Manufacturing Update - 20 February 2025

Insights from articles and reports of interest on manufacturing technology, management, policy, and economics in the US and abroad

Table of contents for article summaries below:

1. CARVING UP INTEL? “Broadcom, TSMC Weigh Possible Intel Deals that Would Split Storied Chip Maker

2. WILL INTEL’S NEW CHIP CATCH UP? TSMC 2nm Process Disclosure: How Does It Measure Up?

3. EFFECTS OF TRUMP’S STEEL AND ALUMINUM TARIFFS: Is it Made of Metal? It Could Get More Expensive Under Trump’s Latest Tariffs

4. JAPAN MOVES ON NEW SOLAR TECHNOLOGY: Japan’s $1.5bn Bet on Ultra-thin Solar Cells in Challenge to China

5. CHINA’S MANUFACTURING DOMINANCE: Installed Manufacturing Capacity in Key Areas

6. REVISITING ‘CHINA SHOCK’: Why Economists Got Free Trade with China so Wrong (Discussion with Economist David Autor)

7. GLOBALIZATION: Globalization Recedes, Conflicts Multiply

8. MANUFACTURING INNOVATION: Could an ARPA Help Resurrect US Manufacturing?

1. CARVING UP INTEL?

“Broadcom, TSMC Weigh Possible Intel Deals that Would Split Storied Chip Maker,” Asa Fitch, Lauren Thomas and Yang Jie, Wall Street Journal, February 15, 2025

Broadcom is reportedly considering an acquisition of Intel’s chip-design and marketing business, and would want a partner for the company’s manufacturing business, while TSMC is reportedly looking at controlling some or all of Intel’s chip plants, potentially as part of an investor consortium. Separately, TSMC has studied controlling some or all of Intel’s chip plants, potentially as part of an investor consortium or other structure, according to people familiar with the discussions. Broadcom and TSMC aren’t working together, and all of the talks so far are preliminary and largely informal.

But the potential deals would have been unthinkable until Intel’s recent struggles made it an acquisition target. The end result could be a breakup of Intel after the American icon spent many decades dominating the business of making central processors for both personal computers and data centers. Splitting the company would also bring it in line with an industrial shift in recent decades toward specializing in either manufacturing or designing chips, but not both.

Frank Yeary, the interim executive chairman of Intel, has been leading the discussions with possible suitors and Trump administration officials, who are concerned about the fate of a company seen as critical to national security, people familiar with the matter said. Yeary has been telling individuals close to him that he is most focused on maximizing value for Intel shareholders, the people said.

Excerpted with edits; more at (paywall): https://www.wsj.com/tech/broadcom-tsmc-eye-possible-intel-deals-that-would-split-storied-chip-maker-966b143b

2. WILL INTEL’S NEW CHIP CATCH UP?

“TSMC 2nm Process Disclosure: How Does It Measure Up?” Scotten Jones, SemiWiki TechInsights, February 10, 2025

Evaluating a major TSMC paper presented at the 70^th Annual IEEE International Electron Devices Meeting (IDEM) in San Francisco, the report found that TSMC's 2nm technology is characterized as potentially the densest and most power-efficient in the 2nm class, with promising early yield reports. However, in terms of performance, we believe Intel 18A chip is the leader, based in part on its leadership in backside power delivery, which TSMC will not implement until 2027. The early TSMC yield reports appear promising, but the reports of $30,000/wafer pricing for the TSMC 2nm chip do not in our opinion represent acceptable value for the process and may present an opportunity for Intel and Samsung to capture market share.

Excerpted with edits; more at: https://semiwiki.com/semiconductor-services/techinsights/352972-iedm-2025-tsmc-2nm-process-disclosure-how-does-it-measure-up/

3. EFFECTS OF TRUMP’S STEEL AND ALUMINUM TARIFFS

“Is it Made of Metal? It Could Get More Expensive Under Trump’s Latest Tariffs,” Lydia DePillis, New York Times, February 12, 2025

Duties set for March 12^th of 25 percent on steel and aluminum will flow through to car buyers, beer drinkers, home builders, oil drillers and other users of metal goods. Although the American steel and aluminum industries are far weaker than they were in their heyday in the 1970s, U.S. companies import only about 26 percent of the steel they use, according to the International Trade Administration, and that number has been falling.

