theCUBE + NYSE Wired: Physical AI & Robotics Leaders | Saman Farid, Formic Technologies

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Saman Farid

CEO

Formic

play_circle_outline The need for robots in traditional industries

play_circle_outline Formic's Mission: Deploying Robots in Factories with Fully-Managed Automation Services

play_circle_outline Impact on small and medium-sized businesses

play_circle_outline Lowering barriers to entry for AI factories

play_circle_outline Impact of robots on workers' lives

play_circle_outline Political Climate Sparks Surge in American Manufacturing Demand

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Saman Farid, Formic Technologies

Saman Farid

CEO Formic

Exploring Robotics and AI with Saman Farid at theCUBE + NYSE Wired Robotics & AI Media Week

Join us for a discussion with Saman Farid, Chief Executive Officer of Formic Technologies, during theCUBE's coverage at the New York Stock Exchange as part of the NYSE Wired Robotics and AI Media Week. Farid draws on extensive experience as an entrepreneur and investor to discuss the flourishing development and application of robotics and artificial intelligence across pivotal industries.

In a conversation with theCUBE Research and video hosts, Farid ... Read more

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Question: How has technology impacted our digital lives over the last 30 years and which industries have continued to dominate the majority of GDP despite technological advancements? add

What strategies have been implemented to increase the adoption of robotics in American manufacturing, particularly among small and medium-sized businesses facing labor shortages? add

What is one proposed solution to addressing the labor shortage in American manufacturing? add

What are the benefits and opportunities of democratizing robotics innovation for small and medium-sized businesses in terms of accessing managed services and integrating AI in manufacturing processes? add

What are some benefits of having robots in factories and how do they contribute to strengthening the American industrial base? add

What factors are contributing to the resurgence of American manufacturing and what impact is it having on the industry? add

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Saman Farid, Formic Technologies

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>> Welcome back, everyone, to theCUBE's live coverage here at the New York Stock Exchange. It's theCUBE's East Coast studio. Of course, we've got Palo Alto and NYSC connecting technology and Wall Street. This is our access point in New York. We got the Palo Alto area, so we can bring it all together here. Citi is here with a big event inside the stock exchange, talking about robotics. The leaders are all here, bringing them into theCUBE. If we can't get them in-person, we bring them in remote. We got our next great guest who's going to break down where robotics is heading, but more importantly, the ecosystem around and what are the core trends and the key drivers in this market. Saman Farid, CEO Formic. Thanks for joining us remotely from the Bay Area. I just came from there with the Palo Alto studio, so we'll certainly have you down. Thanks for joining us remotely here, New York Stock Exchange.

Saman Farid

>> Thank you so much for having me. It's an honor to be here. Awesome to connect robots and always fun to see people interested in them.

>> Yeah, I love your background. You've been an investor, you're an entrepreneur, you've got the company you've been building. You're in the heart of the robotics area. And of course, if you're living under a rock, maybe you don't know this, but Jensen Huang has been on a fire at Nvidia talking about robots in all his speeches, really as a centerpiece. I call it the North Star for him because it's where AI goes on the physical side. You're seeing this intelligent edge emerge with robotics, where all the use cases are manufacturing, warehouses, retail, you name it, where the physical humans are, where this physical property and goods, and it's just connecting in the goodness of AI, open source and everything else. So, first thing, let's set the table. What are you working on now? Explain your venture, why you guys exist, what's your vision?

