🤖 Trade, globalisation and 3-d printers

Using 3-d printing to skirt around trade wars. But does it promise more?

Hello!

Here is another brief for EV Premium members on a topic I’ve been mulling for a while. I’d love your comments.

I am making the post available for non-members until Saturday 29 February. If you want more like this, you can subscribe

Dematerialisation is an important trend in our economies. They increasingly require, and value, intangibles. What something is worth is now disconnected from the weight of its raw materials or the human-hours put into assembling it. Rather, it is encapsulated in design, knowhow, brand and similar.

I found this tale about Pix Moving, a Chinese startup an intriguing case study. Pix Moving routing around Trump’s trade war by sending blueprints for components to 3-d printers in the United States

Says founder, Angelo Yu:

We don’t export cars to the U.S. We export the technique that is needed to produce the cars.

Pix Moving uses (unspecified) AI systems to help design components giving it a speed advantage. Vehicles can be designed in a year, about a third of the traditional time. But the kicker is how the firm’s approach could skirt around rising trade barriers.

Data orchestrates the entire process, it is also relatively easy to replicate what the company does in China at factories elsewhere. This will allow Pix to make vehicles near its customers, holding down logistics costs. More importantly, the ability to shift production lines anywhere, anytime will shelter the company from unpredictable trade conflicts—be it Japan versus South Korea, the U.S. versus China or even the U.S. versus Vietnam.

This type of dematerialisation ultimately leads to all sorts of very thought-provoking discussions. Taking a reasonable assumption that the printing and additive manufacturing facilities and the associated materials will become commoditised, low-margin services, value will accrue in the owner of the IP. 

This will extend the trend that exists in consumer electronics and other sectors. The value of the components in a $1000 iPhone X comes to less than $400, Apple’s software, design, brand and know-how comprises the remaining $600. 

There are many ramifications of this ongoing shift towards value being baked into intangibles rather than physical things. For the best primer on this, I recommend reading the State of the Exponential brief of the Intangible economy.

How will 3-d printing ultimately impact world trade? Research from Dutch bank, ING, a couple of years ago suggested that world trade could wipe out up to 40% of world imports by 2040. Bear in mind, by 2040 we’ll be shipping less coal, oil and gas around the world too, suggesting even lower levels of physical trade, I’m not sure that effect is necessarily calculated in the ING forecasts. (See graph below.)

One likely scenario is the 3-d printing will encourage the convergence of production and consumption. Products will be printed and assembled locally, close to the point of purchase. It might event possibly reduce the value of finished manufactures.

Such novel manufacturing ought to increase the amount of raw materials shipped, relative to final products. Ships will be carting around metals and other feedstocks rather than completed smoothie makers, calipers, vacuum cleaners or whatever.

Of course, the trend towards generative and AI-assisted design means a reduction in the amount of raw materials finished products will need. Turns out 3-d printed parts can use up to 70% less raw material than traditional components. 

My hunch is that localised 3-d production will remain a low value business. Local operators will act as franchises whose margin is eaten both by the manufacturers of the printing devices and the owners of the designs and IP of the products. Printer manufacturers will, no doubt, endeavour to create proprietary hooks around the supply of raw materials or, more likely, move towards a rental model. 

If—and when—such 3-d printing becomes common place, the underlying dynamics of today’s business models and IP laws, will be to skew the profit pool to the firm, no doubt tax-sheltered, that controls the IP. The patent owner will be able to squeeze margins from a concatenated value chain. And increasingly, the temptation to move the business model towards service rather than sales will abound. Local economies may gain as physical production decentralises, but these roles are likey to be rather lowly rewarded, squeezed by the power of the IP owners and the providers of the fabrication kit.

Open source approach to 3-d printing, like the Fablab movement, have potential as a counterweight but they are so limited in scale and impact.

Rights-to-repair, which will allow consumers to open-up and fix the products they buy, will become important. These rights may, in turn, need to extend to component standardisation or royalty-free components so that we can repair 3-d printed items without paying rentier profits to IP owners. Indeed, decentralised 3-d printing could encourage manufacturers to provide more modular products with longer lifespans, helping us with overall sustainability goals.

One key aspect of 3-d printing is how it facilitates dematerialisation. Value moves into the IP. Fewer raw materials are required. And it ecnourages longer use of those raw materials once they have be transmogrified into products.

Here we have another bundle of exponential technologies with tremendous promise.

The most interesting questions raised are not about the technology, but rather about the impacts on our non-technical institutions, like product regulation, tax codes, trade policy & local economies.

In short, it’s complicated.

Cheers,

🤩 Azeem

Further reading on 3-d printing:

Disclosure: Amongst other things, I am a senior advisor at PwC which owns Strategy&.