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Hon Hai Bids $27 Billion for Toshiba Chip Unit

4/11/2017 07:04 PM EDT
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DMcCunney
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Re: It's a game where the Lowest Cost Producer wins
DMcCunney   4/14/2017 2:53:42 PM
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@photonic: Micron probably can't be a Lowest Cost Producer.


Agreed.
 
That's not the issue. The issue is whether Micron can be a Producer.


They can be and are.  The trick is producing in segments where cost is not the only factor driving the purchase decision, and you don't have to be Lowest Cost Producer to get design wins.  This requires heavy continuing investment in R&D to produce new stuff others will pay a premium for.

>Dennis

DMcCunney
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Re: It's a game where the Lowest Cost Proiducer wins
DMcCunney   4/14/2017 2:48:11 PM
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@photonic: As far as I understand it, this is always true and for every manufacturer.

Yes. It's just far more visible in consumer electronics than in other industries.

>Dennis

DMcCunney
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Re: HH partners
DMcCunney   4/14/2017 2:45:58 PM
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@Shinobee: On that same token, if Foxconn can move workers into more "higher end" jobs, they can resort to machines and automation for the "lower end jobs" saving more money.

Yes.  China bootstrapped itself from third world agrarian nation to first world industrial power by leveraging low labor costs.  They moved peasants off the farms to the cities to be the basis on an industrial workforce.  Thos factory jobs had better hours and working conditions, and better pay than being a peasant on the farm, and Chinese workers flocked to get them.  They got paid a pittance by Western standards, but it cost enormously less to live in China.  Thiose factory jobs were a step up for the workers, and they knew it.

But China is running out of peasants on the farm to make industrial workers.  There is competition for labor, and salaries have risen in consequence.  China is no longer lowest cost producer (I believe Mexico holds that title now) and there was a report here a while back on a major Chinese manufacturer announcing a full court press into robotics in consequence, to lower thier costs.

Working in the similar field, I have seen little evidence that western companies and even Japan, wants to open more factories.  They only want to focus on R&D and design. When Toshiba was only offering to sell 20%, I think WD and Micron was interested in working with Toshiba and acquiring any proprietary tech that they might not have known at the cost of a holding a small stake in the company.  Now that Toshiba is selling it entirely and hoping to raise 18 billion, WD and Micron won't be interested.  I don't think anything Toshiba does or has will be worth that much to either of them.  


Yes again.  When the factories are semi-conductor fabs, you have a classic capital intensive business, and the cost of building a fab is so enormous few companies can afford to do it alone.  Even some who can look at joint ventures to lower their share of the cost.  Look at the number of outfits that have gone "fabless", concentrating on design that other vendors will actually manufacture.


The reality is, once any scientific concept is no longer new, it gets handed down to China where their "heedlessness" in handling proprietary information and trade secretes will more or less be disseminated as public information for the whole world.   Mechanical work, pcbs, batteries, screens have joined that pool and should Toshiba's sale to Foxconn go through, so will nand flash.

Western firms have been extraordinarily cautious about producing in China.   Understanding of and  support for intellectual property is still a work in  progress in China.  (A tech CEO interviewed here a while back commented "Bring suit for infringement in a Chinese court and tell me what you come back with...")  Anyone relying on confidential information for the value in what they make  ("You can only get this from us!") will think long and hard aboput producing in China, because it won't be confidential anymore if they do.


But NAND flash is not exactly secret, and Chinese vendors likely already make it.  What Foxconn gets from acquiring Toshiba's memory operations is market share, not technology.  They will certainly want to shift roduction to China for cost reasons, but I don't expect it to happen quickly.

>Dennis

 

photonic
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Re: It's a game where the Lowest Cost Proiducer wins
photonic   4/14/2017 2:18:13 PM
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Micron probably can't be a Lowest Cost Producer.

 

That's not the issue. The issue is whether Micron can be a Producer.

photonic
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It's a game where the Lowest Cost Proiducer wins
photonic   4/13/2017 2:20:37 PM
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As far as I understand it, this is always true and for every manufacturer.

Shinobee
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Re: HH partners
Shinobee   4/13/2017 10:26:18 AM
Although headquartered in Taiwan, Foxconn has around 1 million employees in China and a huge factory dubbed "Foxconn City" in Shenzhen.  For a company with that degree of omnipresence, I'd be surprised if Foxconn and the Chinese government weren't sharing the same underwear drawer by this point.  There is no doubt in my mind that anything Foxconn gets its hands on is going straight to China.

