Breaking the Bottleneck | Issue 73

[2/24/2024], EgoMimic, Figure, State of Hardware & More!

Breaking the Bottleneck is a weekly manufacturing technology newsletter with perspectives, interviews, news, funding announcements, manufacturing market maps, and a startup database!

💥 If you are building, operating, or investing in manufacturing, hardware, or robots, please reach out. My email is aditya@schematicventures.com – I’d love to chat!

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Content I Enjoyed Last Week 🏭🗞️🔬 📚

News:

EgoMimic, Training Humanoids with Project Aria Research Glasses [Meta]

nTop Acquires cloudfluid for DFM Workflow [Engineering.com]

nTop has acquired cloudfluid, a German company specializing in GPU-native computational fluid dynamics (CFD) software, significantly expanding its computational design capabilities. Traditional CFD requires complex meshing and long simulation times, making it difficult for rapid design iteration. cloudfluid’s high-speed solver technology eliminates these constraints by predicting fluid flow without requiring conformal meshing, enabling engineers to iterate on designs in near real-time. By integrating cloudfluid’s capabilities with nTop’s implicit geometry kernel, the platform now allows for seamless physics-based design optimization, enhancing product performance across industries like aerospace, defense, and turbomachinery. According to nTop CEO Brad Rothenberg, this acquisition represents a breakthrough in computational design workflows, enabling engineers to go from requirements to optimized designs at the speed of modern computing. By removing bottlenecks in CFD, nTop’s enhanced platform fosters faster innovation, more efficient manufacturing, and improved decision-making for high-performance product development.

Figure’s Announcement of Helix [Figure]

US Tariffs on Steel and Aluminum: Analyzing the Impacts [BCG]

The U.S. is expanding its 25% tariff on imported steel and aluminum, eliminating all exemptions and applying duties to new trading partners, including the EU, Canada, Japan, South Korea, and Mexico starting March 12, 2025. The new tariffs will cover 26 million metric tons of steel (up from 7 million) and 3.5 million metric tons of aluminum (up from 2.3 million), along with derivative products such as elevator parts, bulldozer blades, lamps, baseball bats, aircraft components, and kitchen appliances. BCG estimates the tariffs will add $22.4 billion in direct costs to steel and aluminum imports and up to $29 billion for derivative goods, bringing the total value of affected products to $72 billion for steel and $132 billion for aluminum. Unlike Trump’s first-term tariffs, there will be no exemptions or exclusions for importers, forcing businesses to either source domestically or pay higher prices. U.S. steel and aluminum firms must adjust pricing, inventory, and capacity expansion strategies to capitalize on rising demand, while manufacturers relying on imported metals must assess cost increases, renegotiate supplier contracts, and explore alternative materials.

Aftermarket Services Drive Growth and Higher Margins for Manufacturers [BCG]

The latest BCG benchmark study highlights the increasing importance of aftermarket services for industrial machinery manufacturers, with top-performing companies generating over one-third of their revenue from services. In 2023, service revenue grew by 10%, with an expected 8% increase in 2024, outpacing new equipment sales. Services such as maintenance, remote monitoring, and diagnostics not only yield gross margins twice as high as equipment sales (30%-50%) but also strengthen customer loyalty and retention. The study finds that companies with direct customer relationships generate 33% of revenue from services, compared to 17% for component and subsystem manufacturers. However, many firms struggle to capitalize on service potential, often due to a lack of equipment data regarding condition, location, and usage history. Leading companies capture more spare parts sales (16 percentage points higher than competitors), secure 31% more maintenance contracts at purchase, and operate with 38% fewer days of inventory, significantly boosting profitability. Looking ahead, digital and AI-driven services present the next frontier. While one-fourth of surveyed companies consider themselves leaders in digital service delivery, only 4% have successfully monetized predictive maintenance and efficiency optimization tools. Given that 28% of new machines now feature remote connectivity, manufacturers have a unique opportunity to offer subscription-based digital services. Additionally, green services, including modernization, end-of-lifecycle solutions, and emissions monitoring, are projected to see significant growth, with nearly one-third of customers contracting for upgrade kits by 2027. Artificial intelligence (AI) adoption is accelerating, with one-third of companies implementing AI in field service support, yet only 5%-8% have advanced AI pilots in spare parts forecasting and service RFP analysis. To unlock service potential, companies should monetize their installed base (boosting service revenue by 15%), optimize pricing using AI (increasing EBIT by 3-4 percentage points), and invest in connectivity, digital tools, and AI to drive 10%-15% top-line growth and 5%-15% cost savings. Firms that proactively embrace digitalization, green services, and AI-driven efficiency improvements will be best positioned to maximize profitability and long-term competitiveness in the industrial services sector.

