Manufacturing Update - 10 July 2024
Insights from articles and reports of interest on manufacturing technology, management, policy, and economics in the US and abroad
“Manufacturing Update” is planned as a periodic newsletter summarizing a small collection of recent articles on manufacturing technology, management, economics, and policy developments in the US and abroad that we think will be of interest.
The concept is to update the group on manufacturing developments that may be of interest, to share ideas, and to promote fluency and expertise with manufacturing issues and the debates around them. We encourage readers to send articles that you think will be of interest to us at mfg-at-mit@mit.edu.
Reviving Economic Statecraft for National Security
How China Innovates
The surprising reasons few Americans are getting chips jobs now
How China is moving up Apple’s supply chain
Taking AI to the next level in Manufacturing, 2024
How did China come to dominate the world of electric cars?
1. ”Reviving Economic Statecraft for National Security,” Linda Weiss, American Affairs, Summer 2024
Linda Weiss (of the Univ. of Sydney and author of America Inc? Innovation and Enterprise in the National Security State) reviews what she has called US “techno geopolitics.” The article discusses the recent revival of US Cold War “economic statecraft” in new forms, but also notes the weaker position the US is working from, particularly through neglecting implementation of manufacturing reforms.
The article notes the new expansion of US ideas of "economic statecraft" to grapple with not only military technological superiority but civilian sector superiority as well, through new industrial policies driven by China’s much more integrated approach to both. But has the US figured out yet in its economic statecraft the right mix of approaches to integrate national security and economic policy?
Remaining issues include guardrails to assure performance conditions for subsidies, improvements in manufacturing efficiency (“the main event for a serious industrial policy”), corresponding workforce talent deficiencies, and in the semiconductor sector, marginal US attention to date to China’s drive to dominate legacy chips.
For more [one free article per month]: https://americanaffairsjournal.org/2024/05/reviving-economic-statecraft-for-national-security/
2. “How China Innovates,” a/symmetric- Force Distance Times, May 11, 2024
The old thesis was that China was once weak on innovation; no more – advances in consumer drones, EV batteries and wind turbines show otherwise. Innovation in the Chinese view is not only about new technologies; as a Chinese Academy of Engineering analyst has noted, basic research goes “from zero to one,” while what he dubs “applied amplification research” goes “from one to 100.”
Chinese firms are less strong at fundamental research (although the country is making a major push now in that area), but very good at following industry trends and creating and leveraging an engineering dividend for technologies that initially emerged in the US. Instead of a basic research focus, where implementing is risky and expensive, China has leveraged its manufacturing might, externalizing those risks, focusing instead on industrializing proven concepts — then winning global market share as it achieves scale.
China’s concept of tech transformation is more explicitly geared towards achieving industrial and commercial scale, so much of innovation in China happens on factory floors. China sees huge strategic value in industrializing invention. And it has major advantages, including a large market in which to scale applications and transform cutting-edge technology into future industries.
For more:
3. “The surprising reasons few Americans are getting chips jobs now,” Heather Long, Kai Ryssdal and Maria Hollenhorst,” Washington Post, April 30, 2024
The Biden Administration has announced $30 billion in grants so far to semiconductor companies. Major new fabs are under construction in Arizona by Intel and TSMC, and their suppliers are opening facilities as well, with over 70,000 fab jobs expected, with 28,000 of these technician jobs. Can these jobs be filled?
Area community colleges cooperated with industry to develop a ten-day “quick start” introductory training program for fab jobs by familiarizing students with basic tools and processes. But few students actually trained in the program have obtained jobs. Some of that problem is construction delays. But Intel’s CEO says a year or more of study will likely be needed to create highly skilled workers in areas like hydraulics, electrical wiring and robotics.
Given the potential needs, there are not enough places in area community colleges to train for these skills, so the numbers are not yet emerging. The best solution may be “earn and learn” apprenticeships, but these programs, and the employer-community college or union trade alliances needed for them are only now starting to scale up. Meanwhile, TSMC, based in Taiwan, is bringing in engineers from Taiwan to staff up.