At the same time, end users seeking alternatives to foreign suppliers may have options. U.S. iron and steel producers are operating at only about 70 percent capacity. The first Trump administration aimed to get to 80 percent, and did so briefly. But underpriced Chinese exports have taken a toll on domestic producers in recent years, forcing older, less efficient mills to close and leaving others with fewer orders than they can handle.

Also, primary metal tariffs don’t appear to be completely passed on to consumers. According to a 2020 study, foreign exporters absorbed about half of Trump’s 2018 steel tariffs, dropping their prices to maintain access to the U.S. market.

For an idea of which industries could be most affected by new tariffs, it’s helpful to look at how important steel and aluminum are to their production. As part of its report on the impact of the 2018 Trump tariffs, the International Trade Commission ranked industries by their dependence on the two metals. A type of business that uses the most steel is motor vehicle metal stamping, at 58 percent, with other components of auto manufacturing also using quite a bit.

While much of the steel that auto manufacturers use is produced in the United States, those companies and their suppliers also depend on specialized alloys that are available only from overseas producers. Virtually all automakers would be affected

Many automakers are already struggling to remain profitable in the face of increased competition from Chinese automakers and the cost of developing electric models. Tariffs on goods from Mexico and Canada could damage the creditworthiness of some manufacturers — particularly Nissan and Stellantis — said Fitch Ratings, which grades company finances. Next up for reliance on steel: buildings. Commercial construction and large apartment buildings require a lot of rebar — a steel reinforcement in concrete — which could add quite a bit to the bill for developers. This would be contrary to Trump’s desire to make housing more affordable.

A sector that uses no steel but a lot of aluminum is brewing and soft drink bottling. In 2018, when aluminum tariffs were set at 10 percent, they added half a billion dollars to production costs, says the American Beverage Association. Higher aluminum prices could also affect Boeing, for example. The company is already behind schedule on jet deliveries after a quality crisis and extended worker strike last year. In a recent securities filing, it said tariffs, particularly on aluminum and titanium, could mean that the company would be unable to deliver one or more of its products in a timely fashion or at budgeted costs.

Another big user of metal is the federal government, through construction and repair of railroads, bridges, submarines and aircraft carriers. Most of those are already required to use domestically produced steel and aluminum, but tariffs can push up those prices, too. Tariffs could also feed into the price of energy, both fossil-fuel-based and renewable. Drilling equipment and pipelines for oil and gas are made of steel and aluminum, as are racks for solar arrays and towers for wind turbines. And building new transmission lines, which is necessary for both types of energy, would get more expensive.

Excerpted with edits; more at (paywall): https://www.nytimes.com/2025/02/11/business/economy/tariffs-steel-aluminum-manufacturing.html

4. JAPAN MOVES ON NEW SOLAR TECHNOLOGY

“Japan’s $1.5bn Bet on Ultra-thin Solar Cells in Challenge to China - Tokyo Aims to Disrupt Beijing’s Dominance of Renewables and Reduce Fossil Fuel Dependence,” Harry Dempsey, Financial Times, February 16, 2025

Japan is betting $1.5bn on a breakthrough in next-generation ultra-thin, light and bendy solar panels, subsidizing the commercialization of a technology that analysts say could disrupt China’s dominance of renewable energy and reduce Tokyo’s dependence on fossil fuels. Perovskite cells are 20 times thinner than regular solar panels and could be plastered over stadiums, airports and office buildings, enabling mass adoption of solar in a mountainous country that lacks the open space needed for more conventional solar farms.

