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> one large industrial conglomerate had resorted to buying washing machines just to scavenge the chips inside them for its products Is this really more efficie

> one large industrial conglomerate had resorted to buying washing machines just to scavenge the chips inside them for its products Is this really more efficient than say, contacting the washing machine manufacturer and buying up the chips at a premium (i.e. above the washing machine cost). I usually applaud hacky solutions, but this just feels like a ton of unnecessary waste. I would prefer scrapping features (like Tesla did with the USB ports) over trashing a ton of washing machines.

scld 4y ago
Yeah, in this case the manufacturer probably didn't have any extra chips. Also, in my experience, these companies were unwilling to go outside their system and charge a markup for their own stock. Instead of giving me the ICs directly, I had to wait for them to ship an order of dev boards to Digikey that I'd already purchased and they were building to order.
londons_explore 4y ago
> buying up the chips at a premium (i.e. above the washing machine cost). Industries often act illogically in cases like this. You see it with many types of goods ordered a long time in advance. If there is a sudden shortage, the people who have ordered their raw materials a long time in advance (who have effectively purchased a future for that commodity) think they made a good move and see it as a business advantage that they can continue production while their competitors who failed to plan cannot. However, they often fail to see that it is an even better business move to still shut down production and sell those raw materials onwards to someone else who will pay handsomely for them. Basically, the futures market should never determine if a factory is operating or not. If it does, then someone has made an irrational decision.
- londons_explore 4y ago
  This is one reason I think most contracts for goods for future delivery should be public knowledge. Ie. "Mr Smith purchased 68 tons of steel for delivery in New York June next year for $200k". Then anyone wanting those same goods and willing to pay more can contact Mr Smith and make an offer to buy the contract. I believe such a system would make the economy substantially more efficient, at the cost of privacy. More knowledge makes a better market. And more knowledge also increases tax revenues because under/overdeclaring goods values becomes much harder.
  - hpkuarg 4y ago
    Why would anybody want to trade with Mr. Smith's contract in particular when a market for the contract still exists, with market makers and other participants providing bids and offers that is better what Mr. Smith can do? At least, assuming you are talking about a regulated commodities futures contracts like those which trade on the CME.
    - bluGill 4y ago
      Mr Smith has a real for delivery contract, not a more common contract to own for some amount of time but no clue who is on either end. As such if you buy from Mr Smith you get real goods, while from someone else you may discover that you created a short squeeze, and not actual material is available: they may have to pay you a ton of $$$ to get out of the contract, but you don't actually get anything delivered. If you really want the actual good and not the dollars, then you should by buying contracts backed by real goods that cannot be shorted. By contrast if you just want to make money there is more money in buying the contact that is a short with no material behind it. Of course knowing when a short squeeze will happen is left as an exercise for the reader - meaning I have no idea when this plan can work out only that once in a while it does.
    - londons_explore 4y ago
      If most buyers buy ahead like Mr Smith, then the liquidity in the spot market can dry up, especially in times of supply constraint. Mr Smith and many people like him might happily sell on his steel for 10x the price he paid for it to someone desperate for some steel. Yet, as things stand now, whenever there is severe market disruption, you frequently find goods aren't available for any price. Thats simply because Mr Smith and people like him continue to take delivery of the steel he ordered 6 months ago, and doesn't actually need right now, because he isn't aware of the guy down the street who really reeds it right away and will pay a lot. If all goods are always 'for sale', then goods can be allocated efficiently to whoever needs them most.
- sidewndr46 4y ago
  Somewhere, an executive's bonus pay is based off the number of units shipped each year. Not the amount of money saved for the company. Under that kind of regime, it actually makes less sense to sell the chips at a premium price. For the executive.
- toast0 4y ago
  > However, they often fail to see that it is an even better business move to still shut down production and sell those raw materials onwards to someone else who will pay handsomely for them. There's also business value in being the washing machine company that didn't have to shut down production. If I'm building a lot of housing with washing machines, maybe I just wait and buy whatever just in time, but maybe I want to do a bulk buy direct from the manufacturer with delivery on a schedule; having a track record of continuing production during supply shortages makes it more likely that the deliveries will happen. If production is stopped whenever it's better to resale materials, it's hard for buyers to rely on scheduled deliveries and those buyers will turn to others.
