Introducing - The Full Stack Economist Newsletter - Feb 22, 2023
The Full Stack Economist is a newsletter for entrepreneurial economists who seek to manage a nation's economy from a holistic framework. It will report information and insights on all verticals necessary to running a healthy economy. In contrast to myopic theoretical economists, this publication will cater to practical economists interested in action. Borrowing from the software concept of the full stack developer — a developer that has mastered all major areas of coding — the full stack economist is an economist that has mastered all major areas of the economy. This newsletter is a product of Ryan Research.
What It Takes to Compete in Semiconductors
The rationale for subsidizing domestic semiconductor fabrication was never to address chip shortages (“The Bill for CHIPS Subsidies Comes Due,” Review & Outlook, Feb. 14). It was to reduce dependency on Taiwan and potentially China. Yes, U.S. semiconductor companies would have made tens of billions of dollars’ worth of capital expenditures over the next decade anyway. But the question is how much they would have invested in the U.S. if not for the subsidies in the CHIPS Act.
- Robert D. Atkinson, The Wall Street Journal
Securing Supply Chains of Critical Minerals and Materials for America’s Tech Future
Among the lessons of the COVID-19 pandemic is that the United States must do more to secure the supply chains for critical goods and materials. President Joseph Biden clearly had this in mind when signing Executive Order 14017, which mandated an accelerated review process with an eye toward creating more secure supply chains, including those for critical minerals essential to high-tech applications including electric vehicles, wind turbines, solar panels, and even smart phones. Many of the consumer products and other crucial clean energy solutions for a low-carbon economy required to meet the Biden administration’s ambitious climate action goals rely upon critical minerals for their manufacture or operation. Moreover, irrespective of one’s view on the administration’s climate agenda, America’s future technological innovation increasingly will be dependent upon reliable access to secure supplies of certain key minerals and other strategic materials.
. . .
It is one thing to call for securing the supply chains for critical minerals, but another thing to do it. Policymakers and public officials should bear in mind the following:
Critical Minerals Are Today Mostly Imported to the U.S. – Of the 35 minerals or groups of minerals designated as essential for U.S. economic and national security, imports account for over half of the country’s consumption of 31 of these and 100 percent of 14 of them. Today, China produces or processes more than 80 percent of the world’s rare earth elements (REEs), 1 the Democratic Republic of the Congo (DRC) possesses half the world’s cobalt reserves, and Guinea has the world’s largest reserves of bauxite, the primary source of aluminum.
For Most Critical Minerals and Materials, Reshoring is Not an Option – Political support for reshoring upstream suppliers may have reached a fever pitch but meeting all of the current—let alone future—U.S. demand for critical minerals by reshoring is not realistic. Even when U.S. companies can mine critical minerals here at home, they often cannot readily process them domestically due to onerous environmental regulations or local unfavorable political environments. For critical minerals, policymakers should focus less on reshoring and more on solutions that allow U.S. firms and other trusted partners to control more of the mining or manufacturing process. This solution would ultimately help reduce the dependence on China—or any other potential adversary—to meet U.S. needs for critical minerals.
Securing the Supply Chain for Critical Minerals is Essential to Meeting U.S. Climate Goals as well as Enabling Future Technological Innovation - To achieve the goals set out by the Biden administration of a carbon pollution-free power sector by 2035 and a net-zero economy by 2050, the U.S. must increase deployment of solar and wind power and ramp up its fleet of electric vehicles. Making these advances requires critical minerals, since the manufacture of permanent magnets used in wind turbines as well as for electric vehicles, for example, requires rare earth elements such as neodymium, praseodymium, and others. Solar panels require dysprosium, indium, and other elements found only in a handful of countries. Efficient power storage for renewable energy has become a Holy Grail of sorts in recent years and vanadium-based batteries have shown great promise for long life cycles. Currently virtually all of the metal is produced in three countries. In order to achieve America’s climate goals and enable future technological innovation, securing reliable supply chains for critical minerals from overseas sources is paramount.
Creating a Strategic Reserve Can Help Ensure Critical Materials Are Available When Needed – Not only can a strategic reserve protect against costly hold ups for manufacturers, but it can also catalyze investments in critical minerals that further protect U.S. supply chains. Through instruments such as offtake agreements and incentives to private companies to supply needed critical minerals, the U.S. can ensure that no one country can cause a market failure for any given mineral or group of materials. In the case of rare earth elements, for example, a strategic reserve could help mitigate the risks of the near-total monopoly on processing presently enjoyed by China.
