1. Washington State Department of Commerce The Composite Industry in Washington Commerce Research Services October 2011

2. Research questions What are carbon fiber composites, and why are they important? What does the supply chain look like in Washington? How does Washington compare to other domestic and international regions with carbon fiber activity?

3. Project methodology Phase One: o Descriptive, qualitative and quantitative research o A “snapshot” of the carbon fiber supply chain statewide Phase Two: o Determine key comparators and inputs that support industry development o Compare Washington’s industry to other regions

4. What are carbon fiber composite materials? Carbon fiber composites are the “new aluminum” Aerospace, transportation, marine, wind energy, and recreation industries are committed to replacing aluminum with carbon fiber composites Variable tensile strength and durability make composites highly customizable and useful in a variety of applications, including consumer products and biomedical devices

5. Why is the carbon fiber industry important? Prospect of dramatic growth in the coming years Global composites market expected to reach $27.4 billion by 2016 1 Low-cost labor countries will not dominate the industry; the quality of the finished product is most important Jobs created will be high-value with many external multipliers

6. Why is the carbon fiber industry important?

7. Why is the composites industry important? Governor aims to make Washington the “Silicon Valley of Composites” Position state as global leader in automobile, energy, and consumer composites Diversify carbon fiber expertise gained through aerospace and Boeing’s 787 project

8. Carbon fiber leaders in Washington

9. Washington’s carbon fiber supply chain The Dept. of Commerce has identified over 80 carbon fiber supply chain locations in Washington 3 53 composite supply-chain companies headquartered in state 13 foreign companies with in-state operations at 17 locations 1 major precursor manufacturer: SGL Group 31 composite manufacturers at 70 locations, including: o Hexcel, Saint-Gobain, Toray, Triumph 50+ composite fabrication companies at 70 locations, including: o AIM Aerospace, C&D Zodiac, Fokker Aerostructures

10. Washington’s carbon fiber supply chain 25 input manufacturers and 31 input distributors at 65 locations: o American Autoclave Company, Aronson-Campbell Industrial Supply, Composites One, Janicki, Heatcon 24 supply-chain locations employ fewer than 50 workers Primary industries served: 40 locations involved in aerospace composites 20 locations focus on defense 15 locations serve the automotive, energy, and recreation industries

11. Washington’s carbon fiber supply chain

12. Washington’s carbon fiber supply chain: Revenue data Initial revenue estimates 4 Aggregate gross business revenue increased by over 11% from 2009 to 2010 o 2009 revenue: $2.98 billion o 2010 revenue: $3.32 billion o 72 of 80 locations included in estimates o Estimates do not include Boeing or SGL

13. Washington’s carbon fiber supply chain: Revenue data

14. Washington’s carbon fiber supply chain: Employment data Initial employment estimates 5 Employment decreased by almost 7% from 2009 to 2010 o 2009 employment: 8,494 o 2010 employment: 7,940 o 69 companies out of 84 UBIs included in estimates o Estimates do not include Boeing and SGL; SGL’s Moses Lake facility will employ more than 200 workers at full capacity

15. How are composites manufactured? Generally, carbon fiber manufacturing includes five stages: 1. Precursor preparation 2. Spinning/stabilizing fibers and producing yarn 3. Weaving fabric 4. Pre-impregnating the fabric (prepreg) 5. Fabrication and the composite part: autoclave molding, vacuum bag molding (resin infusion), press molding or pultrusion

16. How are composites manufactured? The precursor Raw material is made into long, thin strands under.01mm in diameter Derived from polyacrylonitrile (PAN), cellulose, petroleum or tar pitch, phenolics, and rayon 39,280 tons produced globally in 2010 Global demand will increase to 89,000 tons in 2015 and 134,000 tons in 2019 Wind energy industry demand will almost quadruple to nearly 38,000 tons in 2015 6

17. How are composites manufactured? The precursor Precursor processing is the most energy-intensive component of the carbon fiber supply chain: Energy accounts for one-third of the manufacturing cost for low-grade fiber and increases with high-grade fiber Total production costs can reach $7.88 per pound of high-grade fiber 6 Process uses heat: Oxidative stabilization heats fibers to 572° F Carbonization process heats fibers to 1300°to 1600° F Final processing can use heat as high as 4500° F7

18. How are composites manufactured? The yarn Several thousand strands are twisted together to form yarn Used in prepregs, filament winding, pultrusion, weaving, and braiding Rated by linear density (weight by unit length) or number of filaments per yard count Some carbon fiber yarns can tolerate over 750,000 PSI (pounds per square inch) before failure

