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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 parti

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.
  - PaywallBuster 5y ago
    We're talking about supply chain here e.g. Foxconn investing in capacity outside of China (India) and Apple being part of it (as customer)
    - baybal2 5y ago
      Having your essential RnD office shut down, if something happens to/in China, would not be any much less ugly, and disruptive than having your access to microchips shut down. In other words, the Silicon Valley is still going all in on China, despite 4 years of Trump, public scorn, trade war, rising costs etc. In other words, they really gave up on any vision where they don't critically depend on China, and can run with critical assets in US only.
Causality1 5y ago
The nightmarish results of agricultural subsidies in the US is an excellent reason to not involve the government in the chip shortage.
- only_as_i_fall 5y ago
  Sure, but pontificating on government inefficiencies doesn't actually improve supply chain weakness either.
  - wuliwong 5y ago
    The comment was a response to a suggestion that the solution to the chip shortage was government intervention. I don't consider giving a evidence to the contrary of an argument as pontificating.
    - only_as_i_fall 5y ago
      Ok but point to the part of that comment which was evidence? Claiming that the results of ag subsidies have been "nightmarish" with no further elaboration or citation does nothing to advance the conversation, it's simply a strongly worded opinion.
- bumby 5y ago
  Can you elaborate on your point? While I agree there are definitively some downsides to ag subsidies, I think the real question is if the interventionist downsides are worse than the non-subsidized downsides. As bad as they are, I'm not sure that incentivizing unhealthy food is actual worse than famine.
  - Causality1 5y ago
    Cratering agricultural prices so margins are so thin small farmers are driven out of business in favor of huge conglomerates, mind-boggling levels of food wastage on the order of billions of pounds sitting in warehouses until they rot. https://reason.com/2019/03/02/thanks-to-decades-of-government-meddling/ https://reason.com/2019/03/02/thanks-to-decades-of-governmen...
adventured 5y ago
> Then what's the solution? Time and capital investment. It's like this generation of people have never heard of production and supply disruptions, and were oblivious to such things being possible. Frankly, this doesn't matter very much, it's not a critical situation. The auto market malfunctioning short-term due to a pandemic doesn't present a strong argument for government intervention. Tesla can't make batteries fast enough, there isn't enough supply, its restraining their auto production, the government must step in and fix the problem! It's nonsense. The government should not step in every time there is a short-term problem in a market. Toyota won't sell as many vehicles. So what. I know, I know, but what if people have to make due with a three year old vehicle. What if they have to suffer and endure those vehicles being made to last for five or six years. Ten years! The horror. Toyota won't die. Time will pass, during which necessary investments and adjustments will be made. Supply will be increased. The problem will be fixed. It's as simple as some time and capital investment. The companies that maneuver the best will come out ahead, gaining an advantage on their competitors. And the world keeps on spinning. Toyota has generated something like $90-$100 billion in operating income the past five years. They have the resources - and then some - to fix the problem. If they choose not to or can't that's their own incompetence, their competitors will eat their lunch. Never feel bad for a corporation earning $20 billion a year. If they can't get their production corrected, someone else will figure it out and reap the benefits. It does not matter as much as is being portrayed. This is not an important problem and does not warrant the government burning its time and resources to step in and fix (assuming they can help at all). Governments have a lot of other far more important things to be focused on.
- JKCalhoun 5y ago
  > Toyota won't sell as many vehicles. So what. Thousands of employees lose their livelihoods as factories shut down?
  - freewilly1040 5y ago
    Permanent layoffs are an unlikely response to a temporary supply disruption, and unemployment aid covers any short term furlough
- 5y ago
ortusdux 5y ago
Toyota pioneered the "Toyota Way", which is now known as Lean or JIT manufacturing. JIT is famously susceptible to disruption from natural disasters. Over the short term, between disruptions, JIT tends to be more profitable than the alternatives. Over the long term, the market rewards companies that can handle disruptions. Basically, to answer your question, the market is punishing JIT MFG and rewarding resilience. Companies are watching it happen and learning from it. One indication of this is the current increase in inflation. Companies are switching from 1 month of inventory to 6-12, which is making suppliers scramble and driving up prices. I am by no means against government intervention. Companies have short memories, and market forces will force eventually pressure a return to JIT. But now is the exact wrong time to intervene.
deleted 5y ago
[deleted]

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.
- PaywallBuster 5y ago
  We're talking about supply chain here e.g. Foxconn investing in capacity outside of China (India) and Apple being part of it (as customer)
  - baybal2 5y ago
    Having your essential RnD office shut down, if something happens to/in China, would not be any much less ugly, and disruptive than having your access to microchips shut down. In other words, the Silicon Valley is still going all in on China, despite 4 years of Trump, public scorn, trade war, rising costs etc. In other words, they really gave up on any vision where they don't critically depend on China, and can run with critical assets in US only.

