"The bullwhip effect refers to a scenario in which small changes in demand at the retail end of the supply chain become amplified when moving up the supply chain from the retail end to the manufacturing end."
[1] https://www.investopedia.com/bullwhip-effect-definition-5499...
It's like the covid toilet paper shortage, even if you keep producing a thing at the same rate, stockpiling creates shortages which stimulate even more stockpiling.
When that eventually reverses, expect a temporary glut.
"Three months, 700 steps" for the GlobalFoundries Fab in Malta, N.Y.
https://www.seattletimes.com/business/technology/three-month...
This is a bullwhip effect, but that does cause a real build up in inventories and contraction in demand during the down part of the cycle.
And this will be concurrent with the higher rate environment and contraction in homebuilding and other sectors caused by Fed policy.
And so the TSMC warning is likely is forecasting a brewing recession, precipitated in part due to bullwhip effects.
It could also be "normalizing" demand as people shift spending from goods to services.
The possibility space is much larger than global recession.
Sometime ago I recall seeing that changes in TSMC's revenues are pretty highly correlated with measures of global economic activity such as changes in Apple's revenues and changes in global GDP.
If Apple could build an iPhone for 1 cent, why wouldn't they still charge $1000 for it? They can say it's how much iOS costs or whatever. (And hey, use the extra profit to hire more tax-paying iOS developers, making iOS even more valuable.)
... then Samsung can also make a phone for 1 cent, and they might try to steal share by selling for $400, and some consumers would switch, etc.
TSMC's revenue grew too much during the pandemic. It's just normal it should contract when things go back to normal.
Yes, but in isolation it isn't evidence of an economic downturn in general. It is evidence of the whiplash of consumer demand shifting during COVID from services to goods and back again along with the cost of retooling the industrial plant to match that demand. There's a range of ripple effects across industries that will be ongoing for some time.
Cause in healthy capitalism, a competitor could step in and sell it for $999 and Apple would lose market share quickly.
No they can't. You're neglecting the various moats that an entity like Apple enjoys with the iPhone.
First you have to be able to actually build a similar or superior product. You can't do it. Elite of elite tech engineering companies like Samsung can just barely keep up generation after generation. The investment required to build your $999 competing phone is comically enormous. You won't even be able to get access to enough chips to do it, much less have the manufacturing capacity to deliver at any meaningful scale given the components.
Do you have tens of billions of USD in cash ready?
You need to build a brand that consumers desire, such that they'll even want to spend $899 or $999 instead of picking up the iPhone at $1000.
Do you have another block of tens of billions of USD in cash ready, for marketing, brand building, advertising?
You need an extraordinary logistics system globally.
Do you have another block of tens of billions of USD in cash ready to build, deploy, refine your global logistics network?
Apple has ~$114 billion in annual operating income, most of it (including its ecosystem) is riding on the back of the iPhone. If it could be done, somebody would take that giant pot of gold from them. Even if a competitor could take 1/4 or 1/2 of that pot of gold, they'd move on it in a heartbeat. They can't do it, not even remotely close.
And then time. It'll take you a decade to get there, absolute best case scenario.
What Apple is reaping, is decades in the making, and required hundreds of billions of dollars in capital to be deployed over that span of time. Good luck.
A world in which Apple could build iPhones for 1 cent would be a world in which those moats did not exist.
Because if iPhones cost 1 cent to produce, the cost of everything that goes into producing them would have to be trivial. Which means any competitor could easily do the same as Apple is doing.
Of course that's not the case in our actual world; in our actual world, it would cost a huge amount of money for any competitor to do the same as Apple is doing. But that's my point: that very fact is why it costs Apple a lot more than 1 cent to produce an iPhone. Apple has expended huge costs on developing the product and keeping it ahead of competitors, and those costs amount to a lot more than 1 cent per iPHone. The high price they charge for iPhones is how they recoup those costs.
In other words, in the hypothetical I was responding to, Apple could not have done what they actually have done to make the iPhone a high end preferred product. Which means that all the moats that exist in our actual world because Apple did all those things to make the iPhone a high end preferred product, could not exist in that hypothetical world.
Does that mean the hypothetical is basically useless in understanding Apple's position in our actual world? Yes. That was part of my point.
Apple falls in the middle of those two axioms. If Apple could pull of an iPhone for 1 cent there would be a flood of entrants into the market doing the same thing as making the things would be cheap and easy. At first some would pay the premium (pay for the name) but after awhile that premium would erode and it would seem odd to pay when you can get the same thing for wildly less money.
It's Apples install base, app ecosystem, and social moat (iMessage) allows continued high gross margins on their hardware and locks competition away from their profit center. The sale price has very little to do with the marginal cost of production and a ton to do with a naturally occuring software monopoly.
Apple also pursues this strategy, but they don’t push it nearly as far as Samsung. The cheapest iPhone, the SE 3 at $430, has a 5 nm chip in it, which they only released two years ago. Apple just isn’t willing to release a parts-bin device, because they have a high quality bar. This is part of a moneymaking strategy, but my point is you can’t compare the A03 price to any current iPhone model.
