Manufacturing Matters- Tuesday Top-Up 81

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• What’s Been Happening in our MAKE│NZ Community
• News From The World of Manufacturing
• Other News of Interest to Manufacturers
• Fun Facts

What’s Been Happening in our MAKE│NZ Community

It’s the final countdown…

We’re helping kick off EMEX 2026 with our full day conference.

Delving into AI, Industry 4.0 integration, robotics and human‑robot collaboration, future‑ready skills, and workforce upskilling, we’re covering a range of presentations and case studies.
Hear from range of presenters such as:

• Dr Jan Polzer (Faculty of Engineering and Design, Auckland University) running an interactive workshop on Industry 4.0
• Scott Adams (Argon & Co) presenting on human robot collaboration
• Dion Orbell (Buckley Systems), Nathan Hay (Argus Manutech), Kayne Mulcahy (Mulcahy Engineering) on the human capital challenge, with an interactive workshop
• Natalia Galin (Galin Engine) Charlie North (Dawn Aerospace) Josh Down (ENI Manufacturing) working through Start Ups
• Dean Boston (FEWORX) running a Q&A on matching capital and opportunity
• Richard Rookes (MHM Automation, Wyma Solutions) Philip Benson (AW Fraser) presenting an interactive workshop on amalgamation and agglomeration

You can find the programme, discounted tickets, and more HERE

Thanks to The Canterbury Manufacturers Trust (CMT) we are now offering
sponsored tickets for University and Polytech students
who would like to attend – if that’s you or someone you know please reach out to sabine@makenz.org

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News From The World of Manufacturing

•At this year’s Hannover Fair, generally recognised as the world’s biggest industrial trade fair, what’s now called Physical AI took centre stage, and within that the focus was on humanoid robots:

By way of example, BMW showcased AEON, a humanoid robot made by Swiss company Hexagon, which is on trial in its advanced-technology factory in Leipzig (Germany). You can watch a short video showing these robots in action here.

We’ve probably all seen the videos of humanoid robots dancing, or running half-marathons. That, in itself, doesn’t prove they can be deployed profitably in a factory environment. At a more fundamental level, and before we get too excited about Physical AI, we need to look at tasks in a manufacturing operation that can be automated using AI agents, as opposed to robots. Any task that doesn’t involve physical activity can – in principle – be performed by an AI agent. Robots have been used to automate processes involving physical activity in manufacturing for decades.

What differentiates Physical AI in the form of humanoid robots from conventional robots can be summarised as follows:

Feature	Conventional Industrial Robots	Humanoid Robots
Primary Strength	Speed, brute strength, and sub-millimeter precision.	Adaptability, spatial navigation, and multitasking.
Safety	High risk; usually requires physical fencing or cages.	Built with advanced sensors to work safely alongside humans.
Tooling	Requires specialized end-effectors (suction, welding torches).	Uses human-style hands to grip existing manual tools.
Deployment Time	Weeks to months (requiring hardware installation).	Hours to days (requiring AI training/mapping).

Back to AI agents vs robots. In a recent paper, the McKinsey Global Institute looked at the potential for automating tasks across different parts of the economy, and in a range of European countries.

At a high level, across all countries and all industries, and expressed as the share of total work hours that can – in principle – be automated, they come up with the following breakdown:

Breaking this down by occupational groups shows that even in production (manufacturing), the share of work hours spent on non-physical tasks almost equals that of the share of physical tasks:

And, further, looking at the potential for creating economic value through the deployment of AI, according to the report even in manufacturing AI agents take the lion’s share:

These are obviously quite high-level analyses, but they will hopefully serve as a reminder that when it comes to improving productivity and profitability, it pays not to be captured by technologies that we intuitively consider to be ‘impressive’ because they can increasingly mimic our own actions and activities.

To emphasise the point, here is the latest manifestation of the ever-increasing rate of development of truly humanoid robots, and this video explains the thinking behind IRON, as it is called:

XPeng, the company behind IRON, has responded to the increasing competition among Chinese EV manufacturers by executing a strategic pivot to “Physical AI,” expanding beyond cars into humanoid robots and flying vehicles. Rather than abandoning automotive manufacturing, XPeng is leveraging its self-developed AI platforms to create a unified ecosystem that operates both smart EVs and robotics.

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Other news of interest to manufacturers

•Maybe non-relativistic quantum mechanics can provide the best explanation for the fact that the Strait of Hormuz appears to be open and closed at the same time?

