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> The downside in general is that other countries lose production capacity in steel, heavy industry, semiconductors, machine tools etc - industries that took de

> The downside in general is that other countries lose production capacity in steel, heavy industry, semiconductors, machine tools etc - industries that took decades to build and can't be easily replaced. That's not really what happens though. You don't actually "lose" capacity, you just move to higher-valued special niches within the overall industry because (1) you can afford to, while low-cost competitors can't and (2) you can no longer expect to be the lowest-cost supplier for the bulk of the market. That's a win-win development and something to be encouraged.

deleted 9mo ago
[deleted]
AnthonyMouse 9mo ago
> You don't actually "lose" capacity, you just move to higher-valued special niches within the overall industry That's not what people mean by "lose" capacity. Suppose DRAM companies expand capacity because prices are high, then demand levels off, the price crashes, and they all go out of business except for the one in China which gets a government bailout. That's fine, right? We're not interested in making DRAM, that's a fungible commodity, we want to make iPhones or something. (They make those too anymore, but never mind that.) What happens now if China restricts what you can buy to give an advantage to their own companies who are trying to displace you in the higher-valued special niches? Or just raises the price for you and not them? What if there's a trade war? Or a conventional war? When you still have a domestic industry, you go to them and have a source for the commodity. If only one country becomes the sole global supplier and that country isn't even particularly friendly, that's bad.
- zozbot234 9mo ago
  The domestic industry is still there, only instead of mass-market DRAM it has started making higher-valued varieties of the same stuff. If there's a trade war, they can easily reconvert to making the mass-market stuff, just at much higher cost. You can't expect more than that, since they never really were as big or as low-cost as the lowest cost suppliers can be in normal times. That's not "losing" capacity, it's just acknowledging that you can't create capacity out of thin air.
  - kyralis 9mo ago
    > If there's a trade war, they can easily reconvert to making the mass-market stuff, just at much higher cost. "easily" is doing a lot of work in that sentence. Depending on the good and what they switch to making, this may neither be easy nor quick.
  - Espressosaurus 9mo ago
    No, the domestic industry stagnates (at best) or disappears (at worst). You can't just spin up a 2nm wafer fab when the latest you've been running is a 300nm process. Compare: US shipbuilding industry to China or SK.
    - zozbot234 9mo ago
      We don't want to spin up wafer fabs because, historically, they had a tendency to turn into Superfund sites. That's why the more modern approach is to build the fab in the middle of a frickin' desert.
      - ahartmetz 9mo ago
        Historically, but likely not anymore. You wouldn't be allowed to casually poison the ground in a Western factory anymore and we have the technology to keep the environment mostly clean. I don't even see it being very expensive compared to other fab costs. Have a sealed floor and proper waste / exhaust processing, don't spill in the first place. Things must be extremely well controlled anyway.
  - youarentrightjr 9mo ago
    > If there's a trade war, they can easily reconvert to making the mass-market stuff Factories, tooling, supply chains, and engineering knowledge aren't fungible in the way they would need to be for your statement to be true.
    - timschmidt 9mo ago
      Different types of DRAM can literally be made from the same already-etched wafer. The DRAM bits themselves don't change at all. What's different between DDR4, DDR5, and HBM is the IO interface to the chip. Changing this does not require significant retooling or relearning.
- PowerElectronix 9mo ago
  The way I see it, China has leverage once you arreive to that dependency situation. That leverages goes away the moment they restrict exports and every country scrambles to create local production once again. We are seeing that with some rare earths, even tho china is back into exporting them (except to japan, I think?) everyone is looking for alternatives already. They may have killed their industry 10 years down the line for playing with the export lever a bit too much. Just like how markets punish the ram cartel creating a chance for cxmt and ymtc to enter. It would create a chance for western companies to do the same if china messes with the markets they have "cornered".
  - AnthonyMouse 9mo ago
    > The way I see it, China has leverage once you arreive to that dependency situation. That leverages goes away the moment they restrict exports and every country scrambles to create local production once again. The first problem is that it doesn't go away instantaneously, so even if you could recover in ten years, you still get screwed immediately. The second problem is that it's leverage. They can threaten to do it if they don't get what they want, and if you then do what they want (which often gives them even more leverage) they don't have to do it. But then they keep their leverage and you have to keep doing what they want.

