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AI's Pivotal Role in Reshaping the Global Supply Chain

We live fast and interesting times; technological advancements redefine market paradigms and asset classes, a new term is gaining traction within the tech community: Shardware**

Shardware represents the seamless and novel integration of hardware and software and it will be revolutionising traditional supply chains and manufacturing processes of everything from buildings to bikes, while also creating a novel AI supply chain. At the forefront of this transformative wave is the application of artificial intelligence (AI), not as a mere add-on to hardware but as an intrinsic, self-evolving component.


A New AI Paradigm

The emergence of shardware challenges the conventional separation between hardware and software. In today's technological landscape, thinking of these elements as separate entities is growingly outdated. This is particularly clear in systems where AI-driven software not only complements but also designs and builds its own hardware. Voxels, the three-dimensional counterparts of the two dimensional pixels, are at the forefront of this revolution, crafting reality of new matters through AI-led processes. In VR and AR, voxels are used to create immersive 3D environments delivered by Apple Glasses, for instance. While users perceive a continuous three-dimensional space, what they are interacting with is a composition of numerous tiny, cube-shaped elements (voxels). These create the illusion of a solid, material reality within the digital world. Though not "material" in the traditional sense, this reality is palpable and interactive within the context of the VR or AR environment.


A prime example of this updated approach to supply chains is Sam Altman's project. It combines AI-enabled smartphones, robotics, nuclear fusion technology, 3D and 4D technologies (where the fourth dimension is Time), AI chips, and advanced language processing models into a unified AI supply chain system. This method highlights how AI can make the creation and distribution of tech products more efficient and innovative. Altman argues that today's computing power falls short for these ambitious goals and he might be right. He believes securing $7 trillion in funding could be justified, aiming to transform the entire AI supply chain, its underlying computing requirements and with it every other supply chain known to us.


Bring it Home

With such a lofty goal in mind, it is only expected that semiconductors production becomes a national security, commercial and geopolitical objective, all wrapped in one. Each country wants to do it home. The importance of reshoring manufacturing, particularly semiconductor production, has been underscored by US Secretary of Commerce Gina Raimondo. Her comparison of the current push for semiconductor manufacturing in the United States to the Space Race highlights the strategic significance of this endeavor. With the ambitious goal for the US to produce 20% of the world's leading-edge logic chips by 2030—a significant leap from producing none today. This initiative is not just an industrial aim but a matter of national security.

The semiconductor industry is experiencing significant growth, projected to increase by 6 to 8 percent annually until 2030, with revenues potentially hitting $1 trillion, according to McKinsey. This boom necessitates a doubling of production to meet future demands, prompting many companies to announce or begin construction of new fabrication plants (fabs), especially as most current fabs are at full capacity. The United States is emerging as a key location for these new fabs, partly due to a collective effort to revitalize its microelectronics sector. Moreover, U.S.-based semiconductor projects, whether planned, in progress, or under consideration, are valued between $223 billion and $260 billion through 2030. Additionally, the federal government is boosting semiconductor production with $54 billion in grants allocated by the US CHIPS and Science Act for domestic manufacturing and research, which is already insufficient.

Geopolitics of AI

The interdependence of chips and AI signifies a broader trend: the merging of technological advancement with geopolitical strategy. This symbiosis between chips, AI, and manufacturing is paving the way for a new economic model, where products are increasingly sold as services. This shift announces a future where products are designed for longevity and renewability, promoting a regenerative economic incentive globally. The technology longevity and renewability are concepts which have been underpinning the AI community’s aspirations for a long time, but they haven’t been able to find a solution to it. Until now.


Moreover, as we advance with general-purpose factory robots and the acceleration in developing novel renewable materials are testaments to AI's transformative impact on manufacturing. These developments are pushing the global manufacturing landscape away from a focus on low-cost unit economics to one centered on advanced technology. And with it, this will bring rethinking of every supply chain.

It's crucial to note that while much of today's AI discussion is centered around the digital world. The future might tell a different story. The integration of AI into the physical world—constituting the bulk of global GDP—could redefine global supply chains, manufacturing processes, and, ultimately, economic models and geopolitics.


The concept of shardware, coupled with the drive for reshoring manufacturing, is not merely an industrial trend but a potential cornerstone for global economic recalibration. This recalibration envisions a world where circular manufacturing and sustainability are not just idealistic goals but practical realities.


Conclusion

As AI continues to merge with the physical world, the implications for global manufacturing, supply chains, and economic models are profound. The journey towards an AI-integrated supply chain—a shardware supply chain—is not just an evolution but a revolution, with the potential to reshape global markets, redefine national security, and pave the way for a sustainable and regenerative global economy. And create a new investment asset class.


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** Shardware is a term coined by Dr Pippa Malmgren whose work is worth following on Substack but also buy her books; Signals, comes highly recommended.



 

** Shardware is a term coined by Dr Pippa Malmgren whose work is worth following on Substack but also buy her books; Signals, comes highly recommended. I also recommend Chip War: The Fight for The World’s Most Critical Technology by Chris Miller

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