19. How are composites manufactured? Weaving and the prepreg fabric Yarn is woven into fabric and combined (impregnated) with resins and additives to form prepreg fabric Carbon fiber can be combined with glass fibers, Kevlar,™ nylon, and polyester Prepreg is ready to fabricate Due to heat sensitivity, prepregs based on thermoset require refrigerated transportation and storage facilities

20. How are composites manufactured? The composite part Prepreg is molded into shape to form composite parts Prepreg fabric can be fabricated in a variety of ways, including (but not limited to): Autoclave molding Resin infusion Press molding Pultrusion

21. How are composites manufactured? Autoclave molding Used to manufacture large parts requiring strong material with minimal air bubbles (voids) 1. Layers of prepreg fabric are placed into molds 2. Molds are vacuum bagged and placed in an autoclave 3. Elevated pressure and temperature in autoclave cures composite material 8

22. How are composites manufactured? Resin infusion Used to fabricate large or irregular parts Design modifications can be made quickly and economically 1. Prepreg fabric is placed into two-sided molds 2. Molds are placed in a vinyl or polyurethane bag and resins are injected 3. Vacuum is applied to shape material and eliminate voids

23. How are composites manufactured? Press molding High-volume production of flat or moderately curved parts 1. Carbon fibers are injected with resins, and formed into shape with a heated press 2. Composite part is cooled

24. How are composites manufactured? Pultrusion Used to fabricate tubes and rods Most efficient fabrication process; almost entirely automated 80-90% of the cost is materials High quality and low scrap 1. Yarn is pulled through thermosetting resins and fillers 2. Material is pulled through a shaped die, cured, and cut to desired length 9

25. What does the supply chain look like? The supply chain can be thought of as “buckets” 1.Raw materials manufacturers, processors, and distributors 2.Inputs / machinery manufacturers and distributors 3.Composites and prepreg manufacturers and distributors 4.Composites fabricators and parts manufacturers 5.Research institutions, workforce training, and trade associations 6.Original equipment manufacturers (OEMs) 7.End users 8.Waste disposal and recycling

26. Recycling Facilities Operational: Recycled Carbon Fibre Ltd., Coseley, UK Mitsui Kinzoku, Omuta City, Japan Potential: Adherent Technologies, Albuquerque, NW Firebird Advanced Materials, Raleigh, NC Materials Innovation Technologies, Lake City, SC Recycling R&D: Aircraft Fleet Recycling Association, Boeing, Hexcel, Mitsubishi, Toho Tenax, Toray Precursor Processing – The Basics 1. Spinning: Acrylonitrile powder is mixed with another plastic like methyl acrylate and the plastic is spun into fibers 2. Stabilizing: Fibers are chemically altered to be more thermally stable 3. Carbonizing: Fibers are exposed to high heat, without oxygen, to expel non-carbon atoms 4. Treating: Surface is slightly oxidized to improve bonding qualities 5. Sizing: Fibers are coated to protect from damage during winding or weaving Composite Fabrication: These companies make specific parts for end-users or OEMs, though they do not manufacture prepreg composite fabrics or original equipment Methods for fabrication: Autoclave molding, vacuum bag molding, press molding, thermal expansion, and pultrusion Composites Manufacturer: Combine processed raw materials with proprietary additives to make prepreg composite fabrics *Some composite manufacturers also fabricate parts, though not all fabrication companies manufacture their own prepreg composites OEMs: OEMs manufacture original equipment using composite materials. Some OEMs manufacture their own prepreg, and many fabricate their own parts. Some OEMs use contracted companies specializing in composite fabrication to manufacture their parts. OEMs using composites span nearly every industry: aerospace, agriculture, automotive, consumer goods, defense, energy, industrial applications, marine, medicine, recreation, and more! End-Users: These are the people, companies, and institutions that use carbon fiber-based products every day. They include airlines, doctors, nurses, teachers, golfers, tennis players, hikers, kayakers, chefs, police officers, artists and musicians, governments, computer users, bus drivers…everybody! ACMA- American Composite Manufacturers Association http://www.acmanet.org/ Raw Materials Examples Acrylonitrile plastic powders Methyl acrylate Methyl methacrylate Nitric acid Sodium hypocholorite Coating materials: epoxy, nylon, polyester, urethane Key Machinery and Supplies for Composites: Autoclaves Chemicals: Silicones, resins, adhesives Tooling and fabrication equipment: robotics, cutting devices, vacuum devices, molds and mold release agents, mechanical presses Finishing products: paints, pigments, sanding products

