America is losing the physical technologies of the future

Electrical technology isn't just a climate thing. It's about national power and prosperity.

Art by Grok. Prompt: “Xi Jinping receiving the gift of electric power from Zeus”

If you’re a little older than I am, you might remember a time, just four decades ago, when the Japanese auto industry was riding roughshod over its American competition. How times change. Nissan just announced a possible merger with Honda, which may end up including Mitsubishi Motors as well. As Bloomberg’s Nicholas Takahashi explains, Nissan has been ailing for a while, with management chaos, outdated products, and plummeting profits. But this merger is the canary in the coal mine — The entire Japanese auto industry is getting smashed by Chinese competition in key Asian export markets:

Source: Bloomberg

Japan’s share of U.S. sales is falling as well. All of this is driving disappointing earnings for Japan’s Big Three. The tie-up between Honda and Nissan is supposed to fight back, by leveraging economies of scale. But just as when a bunch of Japanese semiconductor companies combined to form Renesas Technologies, the benefits from consolidation in the car industry will probably end up being limited.

The reason is that the Japanese companies’ fundamental problem is technological. For many years, Japan’s automakers ignored the promise of electric vehicles, instead choosing to focus on hydrogen cars — a dead-end technology. Now they realize they need to catch up, but they’re way behind. As the world shifts rapidly to EVs, BYD, Tesla, and various smaller Chinese companies have eaten the hidebound Japanese automakers’ lunch.

This is a five-alarm fire for Japan, which is already suffering a punishing economic stagnation. But it’s also an important warning for the U.S. We’re watching in real time as a country forfeits leadership in the technologies of the future. On the other side of the world, Germany is not doing much better.

Such technological stumbles have geopolitical consequences as well as economic ones. As Paul Kennedy wrote in The Rise and Fall of the Great Powers, the power of nations has historically hinged on their ability to master the key technologies of the day, whether that was gunpowder and sailing ships, modern taxation and bureaucracy, or mass manufacturing.

U.S. leaders know this, of course. With the CHIPS Act, export controls, and various AI-related policies, they’ve recently acted to preserve American supremacy in the crucial mature technology of semiconductors and the crucial emerging technology of AI. If Trump doesn’t cancel those programs at Xi Jinping’s behest, they have a good chance of succeeding. The U.S. is ahead in AI so far, and along with its allies (including Taiwan) it maintains a commanding lead in chip technology too.

But those digital technologies are not the only key emerging technologies that will determine national power — and to a lesser degree, economic prosperity — over the next half century. There is also a key nexus of physical technologies that will govern how well countries, companies, and militaries are able to transform software into physical reality. Those technologies are all related to electricity — they include batteries, electric motors, solar power, and various other instruments of electrification. And in pretty much all of these fields, the U.S. and all of its allies are rapidly losing ground to China.

The root cause, I think, is that Americans on both political sides have essentially agreed to frame emerging electrical technologies as being fundamentally about climate change, instead of about national power and prosperity. This is a dangerous misconception. If we don’t stop pigeonholing electrical technology into the climate discourse, it’ll continue to suffer from partisan polarization and misplaced priorities.

Taking Xi Jinping Thought seriously (about electric technology)

Regular readers of this blog will know that I have a pretty low general opinion of Xi Jinping’s personal competence as a leader. His “Xi Jinping Thought”, which he has forcibly inserted into every corner of Chinese society, seems to be mostly a jumble of rambling vague midwittery. But I’ve seen at least one big idea of Xi’s that I think holds some merit — the idea that the world is in the middle of a technological revolution, caused by the simultaneous emergence of a bunch of game-changing technologies.