defense (DOD); its potential to influence the U.S. balance of payments though the twenty-first century; and its practical impact on American society through the creation of new jobs and the development of improved materials for a broad range of end uses. High-performance fibers are the backbone of this industry and as such are keys to determining the ultimate success that composites will have as a replacement for metals or other materials. The commercialization cycle for these premier fibers is often long and very expensive. Because of the long development time and uncertain returns, many U.S. companies are wary of entering the field or do not have the resources to participate. The U.S. government is often necessarily involved because of the strategic nature of some of the materials and the need to control technology export. A continuing effort to develop these high-performance fibers is essential for our national security and economic well-being. To make sure that the United States stays competitive against foreign competition in this field, continuity of funding of research, development, and engineering is necessary, as is improved cooperation between university, industry, and government. As the background for this cooperation, certain policy issues require review and clarification. Some of the more critical issues are as follows: ⢠Education in fiber science/technology. ⢠Domestic sourcing considerations. ⢠Technology export/export control. ⢠Production of small quantitites of specialty fibers. ⢠Foreign competition. ⢠Continuity of support.
IMPORTANT POLICY ISSUES 110 EDUCATION IN FIBER SCIENCE AND TECHNOLOGY Academic Program Development Because of their fiber form, the complex chemistry involved in their production, and their ultimate use in materials, effective research and development of high-performance fibers must involve an interdisciplinary team of textile and materials scientists as well as ceramic, chemical, and materials engineers. Although the present supply of people trained in these individual disciplines is substantial, the curricula are somewhat dated. Future training in these fields must stress interdisciplinary interaction and must specifically emphasize oriented anisotropic materials, if the graduates are to function easily on these teams. Support for course development and seminars in these disciplines will be vital. Such interaction would expose these future engineers and scientists to the problems of other fields and would foster a spirit of interaction even prior to graduation. Equipment Support for Teaching and Research Perhaps the most critical problem facing our universities is outdated equipment for teaching and research. Nowhere is this more apparent than in high-performance fiber research. The equipment available in our textile schools has been estimated to be an average, over 25 years old. Many engineering and science programs suffer from the same problem. Even where the equipment is operational, spare parts are difficult to acquire or simply out of production. If the United States is to remain competitive in fiber technology, this problem must be addressed immediately. To do so, a research initiative program, specifically directed at high-performance fiber research equipment, is proposed. Equipment upgrading should be a part of ongoing funding. In industries involved in high-performance fiber research, many companies invest 25 percent of their research budgets in capital equipment. In the future a similar approach should be applied to federally funded proposals involving high-performance fiber research. Since most universities do not charge overhead on capital equipment, investing 25 percent of a research proposal in new equipment often can provide more effective funding for the actual academic investigator. Such an increase in the expected percentage of equipment funding in fiber research grants could rejuvenate our university laboratories and have a significant long-term effect on education in fiber science and engineering. Industry-University Interaction The long-term competitiveness and health of our synthetic fiber industry will require increased interaction between the industry and our universities. While many problems encountered in high-performance fiber research and development are considered proprietary by industry, the interchange with others in the same industry and the exposure to academic viewpoints could foster increased creativity in our fiber industry. To foster this interaction for the purposes of meeting national needs, the U.S. government must advocate
IMPORTANT POLICY ISSUES 111 and facilitate this interaction. Such contact is critical to ensure that academic research is directed toward the real problems facing the fiber industry in the United States. DOMESTIC SOURCING CONSIDERATIONS Currently, most of the generally accepted advanced structural reinforcing fibers are manufactured in the United States using domestic raw materials. These include S-2 glass, boron, aramid, pitch-based carbon fibers, and ultrahigh-strength polyethylene fibers. Two key structural reinforcing fibers, which are obtained both from domestic and non-U.S. manufacturers, are various classes of ceramics and polyarylonitrile (PAN)-based carbon fibers. Ceramic fibers are early in their commercial development and are not currently significant constituents of advanced material consumption in the United States. PAN-based carbon fibers are probably the largest constituents and the fastest growing of the structural reinforcing fibers used in the United States. U.S. carbon fiber manufacturing capacity is currently estimated at approximately 5000 metric tons (11 million pounds [12 K basis]). At present, the domestic industry is operating at or near full capacity, and domestic