- floxy 4y ago
  >However, they often fail to see that it is an even better business move to still shut down production and sell those raw materials onwards to someone else who will pay handsomely for them. Isn't this the short-term quarter-to-quarter mindset that gets constantly roasted on HN? Isn't there value to your brand in being a dependable supplier to your customers? And isn't there business value in retaining your workforce, instead of having to lay them off, since you shut the factory down?
- axiolite 4y ago
  > the futures market should never determine if a factory is operating But what about washing machine futures? Or more realistically, how much is shutting down the factory going to cost the washing machine manufacturer in terms of employee compensation, lost employees (more hiring and training), washing machine brand losses in the market, failure to deliver on existing contracts, and similar? They can't claim force majeure when they shut down the factory merely because they see a way to make slightly more profit than normal.
  - londons_explore 4y ago
    True... but that has to be compared with those same set of losses the car factory up the street will suffer if they don't get the chips... If there is only enough chips for one factory to run, someone has to shutdown and take those losses. And the shutdown factory should be the one with less to lose, not the one who didn't buy futures in time.
    - axiolite 4y ago
      > the shutdown factory should be the one with less to lose, not the one who didn't buy futures in time. That sounds highly communist. The factory with the most to lose should have been looking out for themselves. They did not, so they suffer economically, and hopefully learn a lesson (or their bankruptcy stands as a lesson for others) for the future. Because of their decisions, one of the factories can claim force majeure to protect them from some of the consequences of shutting down, while the other cannot, so the other shutting down and reselling their chips is probably not an option. Salvaging chips out of washing machines might be the best possible option for everyone to fulfill their contractual obligations.
    - biosonar_ 4y ago
      That's what you'd do in a command economy. In a market economy it's up to the company what they do; there are far more things "real people" try to maximize than just profit. You can see this as people acting irrationally, or you can see it as there're important factors your missing and/or not understanding. Economists be like "guys, your doing it wrong - not maximising profit", economy be like "nah, your theories incomplete".
AdamJacobMuller 4y ago
It might be more (cost) efficient to buy washing machines. It's possible if the washing machine manufacturer knew of the real value of the chip to the buyer, they might charge extortionate pricing. It's also possible that the total value of selling a washing machine exceeds the purchase price (e.g. how much does the washing machine manufacturer get from the detergent maker for putting a packet of detergent in the box).
- bluGill 4y ago
  Buying the machines means that you go to all their dealers and buy - thus ensuring that their dealers remain in business. When things return to normal their dealers are still able to sell to everyone else who wants a washing machine and so they don't have to build a new dealer network. In short it is probably penny wise, pound foolish to not make washing machines even though they could sell the parts for more money now.
MiddleEndian 4y ago
When I tried to build a mattress, I was unable to buy certain components directly from companies, no matter which ones I contacted. Had to buy mattress toppers and rip the parts out. Guess this applies to corporations too lol
- lotsofpulp 4y ago
  There is a lot of liability and time cost involved in a transaction. It does not necessarily make sense for businesses in the business to business space to expend effort on business to consumer sales.
  - koheripbal 4y ago
    Honestly, it's probably easier to get one item for free if they are local and you can talk to the right person.
HeyLaughingBoy 4y ago
Depends. I posted earlier about orders being held up because parts were unavailable. If you have a customer for your $700,000 machine that can't be shipped because a $50 module is off the market, then you bet it makes sense to buy a washing machine to extract that part. The only other alternative is to hope that there's enough margin to redesign around another, available part. We had a client pre-COVID that found themselves in exactly this predicament. If we could have found the part they needed embedded in another machine, that's exactly the recommendation we'd have made. [edited]
Melatonic 4y ago
The problem in these cases is not that you can't buy them at a premium - it is that you cannot buy them at all. What do you do if nobody can supply you the part at any price?

