January 7, 2025
January 7, 2025
A breaking point often precedes the start of a full transformation. Lior Susan, founder and partner at Eclipse Ventures, believes that manufacturing and supply chains are ripe for reinvention after reaching their breaking point over the last 18 months due to a combination of pressures.
These forces include the devastating impact of COVID-19, which has revealed the brittleness of manufacturing and supply chains around the world, as well as geopolitical tensions, such as the U.S.-China trade war. At the same time, technologies like automation, robotics and machine learning have matured and are ready to help transform industrial production.
While manufacturing and supply chain have traditionally been conservative slow-to-change sectors, they now have incentives to transform. “They’re facing a tipping point because, if they don’t change, they may not be able to manufacture at all,” Lior says. Among the issues are a lack of workers and an aging workforce who are about to retire.
Before establishing Eclipse Ventures in 2015, Lior was founder and general partner at LabIX, Flex’s hardware investment platform. He also founded the agtech collective Farm 2050. Earlier this year, Lior wrote a strident argument in favor of U.S. investment in infrastructure.
We talked with Lior about how the U.S. might reimagine manufacturing and supply chains as well as a fresh approach for VCs keen to invest in infrastructure-focused startups. What follows is an edited version of our discussion.
When you look at manufacturing and supply chains, are there particular broken processes that need to be rethought, or is it the whole thing?
Whether it's chemicals, beverages, food or electronics, humans should not be manufacturing things. We can do much greater things for the world than putting things together.
If everything’s automated, we can design for automation rather than design for manufacturing. It’s going to be a whole new exciting category that I think the U.S. should lead. If I'm designing for automation, what will a digital twin of my manufacturing look like? How should I design production lines, what should I expect from throughput, yield, uptime, all of the manufacturing KPIs that I care about?
If I'm doing all of that, I can predict the maintenance needed for my machines so I have less downtime. If I have less downtime, I'm going to have less scrap. If I have less scrap, it's going to be better for the world from an ESG (environmental, social and governance) point of view.
We need to imagine where manufacturing is going to be in 30 years from now, and then draw the plan back and go deploy it right now.
"We need to imagine where manufacturing is going to be in 30 years from now, and then draw the plan back and go deploy it right now."
Are you optimistic about U.S. manufacturing under the current administration?
The Administration’s initial trillion-dollar infrastructure plan was no joke. The last time you saw that kind of focus was post-World War II. In the past three decades, none of the U.S. administrations have put the same emphasis that the current government rightfully is placing on infrastructure due to all of the current trends.
Historically, government support has not meant a fast pace of change. Indeed, the jury's still out if the amount of dollars will correlate to a change. Yes, I'm optimistic. I know people working in D.C. who are smart and capable, but governments have their own challenges.
When it comes to enacting legislation, isn’t that when the lack of knowledge of an area like manufacturing may come into play, and things just don't move forward?
I had a conversation with someone from D.C. about that. My point was that manufacturing is a much more dangerous weapon than an F-35 combat aircraft. How many times a day is the U.S. government using the F-35 versus how many times a day are we manufacturing things?
If China decided to halt U.S. food production or medical device production or semiconductor production, they would hurt us much more than if they had a lot of F-35s. I think the U.S. government now understands that manufacturing should be top of mind as it relates to our national security.
If the U.S. wants to become a global manufacturing powerhouse again, and have secure and resilient supply chains, what needs to happen?
What’s needed is acknowledgement and a strategy that fits the core capabilities that we have in this country. It's very similar to what we tell our CEOs: ‘Focus on your 10x, don't try to do what the other company is doing because that is not your 10x.’ But in the past, there were a lot of tactics along the lines of ‘Let’s try to do what China does in the U.S.’ Those will fail.
In some ways, our main benefit is that China is suffering from its own strategy because its people don't want to do manufacturing anymore. They want to be engineers or software developers.
Now it's game on, because both the U.S. and China are trying to transform. The U.S. needs to build from scratch with a technology point of view, while China needs to rebuild, neither of which are easy to do.
"Now it's game on, because both the U.S. and China are trying to transform. The U.S. needs to build from scratch with a technology POV, while China needs to rebuild."
Which emerging technologies will help to reimagine manufacturing?
At the end of the day, what do you want to mimic? You want to mimic a human. We have arms, so you need robot arms. We have eyes, so you need computer vision. We have a brain, so you need AI and machine learning.
If we can mimic a human in a cost-effective way, essentially we can build the largest manufacturing capacity in the world because we can build as many robots as we want. I think that will remove our disadvantage versus China, which has many more people than the U.S.
You've talked about the optimism you have for the future of manufacturing and supply chain, but do you also worry that the U.S. might not play a major role?
My main concern is that we have missed the train, which might have already left the station. I’m worried that we are going to sweat really hard on this catch-up, but maybe we’ll never grab it because it's moving way too fast.
China has been investing in automation, AI and computer vision for years and they have a central government which makes all the decisions. My big fear is if we in the U.S. do not have a major role in the future of manufacturing and supply chain, we will also find ourselves not controlling a lot of other industries that we’d hoped to, such as semiconductors.
"My big fear is if we in the U.S. do not have a major role in the future of manufacturing and supply chain, we will also find ourselves not controlling a lot of other industries that we’d hoped to."
With the semiconductor shortage perhaps taking years to clear, how should we avoid this happening in the future?
We should make a significant national investment, we should open up regulation, and speed up budget approval. We should highly incentivize universities to teach the next generation of chip designers. We should make ourselves a major customer of our own technology and encourage our allies to buy our own technologies.
We need to be more creative top-down. And that's not only the government, it’s up to people like us in the VC community and Fortune 500 CEOs to understand that we need to take this situation very seriously if we want to protect the GDP growth of this nation.
I think there is a massive opportunity for technology companies to help on the education side in manufacturing because technology alone is not enough. We need a new generation to come in.
What’s your take on how venture capitalists may have to change their approach as they look to support a reinvention of manufacturing and supply chain?
We think there’s a new model for VCs, which we call ‘venture equity.’ It essentially combines cutting-edge technologies which usually fall under venture capital with running business operations which tend to fall under private equity. It is almost like VC and PE had a child, which is venture equity. That was our internal, half-joke name. Seriously, if you want to transform manufacturing, it's not enough just to invest in some fancy AI stack.
