Readers of Strategic Fortunes might recall my January trip to CES in Vegas where I viewed nearly 40 different robotics startups.
The robots are coming fast, and we’ve positioned our portfolios accordingly.
But speaking of fast, last week in Beijing a humanoid robot ran a half marathon in 50 minutes and 26 seconds.
It finished more than 10 minutes ahead of the record for human runners.
Someone described the video as what it looks like when you try to run a 5K in your 40s. It certainly isn’t graceful.
But when you watch it, it’s hard not to think about what had to come together to make it possible.
Running 13 miles isn’t just about intelligence. It’s also about control.
Every step has to be balanced and corrected in real time as conditions change underfoot. That requires a constant loop of sensing, processing and response. Sensors read the ground, software interprets the data and hardware responds instantly.
But when you get past that, all of the robot’s movement comes down to motors. Inside its hips, knees, ankles and arms, dozens of them are working together to keep the machine upright and moving forward.
And inside every one of those motors is the same critical component.
Magnets.
They’re what convert electrical energy into motion. Without them, nothing moves.
And right now, that’s a big problem for the United States.
The Magnet Bottleneck
Unlike cars, which rely on one main motor, robots need many of them.
And more motors mean more magnets.
A single humanoid robot can require several kilograms of high-performance magnetic material spread across its dozens of motors controlling movement, balance and coordination.
Now consider the potential explosion of humanoid robots that we talked about this week.
Factories and warehouses are already deploying humanoid robots that can adapt on the fly, and companies are testing them for jobs that used to require people.
As these machines move out of labs and into real-world environments, each one adds to the demand for magnetic materials known as rare-earth magnets.
Image: reliamag.com
But rare-earth magnets are already in high demand elsewhere.
Electric vehicles use them in their drivetrains. Wind turbines rely on them to generate power. And defense systems depend on them for precision and control.
Anything that turns electricity into motion pulls from the same pool of magnetic materials.
And unfortunately for the U.S., most of that supply runs through China. In fact, China processes roughly 90% of the world’s rare earth materials.
And over the past year, it has tightened how these materials move through its supply chain.
Exports now require special licenses and details about how these materials will be used. China is still sending out shipments, but they can choose to slow them down or even redirect them depending on who’s buying and for what purpose.
For a while, it looked like we might work our way out of our dependence on China.
When rare earths were labeled strategic, the U.S. and Europe moved to build their own supply chains. New mines were planned in the U.S. and Australia, and processing facilities were proposed across Europe.
But it hasn’t played out how we might have hoped.
Europe recently launched a joint procurement platform for critical minerals. That means, instead of producing enough on its own, it’s pooling demand to compete for supply that already exists.
Around the same time, a major magnet factory project in Europe was canceled.
That tells you everything you need to know about how difficult it’s been to rebuild this supply chain outside of China.
Even in the U.S., where companies like MP Materials (NYSE: MP) are bringing new magnet facilities online, that effort is still in the early stages. It takes years to build out mining, refining and manufacturing at scale.
And demand isn’t waiting. It’s accelerating.
That’s why some companies aren’t trying to compete for China’s supply at all. Instead, they’re attempting to bypass it entirely.
What does that actually look like?
I call it U.R.E.
The idea is to build the motors that power EVs, robots and industrial systems without depending on rare-earth magnets at all.
That’s the direction Tesla is already taking.
Elon Musk has said Tesla’s next-generation motors are being designed without any rare earth elements. If it works, it would give the company a clear advantage.
But there are tradeoffs.
Rare-earth magnets deliver unmatched performance. Alternatives can be cheaper and more abundant, but they’ve historically been weaker.
So the challenge isn’t just swapping materials. It’s also redesigning new systems around them.
That means new motor architectures, new control systems and new ways to manage heat, efficiency and power density.
In other words, it’s as much an engineering problem as a materials problem.
But once it’s solved, the China bottleneck goes away.
Here’s My Take
That robot in Beijing represents what happens when software, hardware and supply chains all line up.
But scaling that outcome depends on more than better AI models. It also depends on building large numbers of machines that rely on tightly integrated components.
Unfortunately, many of those components still trace back to a supply chain that hasn’t diversified as much as the U.S. wants it to.
That bottleneck isn’t going away anytime soon.
But U.R.E. could solve it.
Regards,
Ian KingChief Strategist, Banyan Hill Publishing
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