Prologue

Throughout much of the 20th century, commodities like steel, cement, and oil powered industrialization across the global economy. Such commodities underpinned the infrastructure, housing, and auto booms that propelled growth in Europe, North America, and emerging markets, particularly in China and Asia more broadly.

Now, as we approach the third decade of the 21st century, the world is experiencing another industrial revolution driven by computing power, digital technology, and renewable energy. The maturation and scalability of these foundational technologies will continue to transform growth and consumption patterns, as well as reorganize global production and supply chains.

A new set of products today could play as important a role as oil or steel did during the previous industrial revolution. None of these products are “new” per se, but their ascent as a result of new applications and advancements has created demand and competition for vital resources and inputs. These dynamics have catalyzed companies and countries to carve out advantages in these new industries.

To explore this future, we have created a digital book that offers an in-depth and interactive look at the supply chains of three intermediate products that we believe are not only crucial drivers of growth, but also important for understanding key aspects of the global economy.

These products may even come to resemble commodities, though not in the strict definitional sense. Instead, each product could take on commodity-like characteristics after intense competition, massive scaling, and wide commercial adoption drive down its price and turn it into essentially an “undifferentiated good.”

Digging into the supply chains of these products is key to understanding how and where these industries are likely to concentrate. Having supplier clusters is vital to sustaining manufacturing and industrial ecosystems within a single market. Detroit prospered for so long not simply because it was the home of the “Big Three” auto manufacturers but also because an integrated supply chain grew up around them.

Such economic agglomeration strongly influences the location and structure of midstream and downstream supply chains, which tend to gravitate toward where end demand is robust. Getting a handle on the dispersion of supply chains can in turn yield insight into what markets have competitive advantages in potentially dominating key inputs that power the global economy.

Indeed, the spoils of tomorrow’s economy will go to those who master the supply chains today. Markets and firms that build credible and reliable supply chains for these products will likely become leading players in their industries, able to exert more geo-economic leverage in the decades ahead.

This transformation is happening at a time of rising economic populism, when some governments, particularly of advanced economies, have become skeptical of globalized supply chains. Some influential voices even argue for the reshoring of all manufacturing production. But populist politics is at odds with the economics of agglomeration and the reality that high-tech goods require complex supply chains—many of which have long since migrated to Asia.

Each chapter of this digital book first makes a case for why a product will become economically significant as a result of technological changes, industry dynamics, and potential end-demand. They then dissect the product’s supply chain—from upstream to downstream—by mapping, as expansively as possible, the location of resources, processing, and assembly. Finally, they will examine specific company cases, and draw conclusions on supply chain risks, productive policy interventions, and which countries appear to be moving toward dominance in the industry.

We begin with the lithium-ion battery in Chapter 1, follow with Chapter 2 on OLED smartphone screens, and finally Chapter 3 on AI chips. We will conclude with insights and reflections about what these new high-tech inputs, and their associated supply chains, might mean for the global economy, especially in the context of US-China economic competition.

We welcome your feedback. For questions or comments, please contact Damien Ma (dma@paulsoninstitute.org) or Houze Song (hsong@paulsoninstitute.org).

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