This document discusses enabling smart manufacturing with federated AI at the edge. It presents a vision of distributed cloud-edge systems with sensors and cameras generating data at edge devices. Applications can derive knowledge from both cloud and edge data to react to real-time situations. Two approaches are described: distributed AI within a single domain and federated AI across multiple untrusted domains. FogFlow is presented as a way to implement distributed AI, while a function catalog and data usage controls can allow federated learning across domains. An example use case of defect detection in a smart factory is provided.