11 ms·

A negative feedback loop in semiconductor supply seems like a situation where a government should just step in manage the market a bit.

dimitrios1 5y ago
The solution to a market inefficiency isn't to involve a more inefficient entity.
- ramesh31 5y ago
  Ah yes, the Herbert Hoover approach.
  - MagicWishMonkey 5y ago
    I wonder how many of these people rant about how bad the government is while using GPS to navigate their way to work on government funded roadways.
    - evilduck 5y ago
      On the DARPA derived internet, no less.
      - nradov 5y ago
        DARPA funded the basic research. Then the actual Internet was largely built by for-profit private sector companies. That hybrid model seems to usually be the most effective for major new innovations.
        JohnWhigham 5y ago
        DARPA funded most of the grant money used by research entities to create the various parts of the IP stack. That's not "basic research". Simply put, were it not for DARPA, we wouldn't have the Internet of today. We'd probably have something like it, but something a lot more closed off and walled garden-esque.
    - abfan1127 5y ago
      As if those things wouldn't innovate in the market? Or because 1 thing came from the government, then all things the government touches are gold?
      - ramesh31 5y ago
        The free market can do a lot when it has the basic requirements to operate, but the point is that government spending is the only solution when we end up with a chicken/egg problem as the OP pointed out.
      - bumby 5y ago
        This take might have some hindsight bias. While a lot of industry seem obvious and worth the investment today, when they were nascent that wasn't the case. Would GPS exist if private companies had to fund the rocket and satellite research just to tell you where you are on the map? Or would the aircraft industry exist? Most of those types of high-risk, nebulous reward (at least on short-to-near-term timescales) industries are predicated on government investment. SpaceX, as great as they are, probably wouldn't exist if they didn't have NASA as a customer.
        abfan1127 5y ago
        it certainly does have hindsight bias, on both sides. The Satellite TV and Radio industries spend the money to launch. Back in the 90s (during the age of early GPS), Motorola (iirc) tried to launch a satellite phone company too. NASA isn't that big of a customer. DirecTV was a huge consumer of rockets. As it turns out, SpaceX doesn't sell to them because they own their own rocket company.
        bumby 5y ago
        >The Satellite TV and Radio industries spend the money to launch. Correct, but this is an after-the-fact understanding. They spend money to launch now because the industries are no longer nascent and being launched on platforms designed around government investment. The key to my point is that the government spends money when the industries are young and risky to develop platforms. If those platforms work out that helps the private sector have a less risky path down the road. This is why telecoms weren't rushing to develop rockets in the 1960s. >NASA isn't that big of a customer. This is very much the same thing. Early on, NASA was really the only SpaceX customer and NASA helped keep them from going bankrupt [1]. In addition, NASA made early launches more palatable because the government is self-insured. Government contracts help usher along young, risky companies until they could have a less risky business model that the private sector feels more comfortable with. It's very similar to aerospace development over 100 years ago with the Wright brothers and Curtis vying for Army contracts. Without those contracts, they are as much hobbyists as entrepreneurs. [1] https://www.ndtv.com/offbeat/elon-musk-says-nasas-1-5-billion-contract-had-saved-spacex-from-going-broke-2502210 https://www.ndtv.com/offbeat/elon-musk-says-nasas-1-5-billio...
    - adventured 5y ago
      They can't even manage a trivial task like maintaining roads and bridges properly. You could have hardly picked a worse example than the government roads system (including our thousands of dilapidated bridges), which is in absolutely horrific condition and is a humiliating example for the government. It's the opposite of a good example. That's all due to lack of funding, one might suggest? They're not lacking for funds. They spent our money on blowing up other countries and then (occasionally) attempting to rebuild them. Vietnam, Iraq, Syria, Libya, Afghanistan, Korea and 497 other cases of meddling and foreign adventurism. There rests $10 trillion in infrastructure money. No, they have had plenty of our money to spend, and they chose to squander it. What ever would we do if we didn't have those hyper incompetent clowns to manage our roads. GPS is trivial. If Russia can do it, various US private corporations could easily do it just the same.
      - anotherman554 5y ago
