By Daniel Owen Rodriguez (Fall 2023 Intern) and Partner Gabby Cazeau

The manufacturing sector hasn’t had it easy lately. In recent years the industry has faced several challenges due to geopolitical uncertainty, wars, supply chain disruptions, changing consumer preferences, and increasing regulatory scrutiny.

These shocks have shown the need for innovation and catalyzed a mindset shift, where manufacturers are eager for new solutions. One major shift that’s primed to drive innovation within manufacturing is Artificial Intelligence (AI).

AI is becoming increasingly essential to the day-to-day operations of manufacturers all over the world. There is a great opportunity for software or low-cost hardware solutions to apply artificial intelligence to manufacturing, helping to make products better, more efficiently, and safely.

We wanted to study this space and identify where we see great investment opportunities and where we want to partner with visionary founders. You can check out the full report here and a few highlights below.

Why we’re excited about this space:

Growing market

• Manufacturing is a massive category! There are roughly 460,000 manufacturers that produce an estimated $6 trillion in output! Companies are bringing manufacturing back to US shores in hopes of faster and more resilient supply chains. This trend is benefiting from unprecedented government support, most evident in several large legislative bills amounting to $1.85 trillion of total spending. Over the past 12 months, US manufacturing construction spending surged over 80%, compared to only 6% for other categories of private nonresidential building. 

Positive Macro Tailwinds

• Companies are increasingly looking to our Mexican and LatAm neighbors down south to meet our manufacturing needs. Mexico is the top US trade partner with 15.9% of trade. Canada is a close 2nd at 15.7% as China has dropped to 3rd place. A great example of this trend is Tesla’s announcement in March 2023 that they would be building a Gigafactory in Mexico. Tesla and its suppliers will invest $15 billion over the next two years into this project. Another example is major iPhone manufacturer Foxconn establishing a headquarters in Mexico in early 2023. 

Legacy software tools and a plethora of data

• Manufacturing is full of analytical data which is easier for machines to analyze. Hundreds of variables impact the production process and while these are very hard to analyze for humans, machine learning models can easily predict the impact of individual variables in such complex situations.
• There are many legacy tools used today that are ready for disruption and new tools can leverage AI to bring deeper insights and more value to end customers. 

Where we’re excited to invest:

There are 4 core areas where we believe AI will have an incredible impact:

1. Maintenance and Usage

2. Safety and Quality Control

3. Supply Chain and Process Optimization

4. Product Development / R&D

We also wanted to track some of the top companies founded by diverse founders in this sector. Here’s our list of the top 12 Diverse Founded companies in AI Manufacturing.

Check out the full report here! If you’re building in this space we’d love to hear from you! Reach out to us at info@harlem.capital.

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