Apple’s hardware margin is 35%, that is a reasonable estimate of the premium Apple is charging over a totally generic phone.
The are not totally a monopoly. They may be that in some peoples influence. But mine for example my parents literally would not be able to tell the difference between a generic sub 50 dollar phone and a 1500 one. They do not use any of the extra features and it would be meaningless to them. For some people it is about the status of that logo on the back. For others it is the tech stack and integration. For others it is just something to text and phone with.
What's with all the doomslinging in modern discourse? No, no, that's not now it works at all. There was a chip shortage just a year ago! Did that plunge us into recession? No, clearly it didn't. Then it was Inflation that was going to kill us all. And it didn't either. Now all of a sudden we're swinging the other way with chips and have a glut, and... now the doom will happen, I guess you're hoping?
No. This is a cyclic industry and it's cycling like it always has. A 10% YoY revenue drop isn't anything weird. I found a chart here: look at the bottom YoY numbers and see all the times they were in the red. Remember the unmitigated economic disaster of 2016? Me neither.
https://www.macrotrends.net/stocks/charts/TSM/taiwan-semicon...
Because public trust in the ability of governments to manage a crisis has gone completely fucking downhill, worldwide:
- the US couldn't even manage to beat a gang of cave-living Islamist terrorists using kalashnikovs in 20 years, and had to flee the country in shame
- we went through three years of a worldwide pandemic, then panicked governments acted like it was all over due to pressure by the far right - and yet, despite mounting evidence of millions of cases of long covid and almost all nation leaders silently insisting on covid tests prior to meetings, for the citizens it's a free for all for the virus, at the risk of disabled people and other at-risk groups. Governments didn't do anything to meaningfully curb the onslaught of propaganda as well.
- compared to prior environmental threats such as CFC coolants or lead, no one is doing anything meaningful (i.e. something that actually costs Big Money some wealth) against climate change. Instead, again, climate change denial runs rampant.
- we've got Russia invading Ukraine in a land-grab and it took us a year of brutal slaughter, rape and terrorism to send a handful of fucking tanks, and fighter jets are still many months away. I'm not advocating to glass the Kremlin, but NATO could do way way WAY more to stop this shit.
- China has been stealing Western IP for decades and used obvious price dumping to destroy our economies, and yet our politicians and companies keep kneeling before Xi despite the constant Chinese saber rattling against Taiwan
- housing prices and cost of living have been exploding for years and no one cares, despite tent cities of homeless in every major warm US city and people defecating on the streets because they don't have any safe place.
- on top of all of that (literal) shit, Nazis and other authoritarian politicians are back worldwide, to a large degree financed by the Kremlin, and guess what, politicians aren't taking care about that either, instead they let their parties be taken over by them or refuse to fight and go under in elections.
So yes, it's completely rational for people to assume doom when politicians don't give us any reason to hope that the situation will improve. It makes more sense to prepare for the worst case because it's increasingly more likely.
What do you mean by left-wing terrorist uprising? Isn't left-wing ideology kind of relative to each country e.g. Icelandic left-wing/right-wing is not like Chinese Japanese left-wing/right-wing.
What would be the goal of these terrorist?
A lot of the issues I stated - e.g. the rise of the authoritarian/far right, climate change, wealth disparity - are usually associated with the (far) left, or at least the left is the one pushing for reforms.
Generally, people don't become terrorists... if they don't have the feeling they have no other choice left. Israel is the closest to that tipping point, with soldiers threatening to hand in their papers (which is very unusual as it puts the country at a serious risk should any of its enemies attack), but climate change protestors in the UK and Germany have recently escalated their methods (and so has public response, including a lorry driver running over a protestor blocking a street here in Germany), and god only knows what will happen in the US should Trump gain a second term or, worse, DeSantis.
That is why I'm relatively certain at least some people will choose violence - the question is how many will follow them.
> That is why I'm relatively certain at least some people will choose violence - the question is how many will follow them
Judging by history, long periods of wealth disparity, inequality, hunger, authoritarianism, etc, are inevitably met with brutal uprisings: e.g the French/Russian/Chinese Revolution.
As for how many will follow such a revolution: any kind of right(or right policies disguised as left as we have/had in Russia/China) politics, continued over a long period of time, will eventually have the effect of creating a small privileged ruler class out of touch with the rest of society. Thus, it's no wonder that usually EVERYBODY joins such upheavals to dethrone the rich/powerful.
Where in NATO charter are they to interfere for a non-NATO country?
Instead we got Biden being afraid of Republicans (most importantly the Russian asset that was the 45th President), our German Olaf Scholz being afraid of his own party and its close ties to Russia and the far-right and far-left and their even closer ties, and French Macron and Turkey's Erdogan both trying to act like they're kingmakers. Oh and we got Ukraine to agree not to use the pittances we send to hurt the Russians on their own soil.
All while hundreds of thousands of civilians and troops died in Ukraine. What a disgrace - our hesitation cost real human lives for nothing.
https://archive.archaeology.org/0901/trenches/lusitania.html
Providing munitions to non-NATO country is meddling and could be considered an act of war. Where is USA Congress to vote on this war?