        US private corporations maintaining roads implies a society like the one depictive in the Robocop movies. It's fun to see you prosing that unironically.
- only_as_i_fall 5y ago
  Then what's the solution? Seems like the government is the only entity that can intervene if market forces are counter to supply chain resilience. This is partially the justification for agricultural subsidies in the US, so clearly there is precedent.
  - PaywallBuster 5y ago
    Apple approach, invest in your supply chain Extra points by diversifying from China/Taiwan In direct opposition, Auto makers approach of minimizing inventory and producing "just-in-time" caused them to be vulnerable to supply chain or big market shifts
    - ceejayoz 5y ago
      The article notes that Toyota avoided "just-in-time" supply for chips, and has benefited for a while from this. Their stockpile just ran out. > New cars often include dozens of microchips but Toyota benefited from having built a larger stockpile of chips - also called semiconductors - as part of a revamp to its business continuity plan, developed in the wake of the Fukushima earthquake and tsunami a decade ago.
    - baybal2 5y ago
      > Extra points by diversifying from China/Taiwan Take a look on the linkedin jobs in Shenzhen. The trend IS NOT towards diversification. In the last 5 years since Trump's election, US multinationals were increasing their presence in China, not decreasing. Google for example said to open "a small representative office" in Shenzhen 2 years ago, now it's a full giant RnD centre in the Ping An Tower where they shipped all of Pixel's development. Apple had RnD offices in China for more than a decade, but they barely acknowledged their existence. Their people in the Kerry Plaza were prohibited by their contract to even show their employment for Apple in their LinkedIn profiles. Their Shenzhen RnD centre is where AirPods were developed, along with many other iPad, and iPhone sub-assemblies. Apple's VR goggles project had its start in Shenzhen as well. Amazon had no presence whatsoever in China besides a failed Chinese Amazon.com launch. They left China, and then returned to move the whole of their Kindle, and Echo device development to Shenzhen. Now they are working on something rather cryptic there. Some suggest VR goggles of their own design. Facebook... absolutely bizarrely opened their RnD centre in Shenzhen amid the COVID, just a floor below Google I heard. Dell, Microsoft, Nvidia, Qualcomm, Intel — all conventional hardware makers were here since nineties, but I think they really doubled down on China recently as well too, to one up the dotcom upstarts in hardware.
- blululu 5y ago
  This is a pretty axiomatic view that governments can never be as responsive or as efficient as markets. The more commonly accepted economic wisdom is that they are usually less efficient and responsive than free market forces operating under ideal conditions. There is a lot of room for market failures, inefficiencies and temporal dynamics to change the balance. The are plenty of examples of government regulatory bodies that have a nice anchoring effect on the relevant markets. The Federal Reserve Bank, for example, responds quickly to changing market conditions, looks at the data and intervenes at a speed that keeps pace with the rapidly fluctuating market it regulates.
  - nyokodo 5y ago
    > The Federal Reserve Bank, for example, responds quickly to changing market conditions The Fed was established by Congress and the Chair is appointed by the President, however the Fed is still a private institution. That independence makes it a very different organization than what most people mean by government.
  - abfan1127 5y ago
    The Federal Reserve hardly responds to market conditions. Their free and open printing of money is arguably the greatest risk to our economy. Milton Friedman has great resources on this, including a video series from the 1970s (based on clothing alone) called Free to Choose. Its on Youtube, amongst other places.
    - kube-system 5y ago
      Natural boom-and-bust cycles are a huge risk to economies as well, despite the fact that they're natural and don't have anyone for which we can point a finger at.
      - nickff 5y ago
        The Federal Reserve was originally devised to put an end to the boom-bust cycle... Well before the Great Depression. If you're going to point a finger, the Federal Reserve is a very good institution to point at.
- MagicWishMonkey 5y ago
  We're in this mess due to our never ending quest for more "efficiency" The government needs to recognize the fact that semiconductors are essential to national security and ensure we have the capability to produce our own.
  - bumby 5y ago
    I think you're right, but it's partly because we weren't couching the quest for efficiency in the context of risk. I might be more time efficient by speeding everywhere, but that efficiency gain needs to be understood in terms of how much additional risk it incurs.
    - hypertele-Xii 5y ago
