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Comment by MichaelZuo | Hacker News Reader

What’s stopping a bunch of small manufacturers from pooling together their capital to buy an upstream supplier?

After all if the price disparity is indeed so large and will be sustained then you should have wall street guys eager to lend to get in on the action and make easy returns?

If the returns are not there and the price of resources, labor, etc., have increased simply due to inflation and other factors then this is like saying Ferrari’s are scarce. Or $15000 new cars from Toyota are scarce. 50 years ago that would have bought a new Ferrari from the dealer, and now it can’t even buy a Corolla.

If so, I don’t see anything other than a trivial point.

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> What’s stopping a bunch of small manufacturers from pooling together their capital to buy an upstream supplier?

Texas Instruments is worth ~160 billion dollars, ST Micro ~38 billion dollars. Even at Elon Musk level of wealth, that is unobtainable.

To make stuff worse, all the stuff in short supply (anything from power regulators to not-top-of-the-line SoCs) is made on "outdated" nodes. No one will go and set up a brand new 90nm fab (which is the node size of most current STM32 models), it's just not worth the expense without massive government subsidies.

Why jump all the way to the big fish? It’s more sensible to start with a distributor like Digikey since presumably they’re not buying directly by the pallet from TI or ST Micro if they are ‘small manufactuers’.

If they don’t think they can do Digikey’s job better than what’s already being done then they have their answer.

The folks upstream and at Wall st can presumably do math and think a few steps ahead, so if they saw an opportunity for outsized returns they would likely already have plans for it.

Just like why nobody is making a $15000 Corolla equivalent in 2022, because it’s not profitable enough.

Unfortunately there's another angle here which is that the little fish are competing for supply with higher priced, higher volume products like cars, where a 10x increase in one component can be amortized over a much higher total cost and passed on to the customer. Nobody is going to notice an extra couple hundred bucks on the price of a car, but they'll definitely notice when it's on something that itself only costs a couple hundred bucks.

Big consumers are able to outbid even companies like DigiKey because they can afford to spread the cost around. TI had one of its best quarters ever over the last 12 months, but just try to buy TI parts anywhere - they're being priced through the roof. A $0.30 TI regulator was going for $30.00 on the secondary markets. I feel for any small company trying to build hardware right now.

Indeed that seems like the market telling small manufacturers of lower priced goods, who are unable to increase the price of their product, that other manufacturer’s goods are providing more value.

For those who were expecting cheap electronics to be preordained forever this serves as an effective wake up call, and that nothing on this Earth is truly guaranteed even one second into the future.

Didn't Musk just offer 40 billion on Twitter?

Besides:

> No one will go and set up a brand new 90nm fab

Not 90nm, but a 28nm fab still looks quite viable, as AFAIK, its cost per transistor is still lower than the top of the line ones.

Anyway, the reason nobody is investing is because everybody expects the problem to go away by itself in a year or two, and if they invest now, they will start production just in time to get destroyed by the opposite phase of the whiplash effect.

> Anyway, the reason nobody is investing is because everybody expects the problem to go away by itself in a year or two, and if they invest now, they will start production just in time to get destroyed by the opposite phase of the whiplash effect.

Or rather because in two or three years the top CPU/GPU manufacturers will have moved to TSMC's "2nm" node size, which frees up capacity at larger nodes and that will propagate across the chain.

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