27. Supply chain vertical integration

28. Heatcon Composite Systems Tukwila Heat blankets, autoclaves, curing systems, and tool kits for composite manufacturing and repair Adhesives, resins, prepregs, primers, and release agents for composite repair Composite repair training courses offered globally Hexcel Burlington and Kent One of the world’s leading composites manufacturers Prepregs, reinforcements, molding compounds, honeycomb, tooling materials, adhesives, and carbon fiber Serves commercial aerospace, space and defense, wind energy, and industrial applications Boeing – multiple locations Christensen Shipyards - Vancouver Insitu - Bingen James Betts Enterprises - Anacortes Nolimitz Windsurfing – White Salmon RainSong Graphite Guitars - Woodinville Westport Shipyards – Westport Janicki Industries, Inc. Sedro-Woolley Designs and builds precision tooling for aerospace, marine, wind energy and transportation industries Provides state-of-the-art engineering services, project management, and composite fabrication R&D lab explores new composite fabrication materials and techniques Electroimpact Mukilteo Manufacturer of factory automation and tooling solutions for aerospace Designs automated fiber placement systems, post riveting systems, automatic drilling machinery, and assorted jigs and robotics SGL Group Moses Lake, Vancouver Leading producer of carbon fiber precursor Located in WA due to skilled labor and hydroelectric power Polyacrylonitrile (PAN) produced with Mitsubishi Rayon in Otake, Japan PAN material turned processed into carbon fiber in Moses Lake Carbon fibers processed in Landshut, Germany for use in the assembly of BMW’s Megacity vehicle University of Washington: Automobili Lamborghini Advanced Composite Structures Laboratory, Center for Advanced Materials in Transport Aircraft Structures Clover Park Technical College Edmonds Community College Everett Community College National Resource Center for Materials Technology Education Olympic College Peninsula College Western Washington University Washington State University: School of Mechanical and Materials Engineering

29. Key comparators: Washington’s competitive advantages Education and workforce: Workforce development supported by an extensive network of universities, community colleges, and technical colleges offering materials technology programs. Large regional institutions researching materials technology. Energy: Nation’s leading hydroelectric power producer. Lowest industrial electricity prices in the nation: $0.022 - $0.042 per kilowatt hour depending on location. 10, 11 Industry presence: Aerospace, biomedicine, and marine industry clusters Infrastructure: Extensive air, water, railway, and road infrastructure

30. Education: Washington’s assets 12 State Higher Education Institutions Population w/HS Diploma Population w/Bachelor’s Degree Population w/Graduate Degree Washington7889.3%30.3%10.8% Alabama7281.9%22.0%7.7% Michigan10688.1%24.7%9.4% North Carolina13383.0%25.6%8.6% Utah3890.2%28.7%9.1% United States66 (Median)84.5%27.5%10.1%

31. Education: Washington’s assets US NEWS TOP MATERIALS SCIENCE GRADUATE PROGRAMS 13 RankSchool Score 1. Massachusetts Institute of Technology4.8 2. (Tie)Northwestern University4.6 University of Illinois– Urbana-Champaign4.6 4. (Tie)University of California– Berkeley4.5 University of California– Santa Barbara4.5 Rankings Among Comparator States 9.University of Michigan– Ann Arbor4.2 22.North Carolina State University3.3 26.University of Washington3.2 42.Michigan Technological University2.7 46.Michigan State University2.6 52. (Tie)University of Utah2.5 Washington State University2.5

32. Education: Washington’s assets PUBLIC UNIVERSITIES University of Washington BS: Aeronautical and Astronautical Engineering, Industrial Engineering MS: Aeronautics and Astronautics, Aerospace, Industrial Engineering PhD: Materials Science & Engineering, Industrial Engineering, Mechanical Engineering Automobili Lamborghini Advanced Composites Structures Laboratory Washington State University BS: Materials Science & Engineering, Mechanical Engineering MS: Materials Science & Engineering, Mechanical Engineering PhD: Materials Science & Engineering, Engineering Science, Molecular Bioscience Western Washington University BS: Plastics Engineering Technology, Manufacturing Engineering Technology

33. Education: Washington’s assets PUBLIC COMMUNITY & TECHNICAL COLLEGES Clover Park Technical College Certificates: Aerospace Composite Technician, Machinist Apprentice AAT-T: Manufacturing Technologies AAS-T: Material Science – Composites, Nondestructive Testing Edmonds Community College Certificates: Materials Science Technology AAS-T: Materials Science Technology ATA: Manufacturing & Materials Technology Everett Community College ATA: Advanced Manufacturing — Composites, Aviation Maintenance