scld 4y ago

Yeah, in this case the manufacturer probably didn't have any extra chips. Also, in my experience, these companies were unwilling to go outside their system and charge a markup for their own stock. Instead of giving me the ICs directly, I had to wait for them to ship an order of dev boards to Digikey that I'd already purchased and they were building to order.

londons_explore 4y ago

> buying up the chips at a premium (i.e. above the washing machine cost). Industries often act illogically in cases like this. You see it with many types of goods ordered a long time in advance. If there is a sudden shortage, the people who have ordered their raw materials a long time in advance (who have effectively purchased a future for that commodity) think they made a good move and see it as a business advantage that they can continue production while their competitors who failed to plan cannot. However, they often fail to see that it is an even better business move to still shut down production and sell those raw materials onwards to someone else who will pay handsomely for them. Basically, the futures market should never determine if a factory is operating or not. If it does, then someone has made an irrational decision.

londons_explore 4y ago
This is one reason I think most contracts for goods for future delivery should be public knowledge. Ie. "Mr Smith purchased 68 tons of steel for delivery in New York June next year for $200k". Then anyone wanting those same goods and willing to pay more can contact Mr Smith and make an offer to buy the contract. I believe such a system would make the economy substantially more efficient, at the cost of privacy. More knowledge makes a better market. And more knowledge also increases tax revenues because under/overdeclaring goods values becomes much harder.
- hpkuarg 4y ago
  Why would anybody want to trade with Mr. Smith's contract in particular when a market for the contract still exists, with market makers and other participants providing bids and offers that is better what Mr. Smith can do? At least, assuming you are talking about a regulated commodities futures contracts like those which trade on the CME.
  - bluGill 4y ago
    Mr Smith has a real for delivery contract, not a more common contract to own for some amount of time but no clue who is on either end. As such if you buy from Mr Smith you get real goods, while from someone else you may discover that you created a short squeeze, and not actual material is available: they may have to pay you a ton of $$$ to get out of the contract, but you don't actually get anything delivered. If you really want the actual good and not the dollars, then you should by buying contracts backed by real goods that cannot be shorted. By contrast if you just want to make money there is more money in buying the contact that is a short with no material behind it. Of course knowing when a short squeeze will happen is left as an exercise for the reader - meaning I have no idea when this plan can work out only that once in a while it does.
  - londons_explore 4y ago
    If most buyers buy ahead like Mr Smith, then the liquidity in the spot market can dry up, especially in times of supply constraint. Mr Smith and many people like him might happily sell on his steel for 10x the price he paid for it to someone desperate for some steel. Yet, as things stand now, whenever there is severe market disruption, you frequently find goods aren't available for any price. Thats simply because Mr Smith and people like him continue to take delivery of the steel he ordered 6 months ago, and doesn't actually need right now, because he isn't aware of the guy down the street who really reeds it right away and will pay a lot. If all goods are always 'for sale', then goods can be allocated efficiently to whoever needs them most.
sidewndr46 4y ago
Somewhere, an executive's bonus pay is based off the number of units shipped each year. Not the amount of money saved for the company. Under that kind of regime, it actually makes less sense to sell the chips at a premium price. For the executive.
toast0 4y ago
> However, they often fail to see that it is an even better business move to still shut down production and sell those raw materials onwards to someone else who will pay handsomely for them. There's also business value in being the washing machine company that didn't have to shut down production. If I'm building a lot of housing with washing machines, maybe I just wait and buy whatever just in time, but maybe I want to do a bulk buy direct from the manufacturer with delivery on a schedule; having a track record of continuing production during supply shortages makes it more likely that the deliveries will happen. If production is stopped whenever it's better to resale materials, it's hard for buyers to rely on scheduled deliveries and those buyers will turn to others.
floxy 4y ago
>However, they often fail to see that it is an even better business move to still shut down production and sell those raw materials onwards to someone else who will pay handsomely for them. Isn't this the short-term quarter-to-quarter mindset that gets constantly roasted on HN? Isn't there value to your brand in being a dependable supplier to your customers? And isn't there business value in retaining your workforce, instead of having to lay them off, since you shut the factory down?
axiolite 4y ago
> the futures market should never determine if a factory is operating But what about washing machine futures? Or more realistically, how much is shutting down the factory going to cost the washing machine manufacturer in terms of employee compensation, lost employees (more hiring and training), washing machine brand losses in the market, failure to deliver on existing contracts, and similar? They can't claim force majeure when they shut down the factory merely because they see a way to make slightly more profit than normal.
- londons_explore 4y ago
  True... but that has to be compared with those same set of losses the car factory up the street will suffer if they don't get the chips... If there is only enough chips for one factory to run, someone has to shutdown and take those losses. And the shutdown factory should be the one with less to lose, not the one who didn't buy futures in time.
  - axiolite 4y ago
    > the shutdown factory should be the one with less to lose, not the one who didn't buy futures in time. That sounds highly communist. The factory with the most to lose should have been looking out for themselves. They did not, so they suffer economically, and hopefully learn a lesson (or their bankruptcy stands as a lesson for others) for the future. Because of their decisions, one of the factories can claim force majeure to protect them from some of the consequences of shutting down, while the other cannot, so the other shutting down and reselling their chips is probably not an option. Salvaging chips out of washing machines might be the best possible option for everyone to fulfill their contractual obligations.
  - biosonar_ 4y ago
    That's what you'd do in a command economy. In a market economy it's up to the company what they do; there are far more things "real people" try to maximize than just profit. You can see this as people acting irrationally, or you can see it as there're important factors your missing and/or not understanding. Economists be like "guys, your doing it wrong - not maximising profit", economy be like "nah, your theories incomplete".