There is absolutely no relevant precedence for the supplying of weapons to a country at war to be considered an 'act of war'. It just isn't a thing.
The US Congress has repeatedly voted to approve those arms sales and transfers.
I agree semiconductor is an industry well known to be cyclic and prophecies of doom are ridiculous.
That is a stretch. They jacked rates on Trump, lowered rates for Biden, and in my opinion were forced to raise rates when the Ukraine money/power grab ramped up.
Rates were already decreasing when COVID hit, and they dropped rates to zero when the economy shut down, as they should have done.
Correlation does not necessarily imply causation, as I'm sure you know.
You could have simply looked up a long-term chart of the FED funds rate to verify your political belief, but you chose not to. Why?
https://www.coxautoinc.com/market-insights/new-vehicle-inven...
This nanometer matter is identical to a problem w sandwiches i had recently, only difference being scale. It led me to escalate when a local Subway®, a sandwich shop, got out a bread for my sandwich n when asked to compare it to the other breads because i considered it to be too small, the loser fixing up my sandwich did magician tricks to impede my verifying that it was in fact a shorter sandwich. Did like four tricks, first comparing it to another short bread rather than the clearly longer control group i was referring to, smart at playing dumb, called him out on it, one time almost lining them up but offset so it looked difficult to tell, unlike aligning them which makes telling one is shorter than the other trivial, but i had seen that at a Subway® before n called him out on it, then aligning them but flopping out a piece of paper over it w clearly rehearsed slight of hand, n called him out on that, then said, alright, you got caught, double meat on my bread. N then he's like no, i can't, i have to go get you another bread instead, i was like no, no mulligans, you steal from me you pay double, penalties are inescapable given intent to transgress. There has to be risk-adjustment in Justice, no mulligans or they'll never stop trying to steal from you--n if you come to Chile you'll see exactly what i'm talking about.
But this sub fixer didn't get the difference between can and may, puedo or debo (means ought to) or tengo permiso para which is how you translate the word may, usually saying "No tengo permiso para hacer eso.", that's how you say "I may not." My Spanish is excellent too, top grades in the Spanish class, father was a college professor of Spanish Literature, got the highest grades possible in Spanish classes, i've lived in Chile 30 years now, but apart from the "may" and "can" confusion, which if asked in person i can spice up the story by telling you hhow this petty theft was resolved, i went pro at confronting such transgressions, no mulligans--they are systematic about such things in Chile, n for me it is essential to block hands reaching into my pocket or i can't do business here n help this country be at the center of the algorithms industry. It is also a matter of honor. So started by yelling he was robbing me, which i justified w security when they called security, which i waited for until they arrived, that was lots of fun counter-trolling, but i'm afraid these walls of text will intimidate readers if i law another row of character blocks, like bricks, on them.
Point was, the advertising said 15cm. Metric system, which along w the book is one of the two main engines of modern wealth creation. Subway® could have advertised it was selling at a low price a "rather big sandwich" or a "nice large sandwich", or perhaps "a sandwich so large you'll probably feel full by the time you eat it", n that would have been fine, but they didn't because the metric system is an amazing asset in marketing because it is verifiable. N that brings me back to my point about lithography, n why i care little for the newest ones. They are doing j about the same thing as the sandwich fixer, lying through their teeth, w disclaimers fine but without refunds after being inspected under a microscope, purporting the gate length is smaller than it is. They instead ought to drop nanometer convention except to say the actual verifiable length the user will be able to confirm the gates measure in length given some statistical metric verifiable w microscopy.
N then together w that, a density metric, that's fair, or brag how many transistors are on the chip, that's fair too. Nobody cared about lithography anyway until clock speed stopped its dramatic increases in the late noughts. It was all about clock speed then. It could also be about cores, or computers per chip in the case of the GA144, called nodes to save typing, but they're full-fledged computers in an 8 by 18 matrix, under 20000 transistors each, those are numbers too, it's j about a verifiable number to brag about. People want easily verifiable numbers when they're giving up their easily verifiable numbers, their money, in exchange. Or it's false advertising at best, theft at worst.*
I am very interested in hearing your description of capitalism that does not include taking windfall profits when demand shoots up and some examples of it in the real world.
See this article back from distant Jan 23 for example
"Timeline: causes of the global semiconductor shortage" https://supplychaindigital.com/top10/timeline-causes-of-the-...
We just all riding on the post covid backlog and over order.
1. YoY 10% expected decline from the largest increase in recent history. i.e 2022 was an anomaly.
2. No it is not BULL WHIP effect. Has relatively little to do with it. The problem was with commodity chips, one should read into UMC and SMIC.
3. Nvidia, for the rest of the year is still capacity limited.
4. Samsung Foundry took some market to fill their capacity gap in other sectors. Although I doubt that is even 3% of the expected TSMC revenue decline.
5. In all likely hood it just means their Customer are reluctant to pre-book much capacity and would want the flexibility to increase order when needed. ( Usual Strategy )
6. It is likely China's volume is much worst than everyone expected.
Hopefully I'm wrong.