But maybe, also, things aren’t as complicated as they appear to be if we listen to statements by the Hon. Peter B. Hegseth, still considered to be the Secretary of Defense by the US Senate. In a hearing of the US Senate Committee on Armed Services dealing with the Defense Department Budget Request for Fiscal 2027 on May 12^th, the Minister, in answers to questions from Senator John Hoeven (r-nd) about the current situation in the Strait of Hormuz said the following (https://youtu.be/6kWv9oFFqyw 1:16:00 in):

”I don’t think enough has been stated about the blockade and the power of the blockade and the dilemma it creates for them [the Islamic Republic of Iran]. They can’t move anything out of Iranian ports … the economic pressure that creates on them greatly outstrips the pressure on us and we don’t use the Strait of Hormuz anywhere near as much as the rest of the world does, and certainly they do. And I think it creates a lot of dynamics for future energy dominance for the United States of America, considering the increased capability that our country has, not to mention the opportunities in Venezuela.”

The US government continues to attract a lot of criticism for not having a plan for its war with Iran. Maybe some of that criticism misses the point?

In addition, the US Energy Secretary, Chris Wright, said in an interview following the recent meeting between US President Donald Trump and China’s President Xi Jinping that “I suspect we’ll see a growth in their [China’s] oil imports from the United States …we will see a decreasing importance from the Strait of Hormuz”.

•Staying with fossil fuels and as we mentioned before – the greater the uncertainly, the more voices there are in the chorus of those confident to make predictions. To be on the safe side, we prefer to turn to the agency charged with monitoring (among other things) supply and demand of crude oil globally – the International Energy Agency [IEA]. In its latest Oil Market Report of May 13, the agency states the following:

“World oil demand is forecast to contract by 420 kb/d y-o-y in 2026, to 104 mb/d, 1.3 mb/d less than our pre-war forecast. The biggest decline is in 2Q26, down by 2.45 mb/d, of which the OECD accounts for 930 kb/d and the non-OECD for 1.5 mb/d.

The petrochemical and aviation sectors are currently most affected, but higher prices, a weaker economic environment and demand-saving measures will increasingly impact fuel use.

Global oil supply declined by a further 1.8 mb/d in April to 95.1 mb/d, taking total losses since February to 12.8 mb/d. Output from Gulf countries affected by the closure of the Strait of Hormuz was 14.4 mb/d below pre-war levels. Higher production and exports from the Atlantic Basin provide some relief. Assuming flows through the Strait gradually resume from June, global oil supply is projected to decline by 3.9 mb/d on average in 2026, to 102.2 mb/d.”

It’s worth pointing out the “Assuming …” bit in the quote above. What is being assumed is a matter of choice. Others – like The Economist – are making different assumptions and come to a different prognosis: “Oil prices could soon rise convulsively – The present tranquility will not last.”

The other point to note is that a resumption of supplies to pre-war levels, which were roughly in balance with pre-war demand, doesn’t mean a return to ‘business-as-usual’. The world will have to deal with a supply deficit that is predicted – again under the above Assumption – to peak at 900 mb in August/September this year:

What that means, among other things, is additional demand to replenish stocks that were / are being used to manage the current crisis.

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Fun Facts (some of them not so funny)

•Last we promised to lay out in more detail developments in productivity in New Zealand manufacturing, based on data from Statistics NZ released on April 23rd:

	2008–20	2020–24	2024–25
Manufacturing (all)
Labour	0.4	-1.4	1.1
Capital	-0.5	-3.2	-2.2
MFP	0.1	-2.2	-0.3
Food & Beverage Manufacturing
Labour	-0.6	0.0	1.1
Capital	-0.7	-0.7	-0.8
MFP	-0.7	-0.1	0.4
Transport equipment, machinery
and Equipment manufacturing
Labour	1.3	1.8	3.9
Capital	-2.0	-3.7	2.2
MFP	0.0	-0.9	3.1

The data in the table above shows the three components of productivity: Labour, Capital, and Multi-factor Productivity [MFP]. A reminder: Labour Productivity is measured as the ratio of total GVA (Gross Value Added; GDP) over total labour input, ideally measured in hours worked. Similarly, Capital Productivity is measured as the ratio of GVA over capital input, measured as the total monetary value of all fixed physical assets used in production, adjusted for depreciation (wear and tear) and inflation.

Multi-factor Productivity is a more comprehensive measure. Instead of looking at labour or capital in isolation, it measures how efficiently both are used together. MFP captures the “residual” growth—the increase in output that cannot be explained by simply adding more workers or buying more machines. It reflects improvements in technology, better management practices, organisational changes, and brand innovation.

For a more accurate explanation of how these measures are used by Statistics NZ see here.

So, what does the table tell us about productivity growth or decline in New Zealand manufacturing overall, and in its two biggest sub-sectors? Two things in particular:

• Within a very modest range, high-value-add manufacturing (Transport equipment, machinery and equipment manufacturing) – based on its improvements in labour productivity – performs above industry average and better than food & beverage manufacturing
• But, more importantly, and at least based on these numbers, it is the underinvestment in capital that puts the breaks on productivity growth more than anything else!