AdamJacobMuller 4y ago

It might be more (cost) efficient to buy washing machines. It's possible if the washing machine manufacturer knew of the real value of the chip to the buyer, they might charge extortionate pricing. It's also possible that the total value of selling a washing machine exceeds the purchase price (e.g. how much does the washing machine manufacturer get from the detergent maker for putting a packet of detergent in the box).

bluGill 4y ago
Buying the machines means that you go to all their dealers and buy - thus ensuring that their dealers remain in business. When things return to normal their dealers are still able to sell to everyone else who wants a washing machine and so they don't have to build a new dealer network. In short it is probably penny wise, pound foolish to not make washing machines even though they could sell the parts for more money now.

MiddleEndian 4y ago

When I tried to build a mattress, I was unable to buy certain components directly from companies, no matter which ones I contacted. Had to buy mattress toppers and rip the parts out. Guess this applies to corporations too lol

lotsofpulp 4y ago
There is a lot of liability and time cost involved in a transaction. It does not necessarily make sense for businesses in the business to business space to expend effort on business to consumer sales.
- koheripbal 4y ago
  Honestly, it's probably easier to get one item for free if they are local and you can talk to the right person.

HeyLaughingBoy 4y ago

Depends. I posted earlier about orders being held up because parts were unavailable. If you have a customer for your $700,000 machine that can't be shipped because a $50 module is off the market, then you bet it makes sense to buy a washing machine to extract that part. The only other alternative is to hope that there's enough margin to redesign around another, available part. We had a client pre-COVID that found themselves in exactly this predicament. If we could have found the part they needed embedded in another machine, that's exactly the recommendation we'd have made. [edited]

Melatonic 4y ago

The problem in these cases is not that you can't buy them at a premium - it is that you cannot buy them at all. What do you do if nobody can supply you the part at any price?