      Moving fast and breaking things isn't national security. (I agree with you)
      - deleted 5y ago
        [deleted]
- Slartie 5y ago
  That sounds nice, but a singular entity within a government, entrusted with the necessary power to regulate the relevant parts of the market without too much coordination overhead with other government entities, is actually much more efficient at resolving market inefficiencies than the free market. Case in point: production of vaccines. That's also obvious: the inefficiency in governments originates largely from coordination overhead between many competing entities with overlapping responsibilities. Self-regulating systems like markets do not eliminate that overhead, they just use other means of coordination that trade some of the complexity overhead for a time overhead - instead of having to coordinate a complex set of rules, you now have to give the system enough time to "find" its stable state. But when time is of the essence, an intelligent, singular entity without the need for coordination with anyone besides the entities to be regulated can always outcompete the self-regulating system when it comes to short-term stabilization (though not necessarily with regard to long-term stabilization, but that's not the issue here).
  - freewilly1040 5y ago
    The government did very little in managing vaccine production other than act as purchaser, how is this an example of them managing a market?
    - Slartie 5y ago
      The US government regulated critical parts of the supply chain of raw materials and preproducts in order to ensure that US manufacturers have no sourcing problems. It then compelled the manufacturers into exclusively servicing the US purchase contracts first before fulfilling competing contracts from other global buyers with any of the finished product produced on US territory. I'd call that quite a lot of "market management". But as everyone could see it resulted in the fastest vaccination ramp-up worldwide (excluding Israel, which was a bit faster, but is also much smaller than the US and which had its own way to get "preferred" access to vaccine produced in the EU).
      - freewilly1040 5y ago
        > regulated critical parts of the supply chain of raw materials and preproducts I'm unfamiliar with this having happened, but if it did as you say that would definitely support your point. > It then compelled the manufacturers into exclusively servicing the US purchase contracts Wasn't this just a component of the purchasing contract? I would draw a distinction between cases where the gov was a purchaser and where it was not.
- jimbokun 5y ago
  This assumes an efficient global market, without interference from other state actors. If other countries are implementing protectionist policies, like keeping semiconductors for themselves or supplying other nations first to curry favors or improved relationships, for example, it might be in another nations interest to increase fab capacity with its borders to avoid being vulnerable to those political and diplomatic factors.
will4274 5y ago
Why? Is the government better at inventory and/or supply chain management than the current players in the market? My experience with COVID tests says no.
- MagicWishMonkey 5y ago
  No one is saying the government should start producing chips, but they can offer financial incentives to encourage chip manufacturers to build fabs here instead of overseas.
- bumby 5y ago
  No, but the government can shoulder a larger risk than what the private sector may tolerate. There's all kinds of examples, but aerospace is a classic one. There would be no airline industry or commercial space industry if the government wasn't willing to bear a disproportionate amount of the risk when these industries were nascent. There just wasn't enough market demand to incentivize the private sector to do so on their own. So the govt sets up an incentive structure that brings the risk to a level where the private sector is willing to partake. The government is also generally more tolerant of longer-term scenarios than the private sector.
- jbay808 5y ago
  I think that your experience with COVID tests would depend strongly on which country are you in, and which government you are talking about.
mathattack 5y ago
Just the opposite. Need to let people raise prices to encourage slack in the system. Let’s prices settle where chip makers can produce new chips. There are market failures where the government needs to step in, but this isn’t one. Even with climate change (where they should step in) the government can’t get to the point of saying it’s ok for gas prices to be high. We don’t want the government to pick winners and losers when it doesn’t need to.
- duncanawoods 5y ago
  It's a puzzle to me why companies like nvidia didn't just raise prices and instead left both customers and profit to the dirty world of scalpers. I guess it's "brand damage" but I feel there would be something more fair and honest if in times of tight supply they ran their own ebay-like store and auctioned them off. It wouldn't feel like a price hike and prices could automatically settle as supply/demand reaches parity.
