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There is no upper bounds to economy of scales. Maybe there is for the cents per GB of raw storage, but power usage, security, rent, and everything else scales t
by omeid2 2y ago
There is no upper bounds to economy of scales. Maybe there is for the cents per GB of raw storage, but power usage, security, rent, and everything else scales too, and few of them have upper bounds on economy of scales.
- Retric 2y agoEconomies of scale generally have upper limits. Often when you approach the largest scale the existing market will supply you essentially need to become your own supplier which then runs into span of control issues. The organization needs to become competitive in that new market or their costs increase. Keep scaling and eventually vertical integration ends up looking like a Soviet style planned economy. Your remote mining town needs some way for people to get soap etc so you open a store with it’s own supply chain etc etc.
- omeid2 2y agoYes, there is an upper limit, and that is the entirety of global economy. But that assertion is as useless as it is true.
- Retric 2y agoHardly the global economy, even approaching a global monopoly for something tends to hit such limits. Few companies deal with this today because most markets are fragmented. But even at the 30% marketshare the iPhone has been dealing with these issues for a while. They just can’t buy 200 million volume buttons or whatever off the shelf. Now imagine what happens if one of their suppliers would fail days before the phone launches. They have such tight integration not just with the manufacturer’s process but also their finances because Apple simply can’t get replacements at scale on short notice. And remember that’s at ~30% market share, it just gets worse after that.
- omeid2 2y agoOutsourcing doesn't mean off the shelf. Apple still works with third parties to manufacture parts as they can leverage the scale of their overall operations to do it cheaper than it would cost apple to do.
- Retric 2y agoThey aren’t just working with from a design or quality control standpoint that’s normal enough, they are also purchasing equipment for 3rd party companies to use which isn’t. At this point they need to be world class experts in everything from batteries, sensors, software, and processors to glass. Tesla does some stuff in house because they can, but they just didn’t have any options when it came to scaling battery production. They hit the limits of what the market could supply without getting directly involved.
- omeid2 2y agoWhy are these companies going so far as purchasing equipment for 3rd parties instead of doing it in house?
- Retric 2y agoSeveral reasons, both from Apples perspective and the supplier’s. Suppliers don’t want to purchase a bunch of equipment and scale their manufacturing capacity for a contract that could go away at any time. So when Apple shows up they are going to price that risk in to their bid or sometimes just outright say no. However, by Apple buying that equipment those risks suddenly get reduced. Apple on the other hand has huge cash reserves and isn’t that price sensitive. Plus they want to avoid all the issues bring yet another component in house.
- omeid2 2y agoThat is a long way of saying "economy of scale".