Causality1 5y ago

The nightmarish results of agricultural subsidies in the US is an excellent reason to not involve the government in the chip shortage.

only_as_i_fall 5y ago
Sure, but pontificating on government inefficiencies doesn't actually improve supply chain weakness either.
- wuliwong 5y ago
  The comment was a response to a suggestion that the solution to the chip shortage was government intervention. I don't consider giving a evidence to the contrary of an argument as pontificating.
  - only_as_i_fall 5y ago
    Ok but point to the part of that comment which was evidence? Claiming that the results of ag subsidies have been "nightmarish" with no further elaboration or citation does nothing to advance the conversation, it's simply a strongly worded opinion.
bumby 5y ago
Can you elaborate on your point? While I agree there are definitively some downsides to ag subsidies, I think the real question is if the interventionist downsides are worse than the non-subsidized downsides. As bad as they are, I'm not sure that incentivizing unhealthy food is actual worse than famine.
- Causality1 5y ago
  Cratering agricultural prices so margins are so thin small farmers are driven out of business in favor of huge conglomerates, mind-boggling levels of food wastage on the order of billions of pounds sitting in warehouses until they rot. https://reason.com/2019/03/02/thanks-to-decades-of-government-meddling/ https://reason.com/2019/03/02/thanks-to-decades-of-governmen...

adventured 5y ago

> Then what's the solution? Time and capital investment. It's like this generation of people have never heard of production and supply disruptions, and were oblivious to such things being possible. Frankly, this doesn't matter very much, it's not a critical situation. The auto market malfunctioning short-term due to a pandemic doesn't present a strong argument for government intervention. Tesla can't make batteries fast enough, there isn't enough supply, its restraining their auto production, the government must step in and fix the problem! It's nonsense. The government should not step in every time there is a short-term problem in a market. Toyota won't sell as many vehicles. So what. I know, I know, but what if people have to make due with a three year old vehicle. What if they have to suffer and endure those vehicles being made to last for five or six years. Ten years! The horror. Toyota won't die. Time will pass, during which necessary investments and adjustments will be made. Supply will be increased. The problem will be fixed. It's as simple as some time and capital investment. The companies that maneuver the best will come out ahead, gaining an advantage on their competitors. And the world keeps on spinning. Toyota has generated something like $90-$100 billion in operating income the past five years. They have the resources - and then some - to fix the problem. If they choose not to or can't that's their own incompetence, their competitors will eat their lunch. Never feel bad for a corporation earning $20 billion a year. If they can't get their production corrected, someone else will figure it out and reap the benefits. It does not matter as much as is being portrayed. This is not an important problem and does not warrant the government burning its time and resources to step in and fix (assuming they can help at all). Governments have a lot of other far more important things to be focused on.

JKCalhoun 5y ago
> Toyota won't sell as many vehicles. So what. Thousands of employees lose their livelihoods as factories shut down?
- freewilly1040 5y ago
  Permanent layoffs are an unlikely response to a temporary supply disruption, and unemployment aid covers any short term furlough
5y ago

ortusdux 5y ago

Toyota pioneered the "Toyota Way", which is now known as Lean or JIT manufacturing. JIT is famously susceptible to disruption from natural disasters. Over the short term, between disruptions, JIT tends to be more profitable than the alternatives. Over the long term, the market rewards companies that can handle disruptions. Basically, to answer your question, the market is punishing JIT MFG and rewarding resilience. Companies are watching it happen and learning from it. One indication of this is the current increase in inflation. Companies are switching from 1 month of inventory to 6-12, which is making suppliers scramble and driving up prices. I am by no means against government intervention. Companies have short memories, and market forces will force eventually pressure a return to JIT. But now is the exact wrong time to intervene.

deleted 5y ago

[deleted]