  - cinntaile 5y ago
    They probably did, the only cards they produce under the Nvidia brand are the Founders Edition cards and those are sold for MSRP. Everything else is made by their partners and those cards increased in price.
    - duncanawoods 5y ago
      Yes, soon after posting I realised I was referring to Asus/MSI/Palit etc. rather than Nvidia. It means either two levels of auction or the Nvidia chip sale is a % of the end unit sale.
      - cptskippy 5y ago
        > Palit I've never heard of this brand, are they big in regions outside North America? Or do they function as an ODM for other brands?
        5y ago
1e-9 5y ago
It is a positive feedback loop, not a negative feedback loop. See https://en.wikipedia.org/wiki/Positive_feedback https://en.wikipedia.org/wiki/Positive_feedback.
- robotresearcher 5y ago
  It’s negative WRT the chip production rate.
  - tbihl 5y ago
    No, still positive. Negative feedback is self-righting, while positive feedback is amplification (to speak in very broad terms.)
    - deleted 5y ago
      [deleted]
    - throwawaygh 5y ago
      No! It's negative WRT chip production rate! I have a phd in controls and meant what I said; I assume roboticsresearcher also knows some freshman-level control theory ;-). Stability ==== good in undergrad engineering, but not here. We DON'T want production rate to be stable when we have a global supply shortage! Here, a negative feedback loop is stabilizing the system in an undesirable equilibrium. I.e., the function that's being controlled in "supply of chips", the stable state is "saturated supply", and the negative feedback loop that maintains that equilibrium is "starving chip fab suppliers". (meta: people down-voting comments on control theory terminology by two different experts in this field at least makes me feel a bit better about the signal:noise ratio on the vote counts on my other comments in this thread ;))
      - alisonkisk 5y ago
        It's not stabilizing if the economy is in a death spiral of failing interdependent companies who can't produce machines for each other.
eplanit 5y ago
What experiences with which government would lead you to believe that bureaucrats -- most of whom have never run a company nor made a product -- would be capable of "managing the market"?
- dfxm12 5y ago
  I'm not sure experience running a company is necessarily a good thing here, or at the very least, not pertinent. Wall St.'s and the American people's interests are not necessarily in line. The US' previous president ran some companies and did not really do a good job in this regard, either, wrt his trade wars.
  - eplanit 5y ago
    You're simply wrong. The US's economy was doing _great_ under the previous administration, and even top Democrats agreed that it was right to put strong pressure on China re: trade. https://thehill.com/policy/international/392636-schumer-on-china-tariffs-china-needs-us-more-than-we-need-them https://thehill.com/policy/international/392636-schumer-on-c...
    - dfxm12 5y ago
      Great for whom? Wall St. or the common American? Like I said, their interests don't necessarily align. Sure, maybe stocks were up (usually, not when Trump was threatening to shut down the government if he didn't get his wall, though), but that didn't trickle down to everyone and is far from a total picture of the economy. Also, your article doesn't support your claim. Schumer was praising Trump for being tough on China for the sake of being tough on China, not for managing supply chains well.
  - mediaman 5y ago
    Seriously? You're using Donald Trump, who specialized in brand licensing and being a television character, as an equivalency to all the manufacturing engineers and supply chain specialists working to resolve the problems created by a global pandemic that's killed millions of people? The amount of disrespect to highly skilled professionals in this thread working like crazy to respond to a massive exogenous shock, and then following it up with the idea that "well, the government should fix it" with no specific idea of how exactly, the government would fix it, is mind-bending.
baybal2 5y ago
> A negative feedback loop in semiconductor supply seems like a situation where a government should just step in manage the market a bit. Unfortunately, no Western government can do it even if its life depends on it. German trade officials for example went and completely prostrated themselves in front of Taiwanese govt, and TSMC, offering anything short of switching the recognition of China to Taiwan. It bounced off without any effect. It was only a blank cheque from USA that made them to even scratch, and that is still pending that cheque being honoured, and cashed out.
option 5y ago
absolutely no. government interventions rarely (if ever) are helpful in managing supply and demand.