Out of all the bids though, Foxconn is the only one that makes economic sense.  Pretty much every iphone in existence has trekked through the manufacturing halls of Foxconn at some point, while imported chips from Taiwan, Japan Korea and the USA converge there as well.  The Chinese has a large incentive to reduce importing costs by shifting IC manufacturing within its borders.

Foxconn workers have spent decades making PCBs, connecting screens, batteries, and snapping it altogether before putting it in the box and shipping it out.  Workers are starting to demand higher (relative) wages with more challenging jobs and IC manufacturing is in their crosshairs.  China needs to straighten out their FAB business so workers can get a sense of upper mobility and remain productive.  

On that same token, if Foxconn can move workers into more "higher end" jobs, they can resort to machines and automation for the "lower end jobs" saving more money.

Working in the similar field, I have seen little evidence that western companies and even Japan, wants to open more factories.  They only want to focus on R&D and design. When Toshiba was only offering to sell 20%, I think WD and Micron was interested in working with Toshiba and acquiring any proprietary tech that they might not have known at the cost of a holding a small stake in the company.  Now that Toshiba is selling it entirely and hoping to raise 18 billion, WD and Micron won't be interested.  I don't think anything Toshiba does or has will be worth that much to either of them.  

The reality is, once any scientific concept is no longer new, it gets handed down to China where their "heedlessness" in handling proprietary information and trade secretes will more or less be disseminated as public information for the whole world.   Mechanical work, pcbs, batteries, screens have joined that pool and should Toshiba's sale to Foxconn go through, so will nand flash.

While the government, banks and other companies together could still step in to help Toshiba out, I find it hard pressed anyone will top Foxconn's 27 billion bid.  We can only count on altruism at this point.

DMcCunney
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Re: HH partners
DMcCunney   4/12/2017 11:02:25 PM
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@HH Partners: surprising why micron is not placing a good bid here

Not to me.  My understanding is that Micron is working on next gen flash with higher memory densities, higher prices, and better margins.  I don't think they could make money on product if they bought Toshiba's operations.  Thier cost structure is too high.  As an enormous manufacturer of consumer electronics products, Hon Hai probably can make money, especially if they can shift production to China.

It's a game where the Lowest Cost Proiducer wins, and Micron probably can't be a Lowest Cost Producer.

>Dennis

DMcCunney
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Re: Why not Sony?
DMcCunney   4/12/2017 10:56:03 PM
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@jamestate:Why doesn't e.g. Sony want to buy this? They could certainly use the vertical integration.

Where would Sony get the money?  You may recall that not that long ago, Sony, Panasonic, and Sharp were all in financial trouble over massive losses in big screen TVs.  All had invested heavily in production capacity to meet demands of the burgeoning large flat-screen TV market.  It was a must-have consumer oproduct of the moment, and everyone wanted one.

Burt sooner or later, markets get saturated.  (And in the case of consumer electronics, much sooner.)  The high-end of fancy expensive units was filled, and demand shifted to smaller lower cost units made in places like Korea by companies like Samsung.  Sony, Panasonic, and Sharp suffered enormous losses because they couldn't match the pricing of other vendors.  It was fatal for Sharp, which was no longer viable as an independent, and was bought over Japanese government opposition by Hon Hai.

Sony is still in business, but I don't think it's pockets are deep enough to make this acquisition.

Sony might be able to use the NAND flash, but if the use is entirely in its own products, it doesn't make sense to acquire Toshiba's memory operations.  They are better served to just buy what they need from another flash manufacturer.  Sony would need to be able to sell that flash to other vendors as well as use it in their own products, andf I don't believe they could do so profitably even if they could buy Toshiba's memory operations.

>Dennis

jamestate
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Why not Sony?
jamestate   4/12/2017 9:45:28 PM
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Why doesn't e.g. Sony want to buy this? They could certainly use the vertical integration. The NAND Flash could be used on their smartphones and their consoles. Heck even in DVRs and the like. But no, it makes too much sense, only a Korean would think of vertical integration in the XXIst century.

jamestate
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Re: HH partners
jamestate   4/12/2017 9:41:27 PM
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This buyer *is* Chinese. Sure it was founded in Taiwan but the owner was one of the first to move production to mainland China and he has good relations with the Chinese government.

 

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