Officials in Tokyo have set an ambitious goal of installing enough cells to generate energy equivalent to 20 nuclear power plants by 2040, positioning the technology as essential for Japan to achieve its target for up to 50 per cent of its electricity to come from renewables. With this in mind, the government is providing subsidies worth up to ¥157bn ($1bn) to Sekisui Chemical, the company at the forefront of efforts to develop perovskite solar film. That comes on top of ¥60bn of support for the technology’s earlier development, and more could be handed out through funds aiming to build green supply chains. “Perovskite solar cells are a vital trump card to pursue simultaneously decarbonization, economic growth and energy security,” said Sadanori Ito, the government official behind the plan. “We view it as an indispensable technology for the further spread of renewables in Japan.”

China produces 85 percent of the world’s solar cells and 79 per cent of polysilicon, the material that goes into them. By contrast, perovskite cells’ main ingredient is iodine, for which Chile and Japan are the world’s top suppliers. This could help reduce risks to critical supply chains and energy infrastructure from overreliance on a single country, analysts said. Given the cells will be at least three times more expensive to make than current technology in the early years of production and uncertainty about how much mass output will lower costs, initial demand is more likely to come from denser cities such as Tokyo, Taipei and Singapore.

Excerpted with edits; more at (paywall): https://www.ft.com/content/929b71e6-dbda-4e84-90a7-a20bf5cd2d20

5. CHINA’S MANUFACTURING DOMINANCE

“Installed Manufacturing Capacity in Key Areas,” Financial Times, Jan. 19, 2025

China’s one-third share of global manufacturing output understates its dominance in many key areas of manufacturing capacity:

Full article at (paywall): https://www.ft.com/content/38997f3b-d1f1-46dd-a173-c19b63304f12

6. REVISITING ‘CHINA SHOCK’

“Why Economists Got Free Trade with China so Wrong,” Greg Rosalsky, NPR, February 11, 2025 (Discussion with economist David Autor)

For decades, mainstream economists claimed that free trade would be a clear win for the United States. Sure, they said, there would be some losers. But those losers would get new jobs in a growing economy and basically everything would ultimately be fine. Everything turned out not to be fine.

No research has made that more abundantly clear than a series of studies over the last decade-plus on what's known as the "China Shock." The shock refers to what happened to American communities after China joined the World Trade Organization in 2001. These studies have found that as a flood of Chinese imports came rushing into the U.S., it destroyed well over a million manufacturing jobs and created basically miniature depressions in communities around the country. Contrary to the assumptions of old-school economists, manufacturing workers struggled to adapt and move to new jobs in the aftermath.

Spearheaded by economists David Autor, David Dorn, and Gordon Hanson, the research project on the China Shock has led to a big reevaluation of trade policies in economic circles.

Back in 2011, when the economists began unveiling their research, one of their big, eye-opening findings was that, for displaced workers, "the adjustment process was wrenching, slow and scarring," says Autor, an economist at the Massachusetts Institute of Technology. That was not like classic economic theory, "where you lose one job and you get another almost equally good job at another firm." The economists, as well as others in their wake, also found that the broader communities hit by the China Shock suffered enormously. They saw higher unemployment rates. They saw declines in wages and in upward mobility. They saw an explosion in the use of welfare programs. And they became plagued by social ills, from higher rates of child poverty and single parenthood to an increase of deaths from drugs, alcohol, and suicide.

The China Shock research has helped convince more economists and policymakers to begin supporting greater government intervention in markets, like strategically using tariffs and subsidies to boost certain industries ("industrial policy") and "place-based policies," which take special measures to help left-behind communities succeed.

Recently, the economists published a new installment in their series (this time, Autor, Dorn, and Hanson are joined by co-authors Maggie Jones and Bradley Setzler). Equipped with even better, more precise data — as well as the benefit of being able to see what happened to these communities with the greater passage of time — the economists take another look at the aftermath of the China Shock. Their analysis goes through 2019, the eve of the COVID-19 pandemic.

The economists look at the effects of the China Shock from two angles: how it affected places and how it affected people. They find that on metrics such as employment rates, the places hit by the China Shock mostly recovered by 2019. A different set of industries rose in the ashes of manufacturing, offering residents jobs at places like big-box stores, restaurants, schools and health care facilities.