Securing the Supply Chain for Critical Minerals Demands a Variety of Approaches – Multiple approaches may be necessary to create a secure supply chain for critical minerals, including offtake agreements for alternative suppliers; ensuring multiple supply options; diversifying supply geographically so that armed conflict or natural disaster do not knock supplies completely offline; and finding ways to work with diverse multinational suppliers.
- J. Peter Pham, Krach Institute for Tech Diplomacy at Purdue
The US Auto Industry Doesn’t Have a Supply Problem. It Has a Demand Problem.
The light vehicle market has been going through a significant transformation since last June. Starting in the third quarter of 2022, the demand-supply structure of the market moved from a supply shortage into a serious demand problem that will have marketing teams scrambling to fix it. The vehicle market has been supply-constrained over the past two years. That’s not new information. What seems odd is that many CEOs are still using supply constraints as an excuse for not meeting sales targets or earnings objectives. Memo to the board of directors: Those days are over. There are certainly pockets of supply constraints when looking at specific models. And the level of inventory is not ideal for consumers who want to roam the lots for the right vehicle and haggle on price. However, these minor supply problems are now overwhelmed by the fact that the fundamental economics driving the vehicle market have turned very sour.
- Warren Browne, Industry Week
Hydrogen Not the Answer in Net-Zero Emissions
Green, blue, or grey, hydrogen will not be the panacea to the United Kingdom (UK) meeting its 2050 net-zero targets, the country’s lawmakers have concluded. Their comments come in “The Role of Hydrogen in Achieving Net Zero,” an 83-page report issued by the UK House of Commons Science and Technology Committee. The 11-person committee, the majority of whom were drawn from the governing Conservative party, concluded multiple changes will be needed to the way the UK obtains, uses and stores energy if it is to reach net-zero emissions by 2050.
“Hydrogen will have its place in this portfolio. But we do not believe that it will be the panacea to our problems that might sometimes be inferred from the hopes placed on it. Essential questions remain to be answered as to how, in [the] future, large quantities of hydrogen can be produced, distributed, and used in ways that are compatible with net zero and cost efficiency,”
- Seán Ottewell, Chemical Processing
Market Map: Investors cultivate what's next in agriculture
Agtech saw an explosion of investment activity as many startups searched for ways to solve shortages and climate change's effects on our food supply.
The precision agriculture segment is made of four subsegments:
Robotics and smart field equipment: The tools that are used to cultivate, secure and manage crops on a farm.
Drone and imagery analytics: Tracking harvests and fields of crops to understand how a harvest is progressing and where additional resources may be needed.
Farm management software: Marketplaces for hiring workers, avenues for selling goods and grains, and software to help break down data from drones and other tools.
Field internet of things: Devices that help farmers understand and monitor their crops that are disbursed across a wide geographic range.
In Q4 2022 there were 188 deals worth nearly $1.8 billion tracked by PitchBook, down 6.9% and 34.2%, respectively, compared to the previous quarter. Year-over-year, deal value declined from 2021's high of $12.3 billion to $10.6 billion, down 13.8%. Despite the decline, PitchBook analyst Alex Frederick says that interest in agtech remains historically high due to geopolitical and environmental challenges. Notable recent deals include a $46.5 million round for Verdant Robotics, a startup building specialized nozzles that utilize computer vision to target where to spray herbicide, and Capella Space, a startup developing radar technology to help monitor crops during difficult weather events, which closed a $60 million funding round in January.
- Jacob Robbins, PitchBook
A tidal wave of opportunity
The potential of tidal energy is huge. Seventy per cent of the earth’s surface is ocean and sea and, if we could harness that energy, it would provide 150 per cent of the world’s energy needs. A recent report found that tidal stream energy could provide more than 6GW of energy to the UK grid by 2050. This may be small compared to the potential of offshore wind but, in contrast to wave, solar and wind, tidal energy is entirely predictable, so could provide a significant baseline power source for our future electricity grid.
. . .
There has been significant progress in tidal turbine technology in recent years. The largest tidal device currently is the 2MW Orbital Marine Power’s O2 device in Orkney, with the largest array being Meygen in the Pentland Firth (6MW from 4 x 1.5MW devices). These machines have been silently producing more than 50GW/h of electricity over the last few years.
. . .
All that is about to change. The EU Horizon Europe MAXBlade project, which started in January 2023 – led by TechnipFMC, including Orbital Marine Power, Marasoft, TECNALIA, University of Edinburgh, EMEC, Laborelec and the European Composites Industry Association - plans to increase the length of the largest tidal blade from 10 to 13 metres, resulting in a 70 per cent increase in the area the blade can sweep. The MAXBlade team believes this will have the single biggest effect on bringing down the Levelised Cost of Electricity from tidal energy.
