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The hidden supply chain costs of the AI boom
The interview with economist Willy Shih examines how global supply chains shape manufacturing and the current AI boom. Shih argues that political plans to reshore production can overlook the infrastructure and supplier networks factories need, while AI’s rapid expansion is putting pressure on computing resources.
Drawing on examples including Foxconn’s abandoned Wisconsin factory plan and past chip shortages, Shih discusses why China remains a manufacturing powerhouse despite concerns about reliance on it. His forthcoming book, *Where Does My Stuff Come From?*, explores the economics behind these complex systems, which the interview says politicians and regulators often ignore.
In short
- AI is intensifying demand for computing resources.
- Factories depend on infrastructure and supplier networks.
- China remains central to global manufacturing.
Steelman: both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
Supporters of reshoring argue that relying heavily on overseas production, particularly in China, can leave countries exposed to shortages and geopolitical pressure. Building domestic capacity could improve resilience and security, and public investment may help develop the suppliers, skills and infrastructure that make manufacturing viable. The AI boom adds urgency because surging demand for computing resources could intensify competition for critical components.
The case against
Sceptics argue that factories cannot be relocated by political decree: manufacturing depends on dense supplier networks, specialised skills and infrastructure that take years to build. Costly efforts to recreate those systems at home could prove inefficient or fail, as the Wisconsin example suggests, while established overseas production can offer scale and reliability. They may favour maintaining trade links and managing supply risks over pursuing broad reshoring.