dimitrios1 5y ago

The solution to a market inefficiency isn't to involve a more inefficient entity.

ramesh31 5y ago
Ah yes, the Herbert Hoover approach.
- MagicWishMonkey 5y ago
  I wonder how many of these people rant about how bad the government is while using GPS to navigate their way to work on government funded roadways.
  - evilduck 5y ago
    On the DARPA derived internet, no less.
    - nradov 5y ago
      DARPA funded the basic research. Then the actual Internet was largely built by for-profit private sector companies. That hybrid model seems to usually be the most effective for major new innovations.
      - JohnWhigham 5y ago
        DARPA funded most of the grant money used by research entities to create the various parts of the IP stack. That's not "basic research". Simply put, were it not for DARPA, we wouldn't have the Internet of today. We'd probably have something like it, but something a lot more closed off and walled garden-esque.
  - abfan1127 5y ago
    As if those things wouldn't innovate in the market? Or because 1 thing came from the government, then all things the government touches are gold?
    - ramesh31 5y ago
      The free market can do a lot when it has the basic requirements to operate, but the point is that government spending is the only solution when we end up with a chicken/egg problem as the OP pointed out.
    - bumby 5y ago
      This take might have some hindsight bias. While a lot of industry seem obvious and worth the investment today, when they were nascent that wasn't the case. Would GPS exist if private companies had to fund the rocket and satellite research just to tell you where you are on the map? Or would the aircraft industry exist? Most of those types of high-risk, nebulous reward (at least on short-to-near-term timescales) industries are predicated on government investment. SpaceX, as great as they are, probably wouldn't exist if they didn't have NASA as a customer.
      - abfan1127 5y ago
        it certainly does have hindsight bias, on both sides. The Satellite TV and Radio industries spend the money to launch. Back in the 90s (during the age of early GPS), Motorola (iirc) tried to launch a satellite phone company too. NASA isn't that big of a customer. DirecTV was a huge consumer of rockets. As it turns out, SpaceX doesn't sell to them because they own their own rocket company.
        bumby 5y ago
        >The Satellite TV and Radio industries spend the money to launch. Correct, but this is an after-the-fact understanding. They spend money to launch now because the industries are no longer nascent and being launched on platforms designed around government investment. The key to my point is that the government spends money when the industries are young and risky to develop platforms. If those platforms work out that helps the private sector have a less risky path down the road. This is why telecoms weren't rushing to develop rockets in the 1960s. >NASA isn't that big of a customer. This is very much the same thing. Early on, NASA was really the only SpaceX customer and NASA helped keep them from going bankrupt [1]. In addition, NASA made early launches more palatable because the government is self-insured. Government contracts help usher along young, risky companies until they could have a less risky business model that the private sector feels more comfortable with. It's very similar to aerospace development over 100 years ago with the Wright brothers and Curtis vying for Army contracts. Without those contracts, they are as much hobbyists as entrepreneurs. [1] https://www.ndtv.com/offbeat/elon-musk-says-nasas-1-5-billion-contract-had-saved-spacex-from-going-broke-2502210 https://www.ndtv.com/offbeat/elon-musk-says-nasas-1-5-billio...
  - adventured 5y ago
    They can't even manage a trivial task like maintaining roads and bridges properly. You could have hardly picked a worse example than the government roads system (including our thousands of dilapidated bridges), which is in absolutely horrific condition and is a humiliating example for the government. It's the opposite of a good example. That's all due to lack of funding, one might suggest? They're not lacking for funds. They spent our money on blowing up other countries and then (occasionally) attempting to rebuild them. Vietnam, Iraq, Syria, Libya, Afghanistan, Korea and 497 other cases of meddling and foreign adventurism. There rests $10 trillion in infrastructure money. No, they have had plenty of our money to spend, and they chose to squander it. What ever would we do if we didn't have those hyper incompetent clowns to manage our roads. GPS is trivial. If Russia can do it, various US private corporations could easily do it just the same.