supply is supplemented by sizable quantities of carbon fiber imports from Japan and the United Kingdom. Additionally, major carbon fiber capacity is expected to exceed annual domestic consumption by some margin when newly installed and expanded facilities are in full production in the early 1990s. Despite the rather large and growing U.S. capacity for the manufacture of carbon fibers, until recently most U.S. producers purchased their precursor from overseasâJapan or the United Kingdom. As of 1989, only one carbon fiber producer (Amoco) manufactured its own precursor in the United States and its capacity was very limited. The U.S. government, considering carbon fibers as a critical material for DOD applications, believed that action had to be taken to ensure a secure supply of material in the advent of a national emergency. Thus, P.L. 100-202 was passed in 1987 requiring the Secretary of Defense to "assure that a minimum of 50 percent of the polyacrylonitrile PAN carbon fiber requirement be procured from domestic sources by 1992." As a direct consequence of the passage of this bill, all of the major U.S. carbon fiber suppliers have either built or have announced construction of domestic PAN precursor facilities. Hercules recently completed construction of its facility, and BASF is currently in the construction phase of its new facilities. Amoco is expanding capacity at its existing facility. Additionally, other smaller domestic carbon fiber manufacturers have indicated their intentions to install PAN precursor capacity in the United States some time in the future. On the surface, this method of ensuring an adequate supply of critical materials seems to be quite successful, since the capacity of domestic PAN-based precursor will be dramatically increased by 1992. Some government policy makers may believe that the domestic precursor initiative should be used as a model to protect the supply of future strategic high
IMPORTANT POLICY ISSUES 112 performance fibers. There are, however, a number of significant disadvantages to this type of policy, the implications of which should be clearly understood before it is utilized again. Primarily as a result of P.L. 100-202, the largest U.S. carbon fiber producers will spend millions of dollars to establish domestic precursor capacity by the early 1990s. This large financial investment is being made with no real economic justification, since equivalent precursor is currently obtained from existing sources in Japan or the United Kingdom. Furthermore, it is anticipated that the total unit cost for precursor manufactured in the United States will be higher than the cost to purchase imported precursor owing to unfavorable economies of scale and higher capital and operating costs. Significant financial risk is being incurred by U.S. carbon fiber producers to install capacity that cannot be economically justified and that willâin purely financial termsâplace these U.S. carbon fiber producers at a competitive disadvantage to foreign manufacturers and domestic fiber suppliers that choose not to install domestic precursor. This risk is substantially heightened if major DOD programs (some of them slated to use carbon fiber produced with domestic precursor) are either significantly curtailed or threatened with cancellation. Also of some importance, additional time and millions of dollars will be expended by U.S. carbon fiber producers, fiber converters, and end users to requalify carbon fiber made from the new domestic precursor. Significant industry time and expense will be expended to requalify equivalent carbon fiber product with no new product or technological improvements. Ultimately, either the consumer (DOD or the U.S. taxpayer) or the advanced composites industry will pay the price for domestic sourcing in the form of higher carbon fiber prices or reduced profits (or increased losses) for the composites industry. Moreover, carbon fiber producers that cannot afford the cost or choose not to install their own domestic precursor capacity will be placed at a significant competitive disadvantage when competing for DOD contracts. Despite the very specific implementation schedule stated in the 1987 bill, a number of factors caused a long delay before a detailed implementation plan was issued, leading to considerable confusion within the industry. Nevertheless, the U.S. carbon fiber industry went ahead with necessary capital outlays, taking significant economic risk by installing domestic precursor capacity on its own without really knowing the answer to two key questions: (1) the real timetable for implementation of the domestic precursor requirements and (2) the costs involved in the qualification of the new precursor plants and the responsibility to pay for the qualification. If taken to an extreme (e.g., almost total elimination/extended delay in major DOD programs), this pattern of carrying out domestic sourcing policy could put the major U.S. carbon fiber producers in an extremely uncompetitive situation. Thus, while the domestic precursor initiative is clearly meeting its goal to have precursor capacity installed in the United States, it is not without significant consequences to the carbon fiber industry. It is for economic reasons such as the above that a number of U.S. companies have sold their carbon fiber businesses (e.g., Union Carbide, Celanese, Stackpole, Great