deleted 9mo ago

[deleted]

AnthonyMouse 9mo ago

> You don't actually "lose" capacity, you just move to higher-valued special niches within the overall industry That's not what people mean by "lose" capacity. Suppose DRAM companies expand capacity because prices are high, then demand levels off, the price crashes, and they all go out of business except for the one in China which gets a government bailout. That's fine, right? We're not interested in making DRAM, that's a fungible commodity, we want to make iPhones or something. (They make those too anymore, but never mind that.) What happens now if China restricts what you can buy to give an advantage to their own companies who are trying to displace you in the higher-valued special niches? Or just raises the price for you and not them? What if there's a trade war? Or a conventional war? When you still have a domestic industry, you go to them and have a source for the commodity. If only one country becomes the sole global supplier and that country isn't even particularly friendly, that's bad.

zozbot234 9mo ago
The domestic industry is still there, only instead of mass-market DRAM it has started making higher-valued varieties of the same stuff. If there's a trade war, they can easily reconvert to making the mass-market stuff, just at much higher cost. You can't expect more than that, since they never really were as big or as low-cost as the lowest cost suppliers can be in normal times. That's not "losing" capacity, it's just acknowledging that you can't create capacity out of thin air.
- kyralis 9mo ago
  > If there's a trade war, they can easily reconvert to making the mass-market stuff, just at much higher cost. "easily" is doing a lot of work in that sentence. Depending on the good and what they switch to making, this may neither be easy nor quick.
- Espressosaurus 9mo ago
  No, the domestic industry stagnates (at best) or disappears (at worst). You can't just spin up a 2nm wafer fab when the latest you've been running is a 300nm process. Compare: US shipbuilding industry to China or SK.
  - zozbot234 9mo ago
    We don't want to spin up wafer fabs because, historically, they had a tendency to turn into Superfund sites. That's why the more modern approach is to build the fab in the middle of a frickin' desert.
    - ahartmetz 9mo ago
      Historically, but likely not anymore. You wouldn't be allowed to casually poison the ground in a Western factory anymore and we have the technology to keep the environment mostly clean. I don't even see it being very expensive compared to other fab costs. Have a sealed floor and proper waste / exhaust processing, don't spill in the first place. Things must be extremely well controlled anyway.
- youarentrightjr 9mo ago
  > If there's a trade war, they can easily reconvert to making the mass-market stuff Factories, tooling, supply chains, and engineering knowledge aren't fungible in the way they would need to be for your statement to be true.
  - timschmidt 9mo ago
    Different types of DRAM can literally be made from the same already-etched wafer. The DRAM bits themselves don't change at all. What's different between DDR4, DDR5, and HBM is the IO interface to the chip. Changing this does not require significant retooling or relearning.
PowerElectronix 9mo ago
The way I see it, China has leverage once you arreive to that dependency situation. That leverages goes away the moment they restrict exports and every country scrambles to create local production once again. We are seeing that with some rare earths, even tho china is back into exporting them (except to japan, I think?) everyone is looking for alternatives already. They may have killed their industry 10 years down the line for playing with the export lever a bit too much. Just like how markets punish the ram cartel creating a chance for cxmt and ymtc to enter. It would create a chance for western companies to do the same if china messes with the markets they have "cornered".
- AnthonyMouse 9mo ago
  > The way I see it, China has leverage once you arreive to that dependency situation. That leverages goes away the moment they restrict exports and every country scrambles to create local production once again. The first problem is that it doesn't go away instantaneously, so even if you could recover in ten years, you still get screwed immediately. The second problem is that it's leverage. They can threaten to do it if they don't get what they want, and if you then do what they want (which often gives them even more leverage) they don't have to do it. But then they keep their leverage and you have to keep doing what they want.