    - anotherman554 5y ago
      US private corporations maintaining roads implies a society like the one depictive in the Robocop movies. It's fun to see you prosing that unironically.
only_as_i_fall 5y ago
Then what's the solution? Seems like the government is the only entity that can intervene if market forces are counter to supply chain resilience. This is partially the justification for agricultural subsidies in the US, so clearly there is precedent.
- PaywallBuster 5y ago
  Apple approach, invest in your supply chain Extra points by diversifying from China/Taiwan In direct opposition, Auto makers approach of minimizing inventory and producing "just-in-time" caused them to be vulnerable to supply chain or big market shifts
  - ceejayoz 5y ago
    The article notes that Toyota avoided "just-in-time" supply for chips, and has benefited for a while from this. Their stockpile just ran out. > New cars often include dozens of microchips but Toyota benefited from having built a larger stockpile of chips - also called semiconductors - as part of a revamp to its business continuity plan, developed in the wake of the Fukushima earthquake and tsunami a decade ago.
  - baybal2 5y ago
    > Extra points by diversifying from China/Taiwan Take a look on the linkedin jobs in Shenzhen. The trend IS NOT towards diversification. In the last 5 years since Trump's election, US multinationals were increasing their presence in China, not decreasing. Google for example said to open "a small representative office" in Shenzhen 2 years ago, now it's a full giant RnD centre in the Ping An Tower where they shipped all of Pixel's development. Apple had RnD offices in China for more than a decade, but they barely acknowledged their existence. Their people in the Kerry Plaza were prohibited by their contract to even show their employment for Apple in their LinkedIn profiles. Their Shenzhen RnD centre is where AirPods were developed, along with many other iPad, and iPhone sub-assemblies. Apple's VR goggles project had its start in Shenzhen as well. Amazon had no presence whatsoever in China besides a failed Chinese Amazon.com launch. They left China, and then returned to move the whole of their Kindle, and Echo device development to Shenzhen. Now they are working on something rather cryptic there. Some suggest VR goggles of their own design. Facebook... absolutely bizarrely opened their RnD centre in Shenzhen amid the COVID, just a floor below Google I heard. Dell, Microsoft, Nvidia, Qualcomm, Intel — all conventional hardware makers were here since nineties, but I think they really doubled down on China recently as well too, to one up the dotcom upstarts in hardware.
blululu 5y ago
This is a pretty axiomatic view that governments can never be as responsive or as efficient as markets. The more commonly accepted economic wisdom is that they are usually less efficient and responsive than free market forces operating under ideal conditions. There is a lot of room for market failures, inefficiencies and temporal dynamics to change the balance. The are plenty of examples of government regulatory bodies that have a nice anchoring effect on the relevant markets. The Federal Reserve Bank, for example, responds quickly to changing market conditions, looks at the data and intervenes at a speed that keeps pace with the rapidly fluctuating market it regulates.
- nyokodo 5y ago
  > The Federal Reserve Bank, for example, responds quickly to changing market conditions The Fed was established by Congress and the Chair is appointed by the President, however the Fed is still a private institution. That independence makes it a very different organization than what most people mean by government.
- abfan1127 5y ago
