Van’s Note: Van Bryan here, Jeff Brown’s longtime managing editor. We have been enjoying Jeff Brown’s 2021 prediction series over the past few days. If you missed a few issues, remember you can always catch up by going right here.
Today, I sat down with Jeff to discuss robotics, automation, and the “manufacturing renaissance” that he sees coming in 2021. Read on…
Van Bryan: Jeff, let’s talk about this “manufacturing renaissance” that you have been predicting. Could you bring new readers up to speed?
Jeff Brown: Some context would probably be helpful.
For the last 30 years or so, the world was focused on globalization. It built supply chains where finding the lowest cost of production was the only consideration. Quality of manufacturing was always a secondary consideration. As a result, the world’s manufacturing industries became highly centralized, mostly in China.
And for a time, this worked relatively well. Consumers had access to goods and services at lower prices. This brought roughly a billion people out of poverty. And the world became more interconnected and interdependent than ever before.
But there was a downside, too…
Western countries began to recognize severe ethical issues such as child labor or unsafe working environments. And countries also recognized that all this overseas production was powered by “dirty” energy. Intellectual property theft was also a major problem.
And then there were the lost jobs. America’s manufacturing base moved overseas. That meant there were fewer “breadwinner” jobs in manufacturing for American workers.
But aside from all this, there was an even bigger problem with this centralized manufacturing model. And if it wasn’t for COVID-19, the world might never have noticed it.
Van: What was the bigger problem?
Jeff: The world’s supply chains became fragile. When everything is functioning normally, hardly anybody realizes this. But that all changed with COVID-19 and the economic lockdowns.
Almost overnight, the world’s supply chains were disrupted. For a time, it was difficult to get even basic goods. Nobody was sure if the next shipment would be on time or if it would be delayed indefinitely.
Here’s an example we all might remember. In April, America’s hospitals were running low on personal protection equipment (PPE). These are things like face masks, face shields, and hospital gowns.
According to a survey at the time, 20% of health care facilities were completely out of N95 face masks, while 36% were out of face shields and hospital “booties.” And 34% of medical facilities had no remaining supplies of thermometers.
Even facilities that did have this equipment were running dangerously low. The vast majority had less than two weeks’ worth of this equipment on hand.
Remember when we were urged to not hoard face masks and to save them for medical professionals? That was why.
I’m sure you can guess what caused this shortage. Most of this equipment is manufactured in China. And when COVID-19 hit, supplies were kept within Asian borders as a matter of national security.
Here’s another example. China controls about 80% of the world’s antibiotics manufacturing. And almost 100% of the world’s supply of penicillin G comes from China. Can you imagine what would happen if the world were cut off from these drugs?
Rosemary Gibson is a senior advisor at the Hastings Center. She summed it up. She said that, “If China shut the door on exports of these medicines and the ingredients to make them, within a couple of months our pharmacies would be empty.”
Those are just a few examples. But there are more.
The big story in 2020 is that the world finally woke up to how dependent we are on this centralized manufacturing model. And we finally understood the consequences of this model failing.
And that’s why I’ve been predicting this “manufacturing renaissance.”
Van: How would this “manufacturing renaissance” differ from the centralized model we have now?
Jeff: There will be two big changes. The first is that manufacturing jobs will come back onshore. The world has finally learned that economic independence is a matter of national security.
Put even more simply, manufacturing jobs are coming back to America. Countries all over the world will be looking to bring their manufacturing base back within their borders.
And this will reinvigorate the American manufacturing industry. It’s going to mean more jobs and better-quality products.
Van: Jeff, a lot of people have been skeptical about that claim. Isn’t it still much cheaper to manufacture in China?
Jeff: You’re right. A lot of people think that. But it’s not the case.
Every year, the Boston Consulting Group puts together a global manufacturing cost competitiveness index. Basically, it analyzes the cost of manufacturing in countries around the world. And the results from 2019 were striking.
The cost of manufacturing in China is almost on par with the U.S.
China had an index range between 95 and 97 compared to the U.S. at 100. What that means is that the cost advantages of manufacturing in China are less than 5% compared to the U.S.
And this doesn’t consider factors like tariffs, intellectual property theft, quality problems, logistics costs, or these fragile supply chains that we’ve been talking about. When you consider all that, the advantages of manufacturing in China disappear.
Mark my words. In boardrooms across America, executives are discussing the best ways to bring manufacturing back onshore. And we’re already seeing some clear signs.
Back during the summer, we got word that semiconductor giant Taiwan Semiconductor Manufacturing Company (TSM) was building a $12 billion semiconductor fabrication plant in Arizona. And prominent server manufacturer Supermicro also announced that it is building a new plant in the United States. Supermicro produces large server hardware that goes into data centers.
That means advanced components like semiconductors and data center hardware will be manufactured right here in the United States.
A lot of people have been claiming the “death” of American manufacturing for years. They are dead wrong. American manufacturing will come roaring back.
Van: You mentioned two big changes were coming. The first is that manufacturing will come back onshore. What’s the second one?
Jeff: The second change is that this new manufacturing model won’t be centralized at all. It will be decentralized. What that means is that you won’t have one giant manufacturing hub. Instead, you will have smaller manufacturing plants scattered across the country. There could be a manufacturing site close to every major city.
As we’ve seen this year, having centralized manufacturing can be disastrous. If a manufacturing hub goes down, the entire supply chain gets thrown into chaos. That won’t be the case with a decentralized model.
But these new manufacturing sites will be different than what we’ve seen in the past. They’ll make use of advanced technologies like machine vision, automated robotics, and 3D printing.
Van: Let’s talk about that. Were there any big robotics developments in 2020?
Jeff: One of the biggest breakthroughs was with artificial intelligence (AI) as applied to computer vision and the ability for a robot to grip an object. This has been a huge bottleneck for manufacturing robots.
