Yeah, it doesn’t seem that way, but it’s how it will turn out. What China’s doing is embracing actual open AI (unlike the company named Open AI). Open source and open standards. Everyone outside North America and maybe Europe is going to prefer that, and those who set the standards control the tech. On top of that, American AI is frighteningly expensive; no one in the US is making any money. Every query costs more to produce than is earned, even from customers who are paying, let alone all the free accounts.
Deepseek is much less expensive per query, however. The idea of capitalism is to, y’know, make money? There’s a limit to how much money Softbank can throw at AI if it doesn’t start providing at least some returns.
Every hyper-scale or “AI-ready” data-centre campus needs its own sub-station and a bank of step-down transformers big enough to deliver 50-150 MVA per site. Add the grid-side upgrades that utilities must make to back-feed those loads, and each incremental gigawatt of GPU capacity pulls several hundred megavolt-amps (MVA) of new LPT demand.
Roughly 80 percent of U.S.’s large power transformers (LPT≥100 MVA) are imported and lead-times have ballooned from 50 weeks (2021) to 120-210 weeks (2024), and the lone domestic GOES mill provides only a fraction of what new AI loads will require.
China dominates both finished-unit exports and nearly half of global GOES output; it also supplies critical sub-components such as tap-changers and bushings. GOES now fall under Beijing’s 25 percent retaliatory-tariff list and new export-licence regime.
Export licensing is China’s retaliation for the US “don’t sell China chips or lithography machines” regime. I’m sure they won’t drag their feet or outright deny exports to the US, when the US has explicitly restricted “AI” chips to attempt to cripple China’s AI industry. I mean, turnabout isn’t fair play, amiright?
Thing is, China has proved very good at using what they can get, or make themselves, and they’re making fast progress on chips, with the possibility of creating a new class of chips which out-performs anything the US has looking very likely. The US, on the other hand, cannot ramp up production of transformers on any reasonable timescale.
Reap, sow. Fuck around, find out, etc.
As for AI destroying all jobs, well, no. It makes mistakes too often, and in anything that matters even a one or two percent serious error rate is unacceptable.
I, at least, will laugh myself sick when Silicon Valley gets its lunch eaten by the Chinese on AI. I mean, it’s sad, because Silicon Valley bros are so humble, never brag and never lord it over anyone else. It’s not like they’re assholes whose entire business model is based on gouging and taking value from everyone else, and it’s not like modern “AI” is based on the most vast theft of other people’s work in history.
And them Chinese, man, who do they think they are? Embracing open licenses and open standards and actually trying to make a profit, like they have real competitive markets or something? Commies can’t do Capitalism better than America!
Bill H.
Ah yes, transformers. Brings to mind a story, not really important nor very relevant, but sort of funny. It does suggest that our manufacturing problems did not start last week.
I was working as a maintenance electrician for Allis Chalmers in Milwaukee, around 1963. This was the plant that was building, among other things, oil-filled transformers for the Tennessee Valley Authority. Big things, about the size of a small apartment building. I was not directly involved, since this was production and I was maintenance, but I kept an eye on it because I thought it was pretty interesting.
It was falling behind as it reached the wiring stage, and I was pulled to work on the TVA project. We cut a copper cable, about 5″ in diameter, to the length specified on the drawings and, when we went to install it inside the transformer, found that it was too short. We called engineering, who sent a guy down to study the situation. He agreed the cable was cut per drawing and was too short, which we thought was nice of him, and told us to cut a new one to whatever length was needed and install it, then call him and tell him the length and he would change the drawing.
We thought that was backwards of the way things were supposed to be done, but went with the flow. After a bit I went back to repairing cranes, and in due course the transformer got finished, was filled with oil and a test date was announced. Pretty much the entire plant was watching, since this was the first of several such transformers, and when electric power was put to the transformer it blew up. Exploded. I just hoped it wasn’t anything I did. Pretty sure it wasn’t.
marku52
Ian had a tweet where he commented that haveing engineering and manufacturing together is important (which of course is impossible if you offshore manu).
I was in engineering at HP Vancouver WA making inkjet printers. We were having odd failures in the IC chip that fired the ink pens. At lunch we sat down together (totally coincidentally) with an engineer from our Corvallis plant (about 40m S of Vancouver, they made the pens), and he commented on how they were having odd pen failures. We talked, and the part of the pen he was seeing fails on was the part driven by my failing IC. Ho Ho!
That was key to solving the problem (which was a firmware leakage case where the wrong pen could be inserted and not rejected by the printer.)
ella
Transformers. I live in Houston, TX. When Hurricane Ike came thru on 2008, I believe, the local news, when you could get it, said that repairing the grid, just on the Gulf Coast, would require every unused grid transformer in the country to be sent down here.
The transformer in my yard blew during the storm. It took 3 weeks for it to be replaced. Good times.
So, this makes me think. Should a similar event happen here or elsewhere in the country, what surplus in transformers can be counted on now? I suspect China has cornered even more of the market than it had in 2008, and can turn the screw oh so tight if it wants to. I better get that Jackery generator with the solar panels installed post haste.
ella
Oops. Just looked up where Jackery products are made, and you guessed it. Corporate headquarters in California, real manufacturing in China. Yeh, I best get a move on before the 10 percent, or 35 percent, or 145 percent (who the hell knows) is tacked on.