  The Federal Reserve hardly responds to market conditions. Their free and open printing of money is arguably the greatest risk to our economy. Milton Friedman has great resources on this, including a video series from the 1970s (based on clothing alone) called Free to Choose. Its on Youtube, amongst other places.
  - kube-system 5y ago
    Natural boom-and-bust cycles are a huge risk to economies as well, despite the fact that they're natural and don't have anyone for which we can point a finger at.
    - nickff 5y ago
      The Federal Reserve was originally devised to put an end to the boom-bust cycle... Well before the Great Depression. If you're going to point a finger, the Federal Reserve is a very good institution to point at.
MagicWishMonkey 5y ago
We're in this mess due to our never ending quest for more "efficiency" The government needs to recognize the fact that semiconductors are essential to national security and ensure we have the capability to produce our own.
- bumby 5y ago
  I think you're right, but it's partly because we weren't couching the quest for efficiency in the context of risk. I might be more time efficient by speeding everywhere, but that efficiency gain needs to be understood in terms of how much additional risk it incurs.
  - hypertele-Xii 5y ago
    Moving fast and breaking things isn't national security. (I agree with you)
    - deleted 5y ago
      [deleted]
Slartie 5y ago
That sounds nice, but a singular entity within a government, entrusted with the necessary power to regulate the relevant parts of the market without too much coordination overhead with other government entities, is actually much more efficient at resolving market inefficiencies than the free market. Case in point: production of vaccines. That's also obvious: the inefficiency in governments originates largely from coordination overhead between many competing entities with overlapping responsibilities. Self-regulating systems like markets do not eliminate that overhead, they just use other means of coordination that trade some of the complexity overhead for a time overhead - instead of having to coordinate a complex set of rules, you now have to give the system enough time to "find" its stable state. But when time is of the essence, an intelligent, singular entity without the need for coordination with anyone besides the entities to be regulated can always outcompete the self-regulating system when it comes to short-term stabilization (though not necessarily with regard to long-term stabilization, but that's not the issue here).
- freewilly1040 5y ago
  The government did very little in managing vaccine production other than act as purchaser, how is this an example of them managing a market?
  - Slartie 5y ago
    The US government regulated critical parts of the supply chain of raw materials and preproducts in order to ensure that US manufacturers have no sourcing problems. It then compelled the manufacturers into exclusively servicing the US purchase contracts first before fulfilling competing contracts from other global buyers with any of the finished product produced on US territory. I'd call that quite a lot of "market management". But as everyone could see it resulted in the fastest vaccination ramp-up worldwide (excluding Israel, which was a bit faster, but is also much smaller than the US and which had its own way to get "preferred" access to vaccine produced in the EU).
    - freewilly1040 5y ago
      > regulated critical parts of the supply chain of raw materials and preproducts I'm unfamiliar with this having happened, but if it did as you say that would definitely support your point. > It then compelled the manufacturers into exclusively servicing the US purchase contracts Wasn't this just a component of the purchasing contract? I would draw a distinction between cases where the gov was a purchaser and where it was not.
jimbokun 5y ago
This assumes an efficient global market, without interference from other state actors. If other countries are implementing protectionist policies, like keeping semiconductors for themselves or supplying other nations first to curry favors or improved relationships, for example, it might be in another nations interest to increase fab capacity with its borders to avoid being vulnerable to those political and diplomatic factors.

