[MrBuddyCasino]

TSMC‘s machines can build any kind of chip, once the masks are there, they have many customers and operate in highly competitive market where you can’t afford to fuck up and you can switch to a competitor more easily.

Spirit cannot easily build any airplane part, and it has very few customers and with very low levels of competition, so they can afford to be bad at their job because it is hard to switch suppliers.

The cases aren’t comparable.

[JumpCrisscross]

> Spirit cannot easily build any airplane part, and it has very few customers and with very low levels of competition

The first two factors should increase Boeing’s leverage.

> cases aren’t comparable

Of course they are. They’re all examples of outsourcing. The conclusion is outsourcing isn’t bad per se.

[MrBuddyCasino]

> The first two factors should increase Boeing’s leverage.

No because there isn’t another supplier you can easily switch to. You can see this in the outrageous prices they are able to charge Boeing for parts. With chip fabs you can observe their performance in the marketplace and determine which one is good and which is bad. It makes sense to outsource to them because the know-how and capital requirements have grown beyond to what a single chip designer can reasonably do in-house. Even Intel tries to onboard outside customers to its fabs.

Why would you outsource building a plane wing? They are not standardized but different for each plane, they are huge so you can’t exactly build retoolable conveyer belt production lines and amortize this investment over many models.

The only reason to do this is to safe on labor costs and because you don’t want the hassle of doing it yourself, at which point you have become an OEM that just plugs things together. It is primitive MBA thinking that is ignoring 2nd order effects.

[JumpCrisscross]

> No because there isn’t another supplier you can easily switch to

You listed three factors. The first two, ceteris paribus, increase buyer bargaining power; the last does not. That doesn’t change because in this situation the last overpowered the first two.

By analogy, shape, size and camber contribute to a wing’s stall speed. If a wing has the wrong camber, that doesn’t negate that all three are components. (And that wing, in turn, doesn’t disprove flight.)

> Why would you outsource building a plane wing? They are not standardized but different for each plane

This is true for a lot of specialised manufacturing, e.g. TSMC and Foxconn. Varied lines is not an argument against specialisation.

> they are huge so you can’t exactly build retoolable conveyer belt production line

The first moveable assembly line built ships at the Venetian Arsenale. Size is not an argument against specialisation.

> only reason to do this is to safe on labor costs and because you don’t want the hassle of doing it yourself

Not true for Spirit. In that case, it was labor complexity and capital costs.

> primitive MBA thinking

Shanahan, Spirit’s CEO, was an engineer before MBA.