Saman Farid

>> Yeah, thank you so much. I appreciate it. So, to your point, the vast majority of GDP is in the physical world. We have technology that's impacted our digital lives for the last 30 years, both financially, in terms of data and news consumption and media. We've already seen our world change. But the vast majority of GDP has continued to be locked up in these very traditional industries, manufacturing, agriculture, construction, healthcare. And it's not until robots have eyes and ears, in the form of AI, and arms and legs, in the form of robots, that we're going to start to see that impact on the wider economy. So, we started Formic with that exact idea. We have deployed robots now in more than 100 factories. We've built a series of software tools that make it easy to deploy and easy to manage robots. We've also built a business model. We're the first ones to do what's called fully-managed services around automation. So, we drop into factories that don't have their own in-house robotics engineers and AI engineers, and we help them solve a bunch of those complex issues and we just get paid a monthly or hourly rate to solve those labor shortages for these factories. And so, we've seen a massive uptick in adoption of robotics as a result of these things that we've done. As you may know, 98% of American manufacturing is small and medium-sized businesses. And more importantly, about 70% of those have never deployed a robot ever in their history. And we're facing, on the one side, that lack of adoption. On the other hand, greater than ever labor shortages. There's about one and a half million unfilled manufacturing jobs in America today. As the work around tariffs and reshoring manufacturing continues to happen, we're seeing an increased demand in domestic manufacturing, and that labor shortage is not getting any better. And so, the only way that we can as a country meet the moment of the day and try to increase the American industrial base is by adopting far more robotics, and that's what we're here to try to do.

>> I love that mention around the small, medium-sized businesses because what's really great is if you look at the robotics innovation, it used to be for the rich, it's my word. Maybe I'm saying that, but the big companies, big factories, big dollars, big IT, big edge spend. Now, you're talking about bringing it down to access, managed service. This is huge. Can you quantify and scope the opportunity? Because by bringing down and with democratization of supercomputing with the cloud and also on-prem, you got the now hardware to run factories, AI factories, in tandem with physical plants, and that could be small, medium or distributed, a bunch of semi large distributed systems or factories or manufacturing. It's not just a big monolithic factory anymore. Can you share your thoughts on that? Am I getting that right? And what's your perspective on that piece?

Saman Farid

>> Yeah, that's absolutely right. I think we love to see videos of these highly-automated factories. General Motors and Ford and Tesla are great examples of factories that have automated over the last 30 years pretty heavily. What people often forget is for every General Motors plant you have between 2,000 to 4,000 suppliers that make various components, whether it's nuts and bolts, or seats, or engine assemblies that all get built in these small and medium-sized factories. And those components all end up at a General Motors plant and get assembled into a final car that you buy. And so, what is often missed is that the vast majority of the supply chain is actually these small, medium-sized businesses. The same thing applies in consumer packaged goods. Our robots help make food products, dog food and chocolate chip cookies and tortillas. Our robots help make plastic injection-molded parts for lawnmowers and golf carts. And for every end product that you buy, there are hundreds, if not thousands, of sub-components that come together to make up that final product. Historically, a lot of that supply chain has been overseas. Some of it continues to be in the US. And as we have seen in the last months, there's this massive incentive to try to bring more of that supply chain back domestically.

>> I'm glad you brought up supply chain because one of the things that jumped out at me at Nvidia's GTC, because they did talk about AI factories, digital twins, all that, we can get into some of that in a minute, but one of the things that jumped out at me was their multi-year roadmap that they put out on the chips. Obviously, they want to keep the ecosystem happy. But we noticed a business model opportunity that seems to be there. I want to throw this at you and see what you react to on this because I think we might be seeing the formation of the formula, a template where you got a two-sided marketplace. You've got a supply chain on the component side and then you've got the supply chain on the ecosystem side, both instrumented now, right? So, whether it's instrumented with tokens on one side and maybe crypto tokens on the other, two tokens maybe on both sides. But you're starting to see the evolution of these two-sided environments where supply chain is an integral part of the input and that's important, but it's just not only one piece of the puzzle. Is this something that you're seeing in the market and is this an opportunity for entrepreneurs and for companies to think about innovating around?

