[xyzzy123]

You become dependent on the supplier.

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.

Also they gradually lose the ability to meaningfully innovate in those sectors because there's no grounding against production reality anymore.

This has geopolitical consequences further down the line.

[nandomrumber]

Blame China.

As though moving production to China wasn’t something the West did intentionally.

And now continues to push manufacturing out of Western countries by, for example in the UK and Germany, and Australia too, making electricity and gas so expensive it becomes cost prohibitive to manufacture much at all.

[vkou]

You forgot to mention embargoes against it. The US is free to sanction firms for their exports to China, but then shouldn't be surprised when China builds out domestic competitors.

[zozbot234]

> 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.

[AnthonyMouse]

> 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.

[PowerElectronix]

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]

> 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.

[zozbot234]

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.

[Espressosaurus]

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]

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]

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]

> 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]

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.

[youarentrightjr]

> The DRAM bits themselves don't change at all. What's different between DDR4, DDR5, and HBM is the IO interface

That's not completely accurate - since the bw between these are different, the routing and therefore propagation delays for DDR4 won't allow it to magically be used as DDR5 or HBM.

If you design for the most strict timings, then sure.

[AnthonyMouse]

> Different types of DRAM can literally be made from the same already-etched wafer.

The assumption here is that you would stop making DDR5 but continue to make DDR4 so that you could start making DDR5 again without too much trouble. But the older chips have even lower margins than the newer ones. Most of the fabs and equipment for making DDR4 were created when it was current and then they stay in operation as long as there is still enough demand for it.

If you don't make DDR5 and DDR6, what happens to your DDR4 fabs when DDR4 is where DDR2 is now? They close because nobody wants it anymore. And then you're not trying to get to DDR6 from DDR4, you're trying to get to DDR6 from an empty desert.

[pdhborges]

Does that mean CXMT is one inch away from also eating into the DDR5 market?

[kyralis]

> 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.

[zelphirkalt]

Higher valued varieties, or just higher priced varieties, that no one wants to buy?

[mitthrowaway2]

If the domestic industry had the capability of competing with China on mass-market goods at a profit but just chooses not to in order to pursue a higher-profitability niche, why not simply grow and do both at the same time, instead of yielding the mass market to China?

In my mind, if it can't do that, then it can't make the volume that China does at the cost that China does, which means it really isn't as capable as Chinese industry.

Perhaps at one time it could have, but those muscles have atrophied.

[zozbot234]

Because by pursuing a more profitable niche, you can grow quicker and make more profit. If you really want to do both, you enter the mass market from above, with only slightly higher quality products than what the market leader offers. And you do that after your position in the more profitable niches has long been secured. It's silly to do it any other way.

> which means it really isn't as capable as Chinese industry.

But this was always true. There was never really a time when Western industry was producing as much and as cheaply as China is today - that's the whole point. It makes more sense to diversify away from that, because non-trivial real-world markets will always reward increased variety.

[riku_iki]

> steel, heavy industry, semiconductors, machine tools

the question is if single country can carry all these industries at loss for prolonged period of time.

Another approach is to rely on international supply chain and speed of innovation, we can't produce steel domestically profitably today, fine, we may buy it from diversified international supplier network, and rebuild it fast tomorrow if needed using new tech, and focus on many other high margin verticals, instead of putting many billions of resources into infra which could be obsolete tomorrow.

[xyzzy123]

This is fine as long as the supply chain is, in fact, diversified.

[riku_iki]

sure, looks like more analysis is needed to check which verticals are diversified and which are not, instead of throwing blanket list of everything.

[xyzzy123]

Agree, worth analysing what is genuinely commodity.

There are more elements to it though which can be sort of hard to explain.

There are whole cultures and ways of thinking built around production. The children of engineers who worked on xyz v1.0 have a genuine advantage when its time to work on xyz v2.0. There is a lot of tacit knowledge in these engineering fields and you have a huge advantage in knowledge retention if you can maintain unbroken chains of succession.

You can't achieve the top levels of ability (decades of experience, generational knowledge) if you are whip-sawing production to and fro across the globe every 10 years.

There are also cross pollination effects. Being in the same community with as many related fields as possible (co-located) is what drives cross-pollination and mobility of ideas and people between industries.

Think how many countries have tried to copy "silicon valley" and failed, and _why_ they failed.

What I'm saying is that technology is built by _people_ and there are human reasons why having local capacity is beneficial for all the related industries in the area.

[riku_iki]

> The children of engineers who worked on xyz v1.0 have a genuine advantage when its time to work on xyz v2.0.

my point is that other children with no extremely heavy investments into perl v1.0, will have some skills in c++ v1.0 and python v1.0, and will have advantage in adapting Tensorflow v1.0, which is more valuable than skills in perl v2.0. Heavily investing in one industry you sacrifice some flexibility.

So, this is multifactor analysis, lets say wise American people will elect me as next president, I would create list of industries, assign metrics (national security importance, potential revenue in 5y from now, impact on other industries, potential margin, risks of failure, etc), then build some formula which aggregate those metrics into single, and base on final metric allocate weighted funds to support N top industries.

[esafak]

https://atlas.hks.harvard.edu/