But, the economists find, the people who were hurt by the China Shock did not recover. Manufacturing workers did not transition to these new sectors. The economists find that the people who took the new jobs, concentrated in the service sector, were often newcomers and demographically different, including immigrants, U.S.-born Latinos and younger workers with college degrees. Meanwhile, the ladders in manufacturing that once provided workers without a college diploma a solid wage and upward mobility were kicked over. The research on the China Shock had already illuminated why so many Americans have been swayed by President Trump's brand of populist, nativist politics. This new installment is even more eye-opening on that front.

So why did economists get free trade so wrong? We asked Autor.

For one, Autor says, the preceding history of free trade had not been as disruptive. "A lot of trade in the 20th century was trade among rich countries," Autor says. "So it was more like, we sell some jet engines to France — they sell some Champagne to us." Trade wasn't really about cutthroat price competition. "We weren't used to major trade expansions with much lower-income countries," Autor says. When the U.S. and the rest of the world opened their doors to Chinese-made products, many economists and policymakers underestimated the effects of something that is painfully obvious in retrospect: All of a sudden, rich-world workers had to compete with a vast sea of other workers willing to work for cheap wages. Autor also suggests that the field was failing to ask the right questions and look carefully at the evidence, and that economists didn't have the same data-crunching abilities back then. In the years since, economics has seen what some have called an "empirical revolution," where statistical techniques have seen big improvements, data sources have gotten much bigger and richer, and evidence looms larger than traditional theory.

The theory of comparative advantage also acknowledges there will be losers from trade. But, Autor says, economists began using theoretical models that painted this rosy picture about what would happen to those harmed by it. These models contributed to wishful thinking that labor markets would adjust pretty easily to the trade shocks and that the workers harmed by trade would easily move to new sectors or places as the economy grew and changed.

Autor says they were surprised to find that workers, on average, did not follow these pathways for better jobs. First, their data shows that only a low percentage of workers moved out of manufacturing into nonmanufacturing jobs. Second, he says, they don't see an increase in these workers moving to new places. In fact, he says, it's the opposite.

"They became less likely to move out," Autor says. One potential reason is "they were in such dire straits." Or, maybe, in many cases, "they didn't see better opportunities available to them. Many of the places they might have gone to were similarly affected." And there are, of course, a whole bunch of noneconomic reasons people don't move, including wanting to remain close to family and friends. Instead of moving to new sectors or places, manufacturing workers either dropped out of the labor force or clung to jobs in their dying industries. Even those who were able to keep jobs in declining manufacturing businesses still suffered. They saw their wages stagnate and their opportunities for upward advancement disappear.

In their new research, the China Shock economists find that employment in these places did eventually rebound. It took like a decade or more. And the jobs were different. However, they find, the new jobs in new industries were taken by different people. Rather than the sort of storybook version of trade adjustment, where workers rather quickly find new jobs, Autor says that he and his colleagues find "a lot of this adjustment process is generational. It really is a different generation of workers doing a different set of jobs in the same places."

Excerpted with edits; more at: https://www.npr.org/2025/02/11/g-s1-47352/why-economists-got-free-trade-with-china-so-wrong

7. GLOBALIZATION

“Globalization Recedes, Conflicts Multiply,” Speech by Suzanne Berger,‘Global policymaking in the Trump-Xi Era’ Conference at Bruegel, the European think tank on economics, January 17, 2025

In 1914, globalization ended in one week – between 31 July when the London Stock Exchange closed, and 4 August when the British government declared war on Germany. International trade and capital flows subsequently collapsed – not only for the duration of the war but for more than six decades. Only in late 1970s did the level of cross-border flows of capital and trade return to the 1913 levels. In 1914, however, after a half century of globalization, people’s views on how damaging the changes would be – even how damaging the war was likely to be – were quite optimistic, and wrong. Today, the costs and dangers that the end of globalization is likely to bring are again greatly underestimated. There isn’t even agreement on whether globalization is over.

Today, we are moving in a very different direction from the past forty years. States around the globe are raising the political barriers that surround their territories^. It’s true that the overall level of trade has been fairly stable since peaking in 2008. That is why people disagree about whether what’s happening is deglobalization or reglobalization or new globalization. What drove business during the decades of globalization was competition on costs. What's emerging now is a powerful new driver for business: uncertainty.