Saman Farid

>> Yeah, I think the advent of AI has really changed the landscape of what people need to think about in their supply chain. There are a couple of things to that. One is the types of components that you're going to need in your supply chain look different today than they did in the past. On the one hand, what you used to have to buy a bunch of industrial scale sensors to do, you can now do with a single camera and AI. What you needed in the past a lot of custom compute to do, for example, you would have to buy industrial PLCs from Rockwell or Honeywell or Siemens, a lot of those same tasks can now be done in the cloud with a traditional computer with enough redundancy to solve some of those issues. So, the kinds of components that are in your supply chain on the one hand are going to change. The second thing is, at a more macro level, you can also use AI and some of these more modern tools to change the way that you manage your supply chain. That includes both more accurate demand forecasting, it includes more autonomous management of inventory, and hopefully with the adoption of robots at scale, it also allows factories to more dynamically evolve and redeploy their capacity to different kinds of products as they need to. Historical, traditional automation was very fixed. When you built an automated line, that line could only make one product all day every day. And if your General Motors, that works great. The problem is for most manufacturers, they have to run small batches of production, they have to have a lot more customization. And in order to accomplish that with automation, what's needed is much more flexible and much more intelligent production lines. And so, more intelligent robots have a really big part to play in allowing that to happen.

>> That's a huge point. I want to bring that up, if you don't mind, that versatility factor. Talk about the agility versatility factor, because what's the alternative to not having agility? Resetting the line? Can you scope the cost there and what that would look like, vis-a-vis having technology as a tailwind?

Saman Farid

>> Sure. So, I would say in a traditional automation world, in order to deploy automation, the typical route is to use heavy system integration services. And system integration services are the avenue by which you built a custom solution for your specific plant. That process of hiring system integrator generally ends up being between 40% to 60% of your budget gets spent on these custom engineering services, which is really, really massive as a hurdle. What we're seeing is AI and intelligent systems are really reducing the need for that. And then, the fully-managed services piece that Formic is innovating around is also making it much more accessible to folks. So, as we standardize these solutions and have them be drop-in ready, we have customers who call us up and say, "I have a labor shortage. I need these five different tasks in my factory done in an automated way." We can show up within one or two weeks with a robot that's fully-configured to do that task. AI will get us part of the way there. So, AI makes the robot smarter and more flexible and more capable to adapt, but there is still a physical constraint where if you're picking up, for example, a bottle of water versus an engine block, you might need a very different kind of robot, you might need a very different kind of gripper, you might need very different types of sensors. And so, you need to both resolve the physical differences as well, as the algorithmic and computational differences to accomplish that flexibility.

>> Talk about the company that you founded, the use cases you're going after, and what are some of the examples you can share? Because an end-to-end workflow that's lower cost or easy to get into, buy as you go, sounds like cloud to me, feels like you're lowering the bar to get in with robotics. What's the use case? Are robots actually involved? Are you provisioning those robots too? Is it full end-to-end workflows? Take us through the use case.

Saman Farid

>> Yeah, absolutely. So, the typical use case is we'll get a call from a manufacturing facility that is short staffed. And just to give you a picture of what their world typically looks like, the typical American factory today has about 30% unfilled headcount and has about 200% per year annual turnover in their headcount, which means for a factory that's 500 people, you would often need to hire 1,000 people a year just to keep that factory in business. And so, there's this massive shortage of available labor for these factories. So, what happens is they might get a call from some big automotive company or from General Mills or from Procter & Gamble or somebody else that says, "Hey, I have this new product I would like to make. Can you be my contract manufacturer to make it?" And obviously, every business owner's dream is to be able to say yes to such a request. And the problem becomes that they no longer have the capacity, right? They have maxed out their labor available. Their facility may only be running eight hours a day or seven hours a day because of the labor that they have available. But without automation, they're not able to go and grow and meet that demand and win new business. So, what they'll do is they'll call us and they'll say, "Hey look, I have this problem, can you help me?" So, we generally do a full service automation. What that means is we show up and we do an evaluation of their entire production line and we tell them, "Hey, it looks like these five things can be automated in your facility and here's roughly the cost associated with that. We use a bunch of software to automate the decision-making process around what needs to be automated and how to automate it. Once those tasks have been identified and the customer says, "Thumbs up. Please automate those five things for me," we do all the work. We show up with a bunch of robots that can do those tasks. We have in our fleet of variety of robots that do a bunch of different kinds of tasks, and sometimes it's on a month-to-month basis. Sometimes they're ready to sign annual or multi-year contracts in order to get lower pricing. But depending on the flexibility that they need, we'll come in and fill some of those tasks for them. We do all the engineering work, installation, and more importantly, all the ongoing service and maintenance of those robots. So, most of these small factories, they don't have in-house engineering capabilities to manage and maintain robots, program robots, train the AI to adapt to different kinds of situations that come up, do error handling and all of the complexity that comes with that.