will4274 5y ago

Why? Is the government better at inventory and/or supply chain management than the current players in the market? My experience with COVID tests says no.

MagicWishMonkey 5y ago
No one is saying the government should start producing chips, but they can offer financial incentives to encourage chip manufacturers to build fabs here instead of overseas.
bumby 5y ago
No, but the government can shoulder a larger risk than what the private sector may tolerate. There's all kinds of examples, but aerospace is a classic one. There would be no airline industry or commercial space industry if the government wasn't willing to bear a disproportionate amount of the risk when these industries were nascent. There just wasn't enough market demand to incentivize the private sector to do so on their own. So the govt sets up an incentive structure that brings the risk to a level where the private sector is willing to partake. The government is also generally more tolerant of longer-term scenarios than the private sector.
jbay808 5y ago
I think that your experience with COVID tests would depend strongly on which country are you in, and which government you are talking about.

mathattack 5y ago

Just the opposite. Need to let people raise prices to encourage slack in the system. Let’s prices settle where chip makers can produce new chips. There are market failures where the government needs to step in, but this isn’t one. Even with climate change (where they should step in) the government can’t get to the point of saying it’s ok for gas prices to be high. We don’t want the government to pick winners and losers when it doesn’t need to.

duncanawoods 5y ago
It's a puzzle to me why companies like nvidia didn't just raise prices and instead left both customers and profit to the dirty world of scalpers. I guess it's "brand damage" but I feel there would be something more fair and honest if in times of tight supply they ran their own ebay-like store and auctioned them off. It wouldn't feel like a price hike and prices could automatically settle as supply/demand reaches parity.
- cinntaile 5y ago
  They probably did, the only cards they produce under the Nvidia brand are the Founders Edition cards and those are sold for MSRP. Everything else is made by their partners and those cards increased in price.
  - duncanawoods 5y ago
    Yes, soon after posting I realised I was referring to Asus/MSI/Palit etc. rather than Nvidia. It means either two levels of auction or the Nvidia chip sale is a % of the end unit sale.
    - cptskippy 5y ago
      > Palit I've never heard of this brand, are they big in regions outside North America? Or do they function as an ODM for other brands?
      - 5y ago

1e-9 5y ago

It is a positive feedback loop, not a negative feedback loop. See https://en.wikipedia.org/wiki/Positive_feedback https://en.wikipedia.org/wiki/Positive_feedback.

robotresearcher 5y ago
It’s negative WRT the chip production rate.
- tbihl 5y ago
  No, still positive. Negative feedback is self-righting, while positive feedback is amplification (to speak in very broad terms.)
  - deleted 5y ago
    [deleted]
  - throwawaygh 5y ago
    No! It's negative WRT chip production rate! I have a phd in controls and meant what I said; I assume roboticsresearcher also knows some freshman-level control theory ;-). Stability ==== good in undergrad engineering, but not here. We DON'T want production rate to be stable when we have a global supply shortage! Here, a negative feedback loop is stabilizing the system in an undesirable equilibrium. I.e., the function that's being controlled in "supply of chips", the stable state is "saturated supply", and the negative feedback loop that maintains that equilibrium is "starving chip fab suppliers". (meta: people down-voting comments on control theory terminology by two different experts in this field at least makes me feel a bit better about the signal:noise ratio on the vote counts on my other comments in this thread ;))
    - alisonkisk 5y ago
      It's not stabilizing if the economy is in a death spiral of failing interdependent companies who can't produce machines for each other.

eplanit 5y ago

What experiences with which government would lead you to believe that bureaucrats -- most of whom have never run a company nor made a product -- would be capable of "managing the market"?

dfxm12 5y ago
I'm not sure experience running a company is necessarily a good thing here, or at the very least, not pertinent. Wall St.'s and the American people's interests are not necessarily in line. The US' previous president ran some companies and did not really do a good job in this regard, either, wrt his trade wars.
- eplanit 5y ago
  You're simply wrong. The US's economy was doing _great_ under the previous administration, and even top Democrats agreed that it was right to put strong pressure on China re: trade. https://thehill.com/policy/international/392636-schumer-on-china-tariffs-china-needs-us-more-than-we-need-them https://thehill.com/policy/international/392636-schumer-on-c...
  - dfxm12 5y ago
    Great for whom? Wall St. or the common American? Like I said, their interests don't necessarily align. Sure, maybe stocks were up (usually, not when Trump was threatening to shut down the government if he didn't get his wall, though), but that didn't trickle down to everyone and is far from a total picture of the economy. Also, your article doesn't support your claim. Schumer was praising Trump for being tough on China for the sake of being tough on China, not for managing supply chains well.
- mediaman 5y ago
  Seriously? You're using Donald Trump, who specialized in brand licensing and being a television character, as an equivalency to all the manufacturing engineers and supply chain specialists working to resolve the problems created by a global pandemic that's killed millions of people? The amount of disrespect to highly skilled professionals in this thread working like crazy to respond to a massive exogenous shock, and then following it up with the idea that "well, the government should fix it" with no specific idea of how exactly, the government would fix it, is mind-bending.

baybal2 5y ago

> A negative feedback loop in semiconductor supply seems like a situation where a government should just step in manage the market a bit. Unfortunately, no Western government can do it even if its life depends on it. German trade officials for example went and completely prostrated themselves in front of Taiwanese govt, and TSMC, offering anything short of switching the recognition of China to Taiwan. It bounced off without any effect. It was only a blank cheque from USA that made them to even scratch, and that is still pending that cheque being honoured, and cashed out.

option 5y ago

absolutely no. government interventions rarely (if ever) are helpful in managing supply and demand.