Three big changes have been at work to destroy globalization: first, reactions to job losses arising from imports; second, the lessons people drew from COVID-19; third, war: war in Ukraine and the threat of war with China.

On the first point, globalization was great for much of the world, with extreme poverty levels falling from 42 percent in 1981 to 9 percent in 2018. But globalization was not great for US and other liberal democracies. American blue-collar workers lost 6 million jobs because of imports, and parts of the country – Youngstown, Ohio; Detroit, Michigan; parts of Wisconsin – that were basically single-industry towns became wastelands. The same phenomena fed into Brexit and other developments.

COVID-19, meanwhile, taught the public that there are severe dangers in a production system based on just-in-time production, zero inventory and extended supply chains. The problem was not just the length of supply chains, but the basic firm structure that had emerged in the US because of globalization. Forty years ago, the greatest American companies were all vertically-integrated firms: IBM, Motorola, Dupont, Texas Instruments, GE. Not one of these firms remains structured today as it was then. Under pressure from financial markets, these companies all broke apart into ‘core competence’ firms, and outsourced and off-shored everything they could. These companies became highly dependent on suppliers. And COVID-19 highlighted that dependence. Companies were largely inspired by ‘lean manufacturing’ mantras: eliminate waste, eliminate inventory, Six Sigma (a process improvement methodology). This production paradigm – inspired by the Toyota model – emphasizes optimization of current practices and tends to discourage innovation. In fact, introducing innovation and experimentation on a factory floor is costly and disruptive.

The COVID-19 experience dealt a serious blow to the lean-manufacturing paradigm. It led to a higher valuation of resilience. But it also highlighted the lack of experimentation and innovation in manufacturing. The manufacturers that survived after the waves of offshoring had lost 6 million jobs. They are wary of innovation and they are risk-averse. The manufacturing eco-system has been thinned out, drained, depleted.

This matters all the more because as war with China comes to seem possible – the third major factor in the receding of globalization – American policymakers, whether Republicans or Democrats, will be raising even more border-level barriers.

The US’ difficulty in supplying arms to Ukraine since 2022 is an ominous sign of how far US defense manufacturing has declined over the past thirty years. In the defense industry, there are a few great companies at the top: Raytheon, Lockheed Martin. There are some new high-tech Silicon Valley defense manufacturers such as Palantir and Anduril, which are still in their infancy. And then there are the myriad suppliers that are small and medium-sized firms employing fewer than 500 workers. Of a sample of small and medium manufacturers we interviewed in Ohio, roughly 40 percent had had at least one defense contract in the previous ten years. So, the hollowed-out manufacturing ecosystem that I have described is the defense production base. So the uncertainties of national security as well as the domestic economy make rebuilding manufacturing a key priority for action.

Excerpted with edits; more at: https://www.bruegel.org/analysis/globalisation-recedes-conflicts-multiply

8. MANUFACTURING INNOVATION

“Could an ARPA Help Resurrect US Manufacturing?” William B. Bonvillian, Issues in Science and Technology, February 2025

The weakness of US manufacturing has become both a social and political issue. Supply chain shocks induced by the COVID-19 pandemic made the true costs of disinvestment in US manufacturing capability evident to American consumers. The war in Ukraine has shown the risks to national security from lack of manufacturing depth; it will take the United States years to replenish depleted stocks of missiles and artillery shells transferred to Ukraine. Today, China completely dominates the world market for drones, which have become a critical defense technology. And although lithium-ion batteries and solar photovoltaics were invented in the United States, China is now the dominant leader in both sectors. Of course, this decline was happening long before the shocks of the last few years. US manufacturing has faced falling rates of productivity for 15 years.

Manufacturing is a more important part of the economy than current US policy acknowledges. Traditional approaches to manufacturing policy involve tax, trade, and currency valuation, which remain important. But without a focus on policies that incentivize manufacturing innovation, the country will not escape today’s deficit. Though the United States remains a global leader in research and development, little of that capability is focused on manufacturing.