>> So, you're designing and deploying basically AI factories, AI physical?

Saman Farid

>> That's right. That's right. And then, what happens as an end result is these factories have some of these positions automated, they're now able to take the same workforce that they had before and they're able to actually expand overall production of their factories. So, they can increase their throughput between 50% to 150% with the same base, right? They've already paid for the real estate and the forklifts and the trucks and all of the other machinery on their production lines. Now, all of a sudden, they've doubled or tripled their top line. And more importantly, doubling their top line means they 8X'd their bottom line because all the fixed costs are already paid for. So, you see this massive increase in the efficiency of these factories.

>> So, someone on the L got promoted to supervisor?

Saman Farid

>> We do tend to make our champions look good, that's right. A lot of the team members in the factories actually do end up becoming supervisors of the robots, that's a very common task. Now, they get to watch instead of lifting 60-pound boxes and getting rotator cuff injuries or lower back injuries. I had a slipped disc not too long ago, and so I know the pain associated with that. And now, again, the risk of injury goes down significantly. The overall productivity of the plant goes up. We help America build a much stronger industrial base that's more resilient to change. And then, what happens in those factories is they start to win more business. They start to take on some of those orders. Our robots are making all kinds of products, some of which end up in your grocery store, some of which end up in Starbucks, some of which end up in your car, some of which end up in your lawnmower, some of which end up in mining and drilling equipment or defense equipment. All of these different things are now being made by robots. We've strengthened the American industrial base, we've made these factories more profitable. The workers' lives are better. And the way that we see it is in order to really reach this goal of improving the American industrial base, robots seem to be the only answer.

>> Yeah, I mean, joking aside, the human does actually have a good role to play. Talk about the political climate. You mentioned the American dominance in manufacturing, which is clearly a political tailwind right now. What has that been like for you guys? Has that impacted your business? I mean, all you hear from Washington is, "Hey, we're going to bring manufacturing jobs back to the US." The economy's changed. Certainly the form factor of innovation around robots and IoT has changed with data. I mean, it's just like a perfect storm. What's been the reaction to you and your business? What's your vision and what's your perspective And share your thoughts on this because I think this is a huge point.

Saman Farid

>> Yeah, I think that there's a lot of macro forces that are pushing towards a resurgence in American manufacturing. This actually started even earlier than this administration knew. I think COVID was a big wake up call, when we suddenly couldn't buy high toilet paper, there was this massive awakening, that if we don't build the things that we're relying on on a daily basis, we're severely at risk. And I think this administration has done a lot to also try to improve the capabilities for American manufacturing. Of course, I think uncertainty around the tariff environment does make it harder for a lot of manufacturing businesses to make decisions. But I think the general direction is quite clear, which is we're moving to a world where people are going to heavily incentivized to try to produce more domestically. So, we have seen, even from the time that the Canada and Mexico tariffs were threatened, we've already started to see an increase in demand for domestic manufacturing. We have live data from every single one of our robots as to how many hours a day it's been used. And we've seen February and March, we've seen a 9% to 10% increase per month in utilization. More importantly, a lot of factories are calling us and saying, "Hey, look, Caterpillar, or General Motors, or Proctor & Gambler, Nestle are calling me and asking me to make more. They used to produce this product in Canada, or they used to produce this product in Mexico, or they used to source it somewhere else overseas and they're looking for a domestic alternative, but I can't meet that demand and can you help give me some robots, so that I can go and win that business?" And so, we're starting to see a really massive surge of inbound requests from manufacturers who say, "I want to move my factory to the 21st century. Please help." And that's something we've been really excited to see. To your point, there is a lot of tailwind.