For more [paywall]: https://www.washingtonpost.com/opinions/2024/04/30/phoenix-biden-chips-fabs-workers/
4. “How China is moving up Apple’s supply chain,” Kyle Chan, High Capacity, May 3, 2024
China makes the vast majority of Apple’s products and that this work is mostly done by large contract manufacturers like Foxconn in their factories in China. Yet Chinese firms contribute a surprisingly small fraction of an iPhone’s total value. An analysis of the iPhone 15 found that only 2.5% of the device’s total cost is attributable to parts made by Chinese firms. The vast majority of the iPhone’s total cost—over 80%—derives from components made by companies based in the US, South Korea, Japan, and Taiwan.
But if you look below the surface, you find a different story. While Chinese firms only make up a fraction of the iPhone’s total value, most of Apple’s non-Chinese suppliers actually do a large share of their manufacturing in China. And you find that Apple’s own Chinese suppliers are moving up the value chain. Historically, Apple relied on the big three Taiwanese contract manufacturers to make its products in China: Foxconn, Pegatron, and Wistron.
But the past few years have witnessed the rise of homegrown Chinese contract manufacturers, such as Luxshare and Wingtech, which have been taking on a growing share of Apple’s manufacturing. As companies like Apple move lower-end production out of China, China is moving up Apple’s production value chain into high-tech, high-value components. This raises a big question for other countries. As China moves up the value chain, this might create room at the lower end for countries like India and Vietnam to step in. But will the competitiveness of Chinese firms in the middle levels of the value chain create a ceiling on how far up other countries can go? And how much decoupling Apple will do?
For more:
5. “Taking AI to the next level in Manufacturing, 2024,” MIT Technology Review-Microsoft, April 9, 2024
Maufacturers see Artificial Intelligence as important to the future of the smart factory. Of 300 manufacturers surveyed, 64 percent are currently researching or experimenting with AI while 35 percent have put use cases into production. A major constraint on more AI implementation is talent and skills - manufacturers cite a deficit in both. Problems with data quality, data governance and access to cloud-based computing power are other constraints. Larger companies are leading the investment in AI.
The report states that most common use cases deployed by manufacturers involve product design, conversational AI, and content creation. Knowledge management and quality control are those most frequently cited at pilot stage. In engineering and design, manufacturers chiefly seek AI gains in speed, efficiency, reduced failures, and security. In factories, better innovation is the priority, along with improved safety and a reduced carbon footprint.
For more: https://www.technologyreview.com/2024/04/09/1090880/taking-ai-to-the-next-level-inmanufacturing/
6. “How did China come to dominate the world of electric cars?” by Zeyi Yang, MIT Technology Review, Feb. 21, 2023
China is now the world leader in making and exporting electric vehicles (EVs) – 6,8 million electric vehicles were sold in China compared to 800,000 in the US in 2022. That year, China exported almost as many EVs as the US produced. How did this happen so quickly? The Chinese government has played an important role—propping up both the supply of EVs and the demand for them. As a result of generous government subsidies, tax breaks, procurement contracts, and other policy incentives, numerous homegrown EV brands have emerged in China. China realized in the 2000s that it would be very difficult overtake the US, Germany, Japan and Korea in complex internal combustion cars, so it invested in a new technology, battery-powered electrics, hoping to leapfrog past its established competitors.
The effort was led by Wan Gang, China’s minister for science and technology. Wan was an engineer who had worked for Audi for a decade, and he saw the economic opportunity in a push for all-electric vehicles. China also actively courted Tesla to build a Gigafactory in Shanghai, which now produces half its vehicles – it learned lessons by observing Tesla and using Tesla’s technology as a spur to its domestic industry to improve. China’s dominance of battery technology – 40% of the cost of an EV – has also played a key role. See also a March 2024 article by Zeyi Yang on the export challenge to the US of EVs.
For more: https://www.technologyreview.com/2023/02/21/1068880/how-did-china-dominate-electric-cars-policy/
Since 2022, MIT has formed a vision for Manufacturing@MIT—a new, campus-wide manufacturing initiative directed by Professors Suzanne Berger and A. John Hart that convenes industry, government, and non-profit stakeholders with the MIT community to accelerate the transformation of manufacturing for innovation, growth, equity, and sustainability. Manufacturing@MIT is organized around four Grand Challenges:
1. Scaling advanced manufacturing technologies
2. Training the manufacturing workforce
3. Establishing resilient supply chains
4. Enabling environmental sustainability and circularity
MIT’s Bill Bonvillian and David Adler edit this Update.