- Conchúr Ó Brádaigh, The Engineer
Illinois Allocates $40 Million to Develop Industrial "Megasites"
Illinois officials hope that a new grant program will spark industrial development at some of the state’s largest commercial properties. Illinois Gov. J.B. Pritzker announced a “Megasites Investment Program,” which would authorize up to $40 million in funding to address upfront costs associated with major manufacturing projects, such as land purchases, cleanup expenses, and infrastructure upgrades. The state hopes the effort will lead to more manufacturing jobs, particularly in emerging fields such as green energy. The grants, the Chicago Sun-Times reports, will range from $250,000 to $5 million. Recipients will be required to either own or have an agreement in place to acquire properties of at least 200 acres in size.
- Andy Szal, Thomas
AI in Manufacturing: IndustryWeek Asks What the State of the Industry Is Today
In the manufacturing world, AI is more of the present than the future with many companies using predictive maintenance systems on machine tools, machine learning algorithms to check quality and demand forecasting systems to set work orders.
A 2021 study by KPMG found that manufacturing was far ahead of other industries in its use of artificial intelligence (AI) with 93% of businesses saying AI was moderately or fully functional in at least one system:
Financial Services: 84%
Life Sciences: 77%
- Industry Week
Port Terminals Face Financial Strain
The good news is that the congestion and service failures that plagued North American port operations for several years have finally receded. The bad news for port terminal operators is that they are suffering from financial constraints resulting from the fact that they no longer collect large and container detention and demurrage charges they imposed during the crisis.
- David Sparkman, Material Handling & Logistics
China’s Coal Mining Boom Is Running on Fumes
Something strange is happening in the world’s most polluting industry. China’s coal industry accounts for nearly a fifth of the world’s emissions, a greater volume of greenhouse pollution than every car, train, ship and aircraft in the world. It’s oddly unclear, however, whether that cloud of carbon is growing, or shrinking.
Looking at the tonnage of coal mined during the course of the year, you’d think there was a clear answer — by the government’s numbers, output rose 10.4% compared to 2021. And yet the major consuming sectors don’t seem to be following suit. Thermal power (which in China is almost entirely coal-fueled) increased just 1.4%. Steel and cement production fell by 1.9% and 10.4% respectively. So where’s all that coal going?
- David Fickling, Bloomberg
Webinar: 4 Insights to Propel Growth in 2023: What Manufacturers Expect in 2023
More than three-quarters of manufacturers think their revenue will increase this year—and company growth is their number one goal, new research from Aptean shows. To be clear, that means growing revenue, not just getting bigger. Companies say they’re embracing automation and other manufacturing technologies to boost output without adding more people who are extremely tough to find, train and retain in this environment (38% of respondents said labor shortages remain their top concerns).
How can manufacturers grow the top line without adding people and other expenses? What obstacles could threaten that progress? This webinar is your opportunity to find out what other manufacturers are planning over the next year and how businesses can overcome those headwinds.
Join us on March 1, 2023, at 12pm ET, as we explore 4 insights identified from our research, and how they will shape your 2023 growth strategy. We’ll discuss:
How companies expect to complete digital transformation in 2023, becoming digital enterprises
Improving supply chain reliability and visibility
Combatting rising costs by increasing efficiencies
Using automation to address labor challenges
- Industry Week
EVs to Grow to 45% of the Car Market by 2035, Driving Demand for Cobalt, Graphite, Lithium
Electric vehicle (EV) adoption is rising at an unprecedented pace. It is estimated that EVs will take a massive 32% share of the car market by 2030 and grow to over 45% by 2035. Let’s explore how this projected growth impacts the sourcing of cornerstone chemicals for EV applications and how manufacturers are preparing for increased demand. Thomasnet.com®’s sourcing data from over 76,000 sourcing categories revealed that the top industrial chemical categories showing significant year-over-year growth are lithium carbonate, lithium hydroxide, cobalt, and graphite, all of which are key EV battery materials.
Lithium carbonate is an essential precursor for industrial lithium applications. After reacting with calcium hydroxide, this lithium salt converts into lithium hydroxide, the principal element in most rechargeable battery cathodes. The rise in EV manufacturing is reflected in Thomasnet.com® data, where lithium carbonate and lithium hydroxide sourcing year-over-year surged 156% and 196%, respectively.
- Christian Cavallo, Thomas
Ryan Research is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.