IMPORTANT POLICY ISSUES 113 Lakes). If future needs for domestic sourcing occur, the PAN-based precursor initiative should not be used as a model. When domestic sourcing for a strategic product is inadequate, the U.S. government should coordinate closely with industry, government agencies, and universities to conceive an implementation plant that takes into account the economic and technological implications of the action. The ideal plan should satisfy U.S. strategic sourcing requirements, provide the opportunity for a fair economic return at a reasonable risk to U.S. industry, and encourage actions that will result in improved U.S. economic and technological competitiveness. If the situation is such that domestic sourcing cannot be accomplished without placing U.S. firms at an economic or technological competitive disadvantage versus foreign suppliers, the U.S. government should provide assistance to U.S. industry in establishing the needed domestic capacity. TECHNOLOGY EXPORT/EXPORT CONTROL Growth of the advanced composites industry is fueled by technology. Without sustained fundamental research and development, necessary improvements in the current high-performance fibers will not take place and the next generation of fibers required to support critical future applications will not be developed. The U.S. advanced composites industry has a comprehensive and broad technology base from which it can support the required process/product innovations, but it is not unique in this area. Similar technology bases exist in Western Europe and Japan, where there is an equally strong, if not stronger, commitment to support the development of high- performance fibersâwitness the number of foreign multinational companies that have composites businesses both in the United States and in Western Europe (e.g., BASF, ICI, Ciba-Geigy, BP, Courtaulds). Thus, if the United States is to remain competitive on a worldwide basis, it must find a proper balance between protecting strategic technology and participating in the worldwide technology explosion in fibers and advanced composites materials. This view was recently expressed very succinctly by Edward Bursk, chairman of the Aerospace Industries Association's International Council, in testimony on behalf of the AIA before the Subcommittee on Economic Stabilization of the House Banking, Finance and Urban Affairs Committee: The overriding issue for our industry is technology: the technological advantage we must maintain, and the technology we must be able to exchange with our allies for trade and security reasons. We need a balanced technology transfer policy which allows a two-way flow of technology between the United States and its allies. Unnecessary technology controls cause U.S. firms to lose sales and encourage foreign countries to form consortia which freeze out U.S. industry. If research and development are appropriately funded, then at the time technology is transferred, a U.S. firm should have incorporated still newer technology into its products and processes. The United States exercises various technology export controls for national security, foreign policy, and economic objectives. These controls are implemented via Export Administration Regulations, International Traffic
IMPORTANT POLICY ISSUES 114 in Arms Regulations, and Nuclear Regulatory Controls. Under the Export Administration Regulations, an export encompasses virtually any form of disclosure to a foreign entity, including that occurring within the United States. While the United States and its COCOM partners are taking steps to "build higher fences around fewer products" (thus eliminating many unduly burdensome restrictions on multifarious products), advanced materials and materials processing are among the few areas that will remain heavily controlled. A number of recommendations for ways to improve policy in this area have already been put forth. Some of the approaches that the U.S. government can use to deal with this very complex issue have already been presented by a blue ribbon panel convened under the auspices of the National Academy of Sciences to study the conflicting interests of U.S. national security export controls and global economic competition. Since completion of that study the international political, economic, and military pictures have changed dramatically, further complicating policy considerations. Although the committee believes that broad national policy recommendations on these issues are beyond its charge and competence, it wishes to emphasize that technology export and export control policies have a strong impact on the advanced fibers/composites industriesâan impact that can greatly affect our national scientific, technical, and economic progress. PRODUCTION OF SMALL QUANTITIES OF SPECIALTY FIBERS Invention of a new fiber or material can be a major breakthrough or it can be a wasted asset, depending on the opportunity for commercialization. One of the most critical steps on the route to commercialization occurs after the idea conception and initial laboratory-scale feasibility demonstration. By this time researchers have gained a rudimentary understanding of the technology involved, preliminary data from the lab-scale samples has been generated, and patent applications have been applied for. The commercial potential of the product is, however, uncertain due to the lack of a sufficient quantity (about 25-to 500 kg) of material for application development and assessment. This is particularly true for high-performance, specialty fibers where the development cycle is often long, the initial opportunities are in a relatively small niche application, and the returns are uncertain. Some of the approaches that a company can follow, which range from full-scale development to termination, are as follows: ⢠The company is willing, on its own, to pursue the program to the next stage of development. ⢠The company is willing to continue the developmental effort only with support from the government, arising from government interest in the commercial production of the material. ⢠The company is interested in licensing the technology to other companies.