This is in part a legacy problem. During World War II, the United States developed mass production at a scale that was the envy of the world—no other nation was close. President Roosevelt’s wartime science advisor, Vannevar Bush, never had to give manufacturing a thought in constructing the postwar innovation system because the country was so dominant. America was still catching up with European nations on basic science, so Bush’s plan for US research and development was aimed at science—not production. He left manufacturing out of the equation, and since then there has been no national focus on manufacturing technologies and processes throughout the network of federal agencies that support R&D.

Leveraging the United States’ still-strong innovation system to make manufacturing more productive and competitive could be one way to fix the country’s manufacturing problem. But leapfrogging from our current state will require not only new technologies but also new paradigms of innovation. Fundamental advances in manufacturing technology, like artificial intelligence for production analytics and small autonomous flexible robotics, must be nurtured through to the prototype stage to connect to the rest of the manufacturing ecosystem. Breakthroughs, not just incremental advances, are needed. The United States will not regain its leadership position on manufacturing just by doing more of the same things on manufacturing it does now. It must pursue entirely new paradigms in manufacturing that invoke technological surprise, such as through advanced materials for entirely new product properties or digital twins for remote system monitoring, repair, and operation. The ARPA model fits this role. An ARPA is not a magical fix for what ails the US manufacturing ecosystem, but it does offer one potentially transformative way to target a long-standing gap in government-industry innovation research

DARPA and its clones are unique among other R&D agencies because ARPAs prioritize three critical components. First, ARPAs follow the “island-bridge” model—the agency should be independent enough to do great, high-risk research, but linked closely enough to the “mainland” political decisionmakers who can help take steps to transfer technology breakthroughs into the wider world. Second, ARPAs need to be able to command the resources and ability to transition the technology into implementation. DARPA makes technology transition happen by leveraging the massive acquisition budgets of the military services to move the technologies DARPA is prototyping through demonstration, testing, production, and product introduction. (The DARPA clones not linked to procurement budgets have faced challenges with this.) And third, ARPAs are steeped in a culture of boldness and risk tolerance that is truly unique within the research ecosystem. Breakthroughs require risk-taking; there are few breakthroughs without it.

An ARPA for manufacturing needs to successfully replicate these three features—but that will depend on where it is situated in the federal government. For example, one obvious place for it would be in the Department of Commerce, which houses the National Institute for Standards and Technology (NIST), an R&D agency with a history of industry research collaborations. However, Commerce has no procurement budget and no clear pathway to further technology transition.

An ARPA-M might find more success within DOD. The agency has a major stake in the defense industrial base, as well as in the nation’s overall industrial base, on which its defense capabilities are highly dependent. In fact, a strong argument can be made that DOD must strengthen production capability to restore the arsenal of democracy. To the extent that advanced manufacturing can lead to improvement in overall US industrial capability, that is a major plus for the agency. In addition, DOD has considerable experience with the DARPA model. A final option would be to create a manufacturing mission as a new office within DARPA itself. Two DARPA offices are now looking at expanding their manufacturing depth.

No matter the design or location, it’s not enough to do only breakthrough research on advanced manufacturing technologies in an ARPA-like entity. Technology development relies on a chain of innovation, and every link in the chain must be strong. An ARPA for manufacturing will be successful only if it is one component of a larger ecosystem that addresses research, policy, finance, industry collaboration, and worker education. An overall policy of improved leadership across federal agencies for manufacturing, support for testing and demonstration stages, improved manufacturing innovation institutes, and large-scale scale-up financing, is required, otherwise an ARPA for manufacturing would only be a shot in the dark.

Excerpted with edits; more at: https://issues.org/arpa-resurrect-us-manufacturing-bonvillian/

Since 2022, MIT has formed a vision for Manufacturing@MIT—a new, campus-wide manufacturing initiative directed by Professors Suzanne Berger, A. John Hart, and Christopher Love 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. We encourage readers to send articles that you think will be of interest to us at mfg-at-mit@mit.edu.