34. Education: Washington’s assets PUBLIC COMMUNITY & TECHNICAL COLLEGES Olympic College Certificate: Manufacturing Technology AS: Materials Science Engineering, Aeronautical Engineering, Industrial Engineering Peninsula College Certificate: Composite Structures AAS-T: Composite Structures

35. Energy – How Washington Compares 14 State Average Retail Price of Industrial Electricity to Ultimate End-User, 2011 Average Retail Price of Industrial Natural Gas, 2011 Washington3.85 ¢ / kWh$9.40 / 1,000 ft 2 Alabama5.85 ¢$5.55 Michigan7.35 ¢$8.61 North Carolina5.63 ¢$7.19 Utah4.68 ¢$5.46 United States6.58 ¢$5.08

36. International Snapshot: China’s challenges The Chinese carbon fiber industry is developing slowly and faces significant obstacles to growth and expansion Since the 1960’s, U.S. and European export controls prevented sharing carbon fiber technology with China due to national security and defense concerns. Lack of independent intellectual property rights makes it difficult for Chinese companies to import technology. Developing technology from “scratch” is costly. Most Chinese companies produce low-quality carbon fiber and cannot produce an equivalent to Toray’s lowest-grade T300 modulus. 15

37. International Snapshot: China’s challenges

38. International Snapshot: Why Japan is competitive The Japanese carbon fiber industry is well-established, export-centric, and poised for continued growth. The country is home to world leaders Mitsubishi Rayon Co., Toho Tenax, and Toray Industries Japanese manufacturers shipped 16,028 tons of carbon fiber in 2010, a 66.2% increase from 2009. Three Japanese companies – Mitsubishi Rayon, Toho Tenax, and Toray Industries – account for 50.8% of global carbon fiber production. Japan’s carbon fiber export ratio has expanded continuously during the last two decades, from 57.2% in 1991 to 78.6% in 2010. The industry is supported by the Japan Carbon Fiber Manufacturers Association, which is exploring new commercialization opportunities and promoting life-cycle assessment methods for reducing the industry’s environmental impact. 17

39. International Snapshot: Why Japan is competitive Japan: Annual Carbon Fiber Shipments, in Tons 17

40. Sources 1.Lucintel. 2011. Growth opportunities in global composites industry 2011-2016. February. Available online: http://www.lucintel.com/reports_details.aspx?RepId=RPT1007http://www.lucintel.com/reports_details.aspx?RepId=RPT1007 2.Sloan, Jeff. 2011. Carbon fiber market: cautious optimism. High-Performance Composites. 1 March. 3.Washington State Department of Commerce: Research Services carbon fiber supply chain database. 4.Washington State Department of Revenue 5.Washington State Employment Security Department 6.Boswell, Clay. 2011. Carbon fiber picks up speed. ICIS Chemical Business. 30 May. 7.Warren, Dave and Cliff Eberle. US Department of Energy. 2009. Precursor and fiber evaluation. 8.Daniel, Isaac M. 2006. Autoclave molding process. Northwestern University School of Engineering. Available online: http://www.composites.northwestern.edu/research/processing/autoclave.htmhttp://www.composites.northwestern.edu/research/processing/autoclave.htm 9.http://www.pultrusions.orghttp://www.pultrusions.org 10.U.S. Energy Information Administration. 2011. Form EIA-826, monthly electric sales and revenue report with state distributions report. 11.Grant County Public Utility District. 2011. Rate schedule no. 15 – large industrial service. Available online: http://gcpud.org/customerService/rateSchedules/Rate%20Sch%2015.pdfhttp://gcpud.org/customerService/rateSchedules/Rate%20Sch%2015.pdf

41. Sources 1.U.S. Census Bureau 2.U.S. News. 2008. Materials: best engineering schools. 3.U.S. Energy Information Administration. Available online: http://www.eia.gov/cneaf/electricity/epm/table5_6_a.html http://www.eia.gov/cneaf/electricity/epm/table5_6_a.html 4.ReportLinker. 6 Sept. 2010. Trend Analysis on Global Carbon Fiber Market. 5.Market Research News. 2011. Global and China carbon fiber industry report, 2009-2010. Available online: http://www.salisonline.org/market-research/global-and-china-carbon-fiber-industry-report- 2009-2010/http://www.salisonline.org/market-research/global-and-china-carbon-fiber-industry-report- 2009-2010/ 6.Japan Carbon Fiber Manufacturers Association. 2011. Activities of the statistics working group (year 2010). Available online: http://www.carbonfiber.gr.jp/english/index.htmlhttp://www.carbonfiber.gr.jp/english/index.html