IMPORTANT POLICY ISSUES 115 ⢠The company decides to shelve the development due to the commercial uncertainty of the product. Unfortunately, it is at this point that many U.S. companies drop a project because of limited financial and/or human resources. This is becoming a serious issue for U.S. competitiveness because other countries are finding ways to ensure that potential developments are fully evaluated before a decision on their ultimate fate is finalized. A policy needs to be implemented that facilitates a more cooperative relationship between government and industry and/or between companies within an industry. With government support a company will be able to go to the next level of product development (i.e., production of small quantities of the material for further exploitation). Similar results, beneficial to the country, can also be achieved by collaborative efforts between companies in the industry. FOREIGN COMPETITION The United States historically has relied heavily on foreign technology for carbon fibers, which are one of the most critical fibers used for structural reinforcements. Until recently (1990), we were still heavily dependent on Japanese precursor PAN fiber and, to a lesser extent, on finished carbon fiber. U.S. producers have continued to install additional carbon fiber manufacturing capacity, with little prodding from the government, in order to meet increasing carbon fiber sales (both military and nonmilitary). However, the government did have to become involved in forcing the issue on domestic PAN-based precursor production because of the unfavorable economics that domestic precursor manufacture (versus foreign purchase) places on the industry (see Domestic Sourcing Considerations above). The active development of pitch-based carbon fibers in Japan, if successful, could have important long-term military and commercial implications. Development of a "low"-cost carbon fiber with good structural properties would undoubtedly lead to its widespread commercial use. It would become in effect "black fiberglass" and, depending on how low the cost, could develop sales in the hundreds of millions of pounds per year. In the absence of a domestic source, we would become dependent, once again, on foreign suppliers for a key material. The United States has a very strong carbon fiber industry both PAN-based and pitch based. Therefore, the issue is whether the government should let market forces determine who develops competitive domestic carbon fibers (or even if these are developed at all) versus some type of government incentive program to ensure a leading position for the United States in carbon fiber process/product technology. In the pitch-based, carbon fiber area, DOD is already providing incentives to U.S. industry. Under the Defense Production Act Title III program, DOD is providing for a domestic manufacturing source of 100 Msi and 120 Msi modulus pitch-based carbon fibers. Title III provides the domestic industry with incentives in the form of guaranteed purchase commitments for fiber produced under the program. Additional DOD support will be provided to the domestic
IMPORTANT POLICY ISSUES 116 pitch-based fiber industry through a Navy Manufacturing Technology program. Under a request for proposal issued by the Navy, 120 Msi and 130 Msi modulus pitch-based carbon fibers will be developed with higher thermal conductivity for lower cost. The United States has been dependent on a foreign source for the supply of continuous high-purity silica (quartz) yarn for high-temperature, radar transparent window applications. The DOD has conducted life-of-type buys of astroquartz yarn from the U.S. distributor of the French Saint Gobain (Quartz et Silica) product. However, to avoid foreign dependence and a potential supply problem for future acquisitions, DOD is developing a U.S. capability in high-purity quartz yarns through the Defense Production Act Title III program. Over 63,000 pounds will be produced under the program. Since Saint Gobain has now installed a U.S.-based subsidiary (Quartz Products Corp., which is now on stream with high-purity quartz fiber), competitive multiple sources are available, which will help reduce fiber cost. Another important policy issue is that it takes a long time and a considerable amount of investment for a new structural material to become widely used in the aerospace industry. Ten to 20 years is not uncommon. Add to that the risky nature of new material development and it is not surprising that domestic private investment in the development of reinforcements for high-temperature metal-and ceramic-matrix composites has been very limited. In contrast, a number of Japanese firms, with some government support, are actively pursuing what appears to be a long-term investment strategy. This raises concerns about the source of future high-temperature reinforcements. For example, Nicalon®, which is made by Nippon Carbon, is at present one of the leading, if not the leading, ceramic-matrix composite reinforcements. An important consideration in high-performance fiber development technology is understanding the processes used to make composites from the fiber as well as how it performs in service. A number of Japanese firms are forward integrating into intermediate material forms and finished products or are forming teaming arrangements to accomplish the same objective. This is happening to a limited extent in the United States with carbon fiber composites, but in noncarbon fiber areas it could potentially give the Japanese a significant advantage over competitors who are restricted to fiber production alone. CONTINUITY OF SUPPORT Given the magnitude of the technical challenge normally associated with the development of a new high- performance fiber, it is highly desirable that such a development effort be carried out as a continuous, uninterrupted project. The development of new fibers normally takes 5 to 10 years. Unfortunately, well-conceived and complex fiber programs are frequently funded only in an incremental manner, resulting in periodic work stoppages of hard-to-define duration. Since the work stoppages are not anticipated when the fiber development programs are bid and accepted by the funding source, serious difficulties can result in areas such as retention of key personnel for the
IMPORTANT POLICY ISSUES 117 program and maintenance of the integrity of contractor-owned laboratory apparatus. Both issues arise in connection with the demands of other projects and in the necessity of identifying other time-chargeable work for the technical personnel involved in the suspended program. The overall result of such a suspension of activity is that when the next funding increment is received and the program starts up again, considerably more time is lost than merely the duration of the funding hiatus because of the need to reconstitute the technical team and the laboratory gear. Many programs affected in this manner are focused on the development of new fibers and technology for applications for which the government has tight and urgent time schedules the National Aerospace Plane (NASP). As with other materials needs, the critical fiber/composites components of many urgent engineering or design programs have often erroneously been considered to be program subtasks that can be scheduled for development and delivery on a short time frame. The subordination of fiber development in this way is highly unproductive and unwise. For all the above reasons it is strongly recommended that the issue of securing continuous and appropriate funding for such programs be addressed and resolved.
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