>> Yeah, for all the Star Wars fans out there, that's the Attack of the Clones, they have that factory of clones being built. In a way, this robotics wave is coming. Have you seen a geographic impact in terms of... I can almost imagine if you just take computer science theory, distributing the workloads around. Is there a trend towards decentralized manufacturing systems versus the monolithic plants? Or is that something that's just the fantasy in my mind?

Saman Farid

>> I think you're absolutely right. I think decentralized manufacturing is what resilience comes from. We generally don't end up with one massive factory that makes everything, every single factory has a specialized, right? Somebody makes nuts and bolts, somebody makes engine blocks, somebody makes snack foods and somebody makes chocolate chip cookies. All of those factories have a variety of different kinds of equipment, different needs. And really, what's amazing about the American industrial base is many of these businesses are family-owned and operated. The typical American factory is three generations old, it was started by somebody's grandfather's grandfather. And as these businesses have grown throughout the years, they've not only become quite large and quite resilient, they've also become the primary employer in most of the towns that they're in. So, if you go to a town in the middle of Indiana or Illinois or Wisconsin or California, it's not uncommon for one factory to employ 30% or 40% of a town and that's really massive. As you think about how these businesses are going to grow, they really are tapped out on available working-age adults who want to come and work in a factory. Many young people have left for the cities or would prefer to take different kinds of jobs in the service industry, or they're educated and they work in other industries. And so, if you think about what a factory needs in order to attract a minimum wage labor for their factory is really, really difficult today. And so, they're all turning to technology. Historically, there are tools around workforce distribution and management that can make the plant more productive, but without robotics, there's only so far you can go.

>> It's interesting. You see things that happen like this, gentrification happens. I remember I was talking to a friend about these new baseball stadiums that get built and all of a sudden, San Francisco's booming where it was once not booming, Colorado, you name it. You see regions like Amazon Web Services go into regions, and that creates a revitalization. This second order magnitude, there's a system effect when you have manufacturing. Could you share your thoughts on that impact and does that factor into the valuation? Because if this continues, this new wave of manufacturing, not only do the jobs come back, obviously with robots and humans, but there's a second-order system impact with this. Talk about that if you can.

Saman Farid

>> Yeah, I will address that directly, but maybe just to start. I lived in China for a very long time. And in China you have these massive hubs. Shenzhen is one example, where there's so many different manufacturing facilities in that one region, and you have enough density in that one region that they all really start to benefit from each other. It's much more efficient if I, as a design engineer, can say, "Hey, I want to invent this new product." I can just go down the street and find somebody who can make the components and I can go find somebody else who can make the coating and I can go find another guy who can weld it all together. The time from inception to a new product is weeks versus in the US, we typically see a much longer cycle. You have to put out an RFQ and you wait weeks or months in order to get a response, and then hopefully, the price point is something that's acceptable and you have to go through this long iteration cycle. And so, what we're seeing in the US is as density of manufacturing increases, as each of these individual manufacturers become more capable, the net result is we have an economy that can innovate much faster as a whole. We can bring new products to market much more quickly. I think you see this in the chip industry as well. You mentioned earlier Nvidia and TSMC. TSMC tried to build this massive facility in Phoenix, but it took them much longer than the equivalent plant would've taken to build in Taiwan, and they had to actually fly in a lot of the talent that they needed in order to do that. All of the components that they needed to source were all very difficult to find. Now, thankfully, I think that is starting to happen in different ways, and that's training an ecosystem of suppliers that can build all the things that meet all of those needs. We have the same challenge around data center build, we have the same challenge around automotive build, we have the same challenge around aerospace, but the same thing applies in every industry. In consumer packaged goods and food and beverage, we have the exact same challenges. And so, we're seeing this knock-on effect where it's a flywheel. As the manufacturing gets better, more products are able to be built, that leads to more demand of this manufacturing base, and subsequently, more investment in manufacturing. And the net result of that is we get a better manufacturing base, which continues to improve-

