MZ Weekly Thread for January 27, 2025

Thumb on the pulse read: Affluent U.S. consumer showing economic strength. Consumer spending reported by American Express up 9% year-over-year. Up 11% for travel and entertainment (T&E). Monetary Matters host Jack Farley on X says, "it's definitely a lot worse for consumers in the middle and low-income range. Capital One actually reported declining delinquencies (a good thing) but the real subprime credit companies haven't reported yet and will do so over next few weeks."

US manufacturing labor productivity growth: "We find, perhaps surprisingly, that the pace of change has slowed over time." Report PDF here.

Current state vs future state of U.S. industrial based via Aaron Slodov, creator of REINDUSTRIALIZE, co-founder of New American Industrial Alliance on X @physicist.

Coal as source of electricity production per nation per Michael A. Arouet X @MichaelAArouet. Large Asian countries generate majority of their electricity from coal.

Expansion of Taiwanese contract electronics providers reported by TrendForce. Other manufacturers seeing growing demand for U.S.-based manufacturing confirmed by increasing number of M&A activity projects and firms like Asus and MSI ramping up California production capacity to handle increasing volumes to ship AI servers to the U.S.

Chart showcases chances for M&A success based on whether acquiring firm is buying a company with technology matching their own, has technology that's an extension of their own or the target company has completely new technologies vs the buyer. The same can be said for market. I speak to several M&A projects on strategy here.

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About
What matters when formulating contract electronic strategy? How do you identify supplier profit centers and what are you doing to protect against margin erosion for your outsourcing programs? Why do provider capabilities often not match capabilities they claim? How are you benchmarking your supply chain against competitors?
I’ve spent 25+ years in contract electronics industry setting up contract electronic divisions and running operations, protecting EMS program profits, manufacturing capacity M&A and more. I run a technology solutions firm. A lot of times this means asking the right questions.
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California and Texas have the most number of jobs supported by U.S. exports to China. In Texas, most of these are concentrated in oil and gas, while California’s export-oriented employment is both in goods (agriculture) and services (education). Details at visualcapitalist.com

Top trading partners with China in Middle East and North Africa (MENA) from visualcapitalist.com.

China's progress across a range of overlapping industries creates a mutually reinforcing feedback loop: EVs, batteries, lidar, drones, robotics, smartphones, AI. Chart courtesy Kyle Chan on X @kyleichan.

China's working-age population 65+ via Shanghai Academy of Social Science.

From Harvard's Fairbank Center, following the conclusion of the 20th Congress of the Communist Party of China (CCP), the newly elected central committee convened and elected its new Politburo, Politburo Standing Committee (PSC), and Secretariat.

Patent grants by origin country and field of technology.

Shipments for augmented reality (AR) and virtual reality (VR) hardware headsets. Chart courtesy Matthew Ball on X @ballmathew. View full video gaming industry presentation here.

Demographics in Italy reveal not enough young people poised to enter the workforce to support government pension liabilities. Source: Italian National Institure of Statistics. Chart created by Kaj Tallungs.

The business empire of Indian businessman Mukesh Ambani.

Number of people in India earning 1 crore. This is equivalent to roughly $120,000 depending on the exchange rate. Chart courtesy Chandrashekhar Dhage on X
@cbdhage.

According to Intergovernmental economic organization (OECD), countries with higher wages work less hours.

Half of Nvidia’s revenue comes from Asia.

AI Deepseek appears to be as good as OpenAI's o1 for 3% of the price. Supposedly, DeepSeek was created for only $6 million while billions have been spent by Meta, Google, Microsoft... This is a big deal and will impact customers willing to pay for APIs and is causing OpenAI to circle the wagons around its pricing. China has created one of the world’s best AI models vs US models which are proprietary.

The impact of what recently released DeepSeek V3 and DeepSeek R1 models mean for AI model efficiency and cost.

Bank of China AI industry development action plan via Ray Wang, U.S.-China economic statecraft on X @rwango7. The plan provides 1 trillion yuan ($137 billion) to support its AI industry over next five years. "This might be the most important Chinese AI policy initiative in 2025 so far", says Wang.

AI is all about pattern recognition and applying (hopeful) real inference for output. Some say it appears DeepSeek has taken the value from previously created AI models to create DeepSeek.
Building effective large language models (LLM) for manufacturing supply chains depends on quality of data cleansing - extracting, transforming and loading (ETL) data - combined with data from multiple sources transformed into a large, central repository to ensure manufacturers use only quality and relevant data. I write more about this here.
The next big thing in AI manufacturing supply chain AI is multi-agent systems performing narrowly-focused and specific systems-to-systems tasks vs the current systems-to-person task agents which are a lot easier to create. More on this later.
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