John,
look around, read the papers, this is one of the most competitive businesses in the world
I don't what you use as a basis for saying that the computer chip market is one of the most competitive, say more competitive than a potato chip business.
There are numerous natural impediments that I know of that prevent competition from entering the market. The fact that the computer chip business very capital intensive is one of them.
Add to it various patent / trademark barriers, the fact that a single producer produces in excess of 90% of dollar valume and you have a business that is almost impossible to get into.
Under a classic free market theory, artificially high profit margins attract new participants, who increase supply, reduce margins, and system is back to balance. On the other hand, artificially low margins will eliminate the least efficient producers, reduce supply which will in turn increase margins.
If it is almost impossible for new participants to enter the market, you eventually end up with a lack of competition and widespread ineficincies.
Joe |