>> Are you seeing hubs right now forming or is there a trend that you can share? I mean, any hope? By the way, that's the same Silicon Valley formula. Money, talent, ecosystem, service providers are all dense around each other. We've seen that spark of creativity when that happens. You mentioned China example, super valuable. Are there signs of hubs developing with manufacturing or is it the same bases we we've known in the US? Or is there emergence of new places with money and talent and all that flow?

Saman Farid

>> There absolutely are. I think it's not quite to the same density and scale as China. We generally, in the US, have a much more distributed manufacturing base everywhere across the Midwest and the Rust Belt. If you look at in the Northeast Pennsylvania, New Jersey. There's a lot of manufacturing in California still. In the Northwest, there's a lot of manufacturing. In Texas, there's a lot of manufacturing. So, we do have a pretty large and pretty distributed manufacturing base. I would say, for us, where we've seen the fastest uptake of automation has been in, number one, the Greater Chicago region. So, from our Chicago field service team, we can serve parts of Michigan, Wisconsin, Illinois, of course, parts of Indiana, Minnesota. In that region, we see a lot of manufacturing. In the Northeast, we see a relatively large hub. And then, across Northern and Southern California, there is a lot of manufacturing as well.

>> Yeah, key spots that have those locations. Final question for you on the capital market side. What's the investor appetite around these new dynamics? Are you seeing any things? Are they warm? Are they hot for robotics and AI? What's the view of the investor climate?

Saman Farid

>> Absolutely. I think we're getting calls three or four times a day from different kinds of investors, who seem to have suddenly woken up to the fact that manufacturing is a giant, giant market, historically very underserved. I think that level of investor appetite was unprecedented a few years ago. There have been a lot of conversations in public forums and private forums. I'm here in the Bay Area where in Silicon Valley regularly you go to events and people are talking about, "How do we re-industrialize?" There's actually a conference called REINDUSTRIALIZE. Formic actually just joined the New American Industrial Alliance, which is a group of technology companies that is working across government and the private sector to help support the resurgence of the American manufacturing base. So, I would say this is a very, very big topic in the industrial community. Many, many large funds have set up what they call either American dynamism or global resilience funds, or whatever they call it, they all have different names, but the concept is the same, which is how do we rebuild a strengthened industrial base? And this is something that it's a long-term project, it's not going to happen in one or two years. Often, when the investors ask me about it, I say, "Look, this is a third-year endeavor if we're going to really rebuild the industrial base." But there are enormous returns to be had, even in the very short-term and I think that's why investors are very excited.

>> I mean, it's a classic long-game philosophy, multiple stakeholders, ecosystems, hubs. I mean, that's not a short-term deal at all, certainly. Well, great to have you on. Appreciate it this is the beginning of more robotics coverage with theCUBE, and thanks for sharing all the awesome commentary. We love this trend. We think that the industrial intelligent edge is beyond IoT, the classic sense of IT. I think what you're doing is awesome, lowering the barriers for competitiveness, and also, efficiency, as these supply chains integrate with the data, with the quality. Again, like you said, time-to-value, great to have you on. Appreciate it.

Saman Farid

>> Absolutely. Thanks so much for having me. This was a lot of fun.

>> This was awesome. Thanks so much. All right. We're here in New York City at the NYSC CUBE East location. This is our access point on the East Coast. We've got a subnet developing here. We've been here for 15 years, certainly with the big data move. Of course, we've got Palo Alto connecting tech and Wall Street. I'm John Furrier, host of theCUBE, talking robotics, AI, and the future of American competitiveness and globalization of physical AI. Thanks for watching.