Right now, even the best robots are still not as fast or as efficient as a human when it comes to picking or sorting objects. And the reason is that these robots still aren’t great at “understanding” how best to grip different objects.
Is this object slippery? Is it delicate? Do I have to hold this object a particular way? These are things that humans know instinctively. But manufacturing robots still have a tough time.
Right now, it takes about 29 seconds for a robotic arm to “look” at an object and “decide” the best way to get it from Point A to Point B without damaging it.
But a team of researchers out of UC Berkeley is solving this problem. The team used a form of AI called deep neural networks to train a robotic arm on the optimal way to move objects around without damaging them.
And get this. After training, it didn’t take the robot 29 seconds to “decide” how best to move an object. It took just 80 milliseconds. That’s an incredible 350x improvement.
This was really the last piece of the puzzle. I predict we will start to see this technology deployed in manufacturing plants, logistics facilities, warehouses, and even laboratories in 2021.
Van: What about 3D printing? Will that technology be deployed in the U.S.?
Jeff: Believe it or not, 3D printing, or “additive manufacturing,” is already widely used here in the U.S.
Jeff: Absolutely. 34% of all global installations of additive manufacturing equipment are happening in the U.S.
China is in second place at 10.8%. So America leads the world in 3D printing.
And it’s easy to see why. At a very high level, 3D printing is much more cost effective.
The technology is known as “additive manufacturing” because layers of materials are added to one another to arrive at a finished product.
Compare that to traditional manufacturing, which is known as “subtractive manufacturing.” With this method, a block of some material, usually metal, is cut, filed, drilled, and eventually reduced to the desired shape and size.
Additive manufacturing wastes fewer materials, it is much faster, and it’s done at a fraction of the cost.
Here’s one simple example from a company that needed to create molds to produce a propeller for a large air compressor.
Additive manufacturing saved $147,000 per mold casting. And additive manufacturing saved eight to 11 months on delivery of the mold castings.
And this is having an impact on a lot of different industries.
I’ll give you a prediction for 3D printing in 2021. I predict the first 3D-printed rocket will go into orbit sometime in the next 12 months.
I know what you’re thinking. Sounds crazy, right? But it’s very real.
There’s a company called Relativity Space. This is a company that can 3D print an entire rocket – including the engine – in 60 days. It can take up to a year to build a rocket using traditional methods.
So yes, I predict a 3D-printed rocket will go into orbit in 2021.
Van: This is a great topic, so let’s stick with it. What else do you see from 3D printing?
Jeff: The other big benefit from 3D printing is a high level of customization. Right now, centralized subtractive manufacturing is inflexible. These techniques can really only build three or four different versions of a product. These plants build out a limited number of products at high volume. Then that product is put on a cargo ship, and it’s sent across the ocean. That takes a long time, and we really have few options for customization.
But a decentralized model that uses additive manufacturing throws all that out the window. You can have very high levels of customization. Remember, these products are literally printed from scratch. You can make anything you want.
And these manufacturing plants won’t be overseas. They’ll be right down the road. So the finished product will arrive in hours, not weeks.
Imagine if a company needs a complex, highly customized gear. And it needs it ASAP. It’s no problem with this model. Simply order the part on Monday afternoon. It’s printed overnight. And it arrives at the warehouse Tuesday morning.
A Complex Gear Printed Using Additive Manufacturing
Van: Incredible. And the investment opportunities?
Jeff: I’m already on it. In 2020, I’ve made two recommendations for 3D printing stocks. As we speak, the first is up 245% in just five months. The second is up 57% in just two months. And readers can rest assured that there will be more opportunities ahead.
[Van’s Note: Jeff’s first 3D printing stock recommendation was a micro-cap issued to members of our lifetime program, Brownstone Unlimited. The second stock was recommended to readers of our small-cap investing service Exponential Tech Investor.
Both stocks are active recommendations in our model portfolios. Out of respect to our paid subscribers, we have removed the names of these stocks. But Brownstone Unlimited readers can catch up here. And Exponential Tech readers can go right here.
And readers who would like to join our elite services can do so below.
Join Exponential Tech Investor right here.
And learn how to become one of Jeff’s lifetime readers with Brownstone Unlimited right here.]
Van: Great stuff, Jeff. I’m going to finish today by asking the question that we always get when we talk robotics. Won’t this kill jobs?
Jeff: It’s a common question. And I understand why it’s on readers’ minds. The truth is that jobs won’t disappear. But they will change. Every technology has changed the nature of work.
Remember, before the printing press, text was hand-copied by scribes. We don’t have scribes anymore. We also don’t have weavers, elevator operators, or telephone operators. But were new jobs created in the process? Absolutely.
The truth is that technology has historically replaced the menial or dangerous tasks that humans aren’t well suited for. The same will happen with this “manufacturing renaissance.” Some jobs will disappear. But new ones will be created.
Look at Amazon. Here’s a company that has been innovating with robotics for years. And yet Amazon is an amazing job creator.
The message I want readers to hear is that this isn’t something we should dread. This is an incredible development that will improve our lives in profound ways.
And, of course, investors should be very excited. We’ll continue covering this space in the year ahead.
Van: Thanks as always, Jeff.
Jeff: Of course, happy to do it.
Van’s Note: Be sure you check your inbox tomorrow for our next edition of The Bleeding Edge. I’ll be sitting down with Jeff to discuss the rise of state-backed cryptocurrencies. And I’ll even ask him where he thinks bitcoin is heading in 2021.
And as Jeff said, the American manufacturing renaissance is in full swing. Are you invested in the best robotics stocks? If not, I encourage you to learn the names of Jeff’s top robotics recommendations by going right here.
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