Why Trump’s Clean Energy Rollbacks Could Derail a Factory Boom [NY Times]

The Trump administration’s push to roll back renewable energy incentives threatens this momentum, particularly for battery plants, wind, and solar manufacturing. Over $89 billion in private clean energy investments flowed into the U.S. over the past two years, but uncertainty about federal tax credits and subsidies has led some companies to pause or cancel projects. For example, Norwegian hydrogen company Nel halted plans for a Michigan facility due to unclear long-term tax credit support, while ZF canceled a $157.7 million EV parts retrofit project. Meanwhile, Cummins and other manufacturers remain cautious about their investments in EV production and battery plants amid shifting policy landscapes. The tariff-heavy approach of the administration presents opportunities and risks for different sectors. While critical mineral processors like Syrah Resources and Li-Cycle could benefit from potential 920% tariffs on Chinese graphite, other industries face higher material costs and supply chain disruptions. The wind energy sector has been hit particularly hard, with Trump halting permits for new projects, leading to canceled factory plans, such as an Italian cable plant in Massachusetts. The fate of the Inflation Reduction Act remains uncertain, but interruptions in permitting, tax credit processing delays, and relaxed auto emissions standards could slow clean energy deployment and prolong reliance on gas-powered vehicles. Despite the policy uncertainty, industry leaders like Jigar Shah argue that more than half of federally backed clean energy factories are under construction and that the fundamentals of the industry remain strong, even if some projects falter.

The New Plan for Western Companies Is ABC: ‘Anything But China’ [WSJ]

Western tech companies are accelerating their shift away from China, moving beyond assembly to relocating component manufacturing such as sensors, printed circuit boards, and power electronics, which require heavy upfront investments. The U.S. CHIPS Act, which bars recipients from expanding in China for 10 years, has further pushed companies to diversify supply chains. Semiconductor firms like AM and Lam have been severing Chinese suppliers under U.S. government pressure, while Advanced Energy Industries has shut down all its Chinese factories, relocating production to the Philippines and Mexico. Meanwhile, AI server production, once concentrated in China, is shifting to Mexico and Malaysia due to U.S. restrictions on exporting AI chips to China. This exodus is benefiting Southeast Asia and Latin America, with foreign direct investment in Southeast Asia surging to $230 billion in 2023 from $155 billion in 2018. Malaysia and Singapore are attracting major chipmakers like Intel, Infineon, and Micron, while HP has expanded laptop production in Thailand, contributing to Thai laptop exports growing nearly eightfold in four years. Vietnam, a leading beneficiary, is actively courting semiconductor investment, offering tax breaks, and aiming to train 50,000 engineers to support the industry. However, China remains an unmatched manufacturing powerhouse, with 15% lower production costs than alternative locations. Analysts warn that fully replicating China’s supply chain will be complex, and while diversification is accelerating, China’s dominance in infrastructure, labor, and supplier networks remains difficult to replace.

Research:

State of Hardware [AllSpice]

The State of Hardware 2025 was released based on insights from 1,000 hardware and electrical engineers. Engineers are increasingly adopting modern tools like Git and CI/CD to streamline workflows, yet many teams still face time constraints, component shortages, and collaboration challenges. Some key findings:

• Engineers recognize the value of Git for version control, but adoption remains incomplete. While 50% identify as beginners or interested in using Git, 51% cite a lack of training and resources as the biggest barrier. 32% report team hesitation to change, and 10% mention lack of management buy-in.

• The biggest challenge facing engineers is time constraints and deadlines, cited by 46% of respondents. Other major hurdles include communication inefficiencies (26%) and component/material costs (16%). Many engineers also spend significant time troubleshooting, with 35% dedicating 1-3 hours per week, while 25% report losing track of their hours entirely.

• 35% of engineers spend 11-20% of their time sourcing components, and 44% of companies have no dedicated staff for component library management. This indicates a major bottleneck in component tracking and procurement workflows.

• Hardware development remains an iterative process, with 48% of teams going through 3-5 revisions per product cycle, while 38% iterate 6-10 times per cycle. Streamlining revisions through automation and better collaboration tools can significantly reduce design time.

U.S. Manufacturing Renaissance [JLL]

Some key findings from the report:

• JLL’s Industrial Tenant Demand Study report projects future manufacturing demand requirements to account for over 18.8% of the total, marking a 354% increase since 2018. Growth appears to be concentrated in major markets, driven by land, power, labor, and advanced manufacturing needs.

• The U.S. manufacturing sector is characterized by aging infrastructure, with over 52% of inventory being 30-60 years old. However, there's a growing demand for modern facilities that can support advanced manufacturing processes and meet sustainability standards.

• Manufacturing growth is driven by legislation, technology, and infrastructure needs. Challenges include power, labor, and sustainability. Opportunities in tech adoption, international expansion, and sustainable practices offer a competitive edge.

Podcasts/Video:

Bootstrappers Guide to Re-Industrializing America [Manufacturing Happy Hour]

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Finance & Transactions 🏭💵

Venture Capital:

Figure - A company building humanoid robots.

• $1.5 billion [Financing] - Led by Align Ventures & Parkway Venture Capital at a $39.5b valuation

Saronic - A company building autonomous surface vessels naval and maritime forces.

• $600 million [Financing] - Led by General Catalyst

Lumotive - A a developer of programmable optical semiconductor products.

• $45 million [Series B] - By Swisscom Ventures, East Bridge, EDOM, Grazia, Hokuyo Inc, and TSVC

Augury - A company providing manufacturers with insights into the health of machines, processes, and operations.

• $75 million [Series F] - Led by Lightrock and joined by Insight Partners, Eclipse Ventures, Qumra Capital, Schneider Electric Ventures and Qualcomm Ventures

ClustroAI - A company advancing edge AI through containerized architectures, GPU acceleration, and scalable computing frameworks.

• $12 million [Series A] - Led by Forum Ventures and joined by MetaBlast and Metaverse Group

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Planned Downtime 🏭🧑‍🔧

Lewis Hamilton’s First Ferrari Interview