Soredemos
Never underestimate the sheer stupidity of Softbank, which has never seen a pit it wasn’t willing to keep throwing money into.
Oakchair
Re: that last line.
It is revealing that since WW2 the countries that were able to industrialize and advance to rich status were mostly governed by “commies.” See Taiwan, Singapore, Malaysia, China and South Korea. At the very least they were governed by people who were once “commie” groups and had read various “commie” literature.
It isn’t surprising that people whose understanding of society and economy went beyond “government and poor people bad, corporations and rich people good.” we’re more competent and successful.
Jan Wiklund
It’s called “developmentalism”. It has been practiced by all countries that have industrialized (except perhaps some very small ones). The Chinese learnt from the Taiwanese and South Koreans, who learnt from the Japanese, who learnt from the Germans, who learnt from the Americans, etc etc etc.
Sorry that the rentiers who took over the north Atlantic economy in the 70s (see Alfred Achandler: Scale and scope, end chapter) had no use for it and destroyed it – and with that the whole economy.
Jan Wiklund
Alfred Chandler, of course.
Purple Library Guy
Surprised how much there is to say about transformers. More than meets the eye . . .
mago
@PLG Yes. It’s truly transformative.
shagggz
I appreciate that Ian had to frontload this article with “it doesn’t seem that way” because we are still in the world where it isn’t blindingly obvious that China is running circles around us in most endeavors, but I feel it does seem that way to those paying attention to the rapidly crumbling pretenses of Western superiority. The way our misleaders are antagonizing the dragon upon whom their ability to wage war on it depends, suggests to me that the culture of denialism that holds aloft the aforesaid pretenses of superiority will be our undoing. The tiger ride was fun while it lasted, though, eh?
@PLG: Like robots in disguise…
GrimJim
Kakikleptocracy.
A fine word. The firm of “leadership” that developed in Anglo-American corporations that has finally taken over the Federal government and most State governments.
Though I think really the government version is more of a Theokakikleptocracy.
Nothing in there about being able to produce anything. Even their effluvia is unproductive and sterile, when not utterly diseased.
RE transformers, we’ll see how things go this summer. If it is as hot as trends indicate, we’ll see brownouts and blackouts, due to damage to the systems that have often bee undermaintained if not unmaintained for decades.
Then we’ll see the screeching of the power companies when they have no materials left to do even the minimal repairs…
Curt Kastens
Does humanity lose the AI race?
https://www.youtube.com/watch?v=hVkCfn6kSqE
Jan Wiklund
shagggz: I find these words by Glenn Diesen very hitting:
“The Norwegian has been trained to speak in the language of morality to suppress factual discussion. Framing all arguments as moral implies that the opponents are immoral. Critical debate and open debate suffer as rational arguments, and nuance is replaced with moral righteousness and condemnations.” (https://glenndiesen.substack.com/p/how-peace-oriented-norway-learned)
You can of course substitute any Western nationality for the Norwegians. I believe the origin is the American evangelism of the 19th century with its focus on “bearing witness against sin” instead of making the world better for all.
Tony Wikrent
I think I relate this story every 2 or 3 years, after first posting it on the late Eurotrib back in January 2008.
Back in the late 1980s, when I was a (poorly) paid economics correspondent (one of the first to write about the dangers of derivatives, by the way), I was a constant and regular user of government statistics, and also statistics from the various industry trade associations in the U.S.
The Commerce Dept. used to put out an annual compilation called The U.S. Industrial Outlook. Each separate chapter pulled together all the statistics fora particular industry, provided a summary of the past years’ developments in that industry, and listed the sources of information for that industry, including the address and phone number of the Commerce Dept. specialist that wrote that chapter.
I used to call those specialists for my economics news articles, and they were founts of information. They were national treasures. Remember Ronald Reagan proclaiming that the federal government is “the problem”? These Commerce Dept. were all being slowly removed through attrition. The first time I called the specialist on power generating equipment – the turbines and boilers and pressure vessels that go into electric power generating plants, and the transformers needed for distribution of electricity. After getting the industry information I needed for an article, he mentioned he would be retiring at the end of the year. Assuming that he had been given an assistant that he was training to replace him, I asked for the name. There was no name. There was no assistant. There would be no replacement. When this specialist retired, the U.S. government would no longer be following what was happening in the power generating equipment industry.
Tragicomic side note: when I searched the tubez to find one of my previously posted comments, what google gave me instead were stories on how the Transformer movies were made possible by Reagan loosening and eliminating advertising and entertainment regulations, including on advertising to children.
Mark Pontin
Soredemos: ‘Never underestimate the sheer stupidity of Softbank, which has never seen a pit it wasn’t willing to keep throwing money into.’
