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November 2005 edition

Outsourcing US commercial aircraft technology and innovation: implications for the industry’s long term design and build capability

By David Pritchard

In recent years, Boeing Aircraft Company has opted for a systems integration mode of production, whereby key components and subassemblies are designed and manufactured by external suppliers 1 While this represents a logical strategy from a financial standpoint, a potential downside is that foreign subcontractors and/or risk-sharing partners must receive direct infusions of technology or tacit knowledge from the systems integrator, which raises an important question. To what extent does technology transfer to foreign companies represent a good idea in terms of long-run economic or industrial effects?

As part of the launch process for the 787, three Japanese companies are expected to create the manufacturing processes for final wing assembly. Boeing has never considered subcontracting wing production to external suppliers before. Given that Japan has incrementally acquired production competence for a wide range of airframe components via years of industrial offsets from Boeing, 2 the transfer of wing manufacturing and assembly expertise to Japanese companies effectively gives Japan ‘total production competence’ with regard to commercial airframes. Japan has already announced that it wants to produce commercial aircraft, 3 and some experts believe that the next generation of Boeing's 737 will be an all composite aircraft with coproduction lines in Japan and Seattle. Where does this leave the existing US supplier base and the nation's engineering capability?

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