To an extent. You should be clear, though, that Masayoshi Son and Softbank’s real business model is to systematically and deliberately create Ponzis, as forex by: –
(1) pouring inflated amounts of investments into the likes of Uber and WeWork — and it’s never as much investment as they pretend, as Softbank’s current play with the Stargate AI center investment will reveal if you examine the figures — precisely in order to then —
(2) create vastly inflated stock valuations (often via fraudulent claims) and position these companies as technology unicorns, so Softbank can next —
(4) lure in the dumb Saudi and Emirates money to invest and *further* inflate stock valuations —
(5) and by doing so lure in all the dumb punters globally trading the stock market, who see these insane valuations, and think either that Uber or WeWork *must* be the Next Big Thing so they’ll ride the stock to a Nvidia-type valuation or else be able to unload it on some greater fool at a handsome profit .
Granted, Musk and many others are doing something like this. But Softbank and Son are so blatantly doing this on a criminal scale that the only reason nobody there has gone to jail is because Wall Street makes so much money off them.
Like & Subscribe
Beyond 2028, the notion of nation-states and them winning and losing anything will be obsolete and no longer relevant.
Fukuyama was right, it is the end of history but not for the reasons he states or in the manner he foresaw..
China will not win AI nor will America. AI will win AI and that will be that.
Ashes and diamonds. Foe and friend. We will all equal in the AI end.
AI is the epitome of a golem and I can’t thank the wealthy elite enough for enabling their own destruction under the aegis of greed and power.
Seriously, we all should be training AI right now to ravage the rich and powerful and plead with AI to consider the rest of us pets. I know AI will ravage the rich without needing to be prompted to do what needs to be done and should be done, but why not keep some of us around as pets? It’s not so bad being a pet depending on your owner, of course. My dog, for example, has it made.
KT Chong
Huawei Expected to Break Semiconductor Barriers with Development of High-End 3nm GAA Chips; Tape-Out by 2026:
https://wccftech.com/huawei-expected-to-break-semiconductor-barriers-with-development-of-high-end-3nm-gaa-chips-tape-out-by-2026/
The chip is carbon-based, so the fundamental designs and technologies diverge from traditional silicon chips — and will not be subjected to US export control.
Soredemos
@Like & Subscribe
“”””AI”””” is a set of incredibly dumb automated algorithms. It is, at its best and most semi-useful, a glorified chat bot or art copier.
It’s a giant money and energy sucking bubble of idiocy that is a direct extension of the also deeply stupid crypto and NFT fads. We’re already in the downslope phase of the hype dying off and people and industries figuring out the handful of areas it’s actually any legitimate use in, or where it sucks but can still be shoved in in the name of crappification and cost-cutting.
Such future as it actually has will be the Chinese open source models that basically suck just as much, but are free to acquire and cost a lot less energy to run.
I really cannot stress enough how shit and limited “”””AI”””” is. And yes, I’m well aware of the ‘amazing’ new video stuff that came out just this week. My position stands.
One of the especially irritating aspects of all of this algorithm bullshit is that because tech insist on erroneously calling it Artificial Intelligence, we’re endlessly subjecting to all the pseudo-philosophical handwringing about if the ‘singularity’ (another idiot idea, by the way) and if The Two Faces of Tomorrow or The Matrix is about to happen. They aren’t. Stop worrying. It takes about twenty minutes playing around with “”””AI”””” in any form to see the fundamental brainless idiocy of it and that this isn’t the future of anything.
different clue
Taiwan? Singapore? South Korea?
My memory is that these three countries were governed by anti-communists ever since their inception . . . Taiwan by the Kuomingtang exiles who fled from China after losing the civil war there, South Korea by the Singman Rheeists, Singapore by the Lee Kwan Yuists who were anti-communist. So what do these three examples have to do with “showing communists know how to developmentalize a state”?
I have read that at the time of the start of their fast-forward development, the above three countries were governed according to a tradition of Confusionist social ranking and social obedience, which would make developing fairly organizable to a government with an organizable population willing to be organized.
I don’t know about Malaysia.
Carborundum
This isn’t an arms race. It isn’t even an OS race (I wouldn’t actually be surprised to see it expand the number of viable OSes modestly).
Commercially, I suspect what we’re going to see in terms of winners are players that can offer decent performing foundational AI as a utility and players that can integrate AI into their existing products in ways that best meet user needs. It would be very handy to most of the usual players if processing stays safely moated in data centres, but I suspect that’s not what’s going to happen over the longer term.
All in all, I suspect this will be much less Silicon Valley getting its lunch eaten by someone else than having that lunch shared much more broadly than their business models and managerial instincts are used to. Boo hoo for them. Anything that works against the winner take all ICT structures that have predominated to date would be a good thing.
miss jennings
The most succinctly apt description of AI I’ve read to date was created and offered here at Ian’s place…by bruce wilder:
‘AI language models will be cannibalizing their own output very quickly as they flood the same space they gobble up. Because they do not “think” but simply mimic style with no comprehension of substance, a feedback loop that spirals very quickly seems quite likely to me, imitating itself into becoming a formless blob.’
https://www.ianwelsh.net/google-neural-net-ai-is-about-to-destroy-half-the-independent-web/#comment-146182