Robert,
<<Why should overcapacity matter? Other industries manage to remain profitable with chronic excess capacity. >>
Robert, the above comment discombobulates me. To me overcapacity is propositionally simple. Supply/demand seems to me a well understood reciprocal. When one exceeds another prices, are affected proportionally. N'est Paux? I would welcome some examples to the contrary.
But you go on to ask some interesting questions about the drive industry. e.g. <<Can the HDD industry learn to profitably coexist?>>
Certainly not in its current state of too many competitors. The reason, I believe, is relatively simple. It lies in the nature of volume and, inextricably, the demand behind it. Volume and its corrollary, yields, are at the very heart of the financial model that is the current paradigm of a competive disk drive company. Why is it so? Because, when truly considered, there really is very little differentiation in the products. And yet, there is also little in the way of an alternative to disk drives as the primary data storage mechanism of choice. So, the market is huge and will grow. The "prize" (market share) is staggering. While there is room for differentiation through ancilliary products and services it is limited. Branding as a strategy can be likened to the "Intel Inside" campaign. None of it matters if you don't have high volume, high yield processes. (As Lawrence has pointed out time and again there is another "sine qua non": time-to-market development.)
So I submit this isn't like the America steel industry of the 70s, where busting up into boutiques of niche products salvaged more then one company. This market just will not work that way IMO.
Nor is it simply a case of waxing and waning assembly lines to match demand. You asked where the overcapcity was. It is virtually in all aspects of the supply chain.
You may want to read the two papers I mention and link below. I think they go a long way to supplying a macro view of the forces at work in the drive industry.
One final note: I think your wife should stick to the waffles. If for no other reason then to assure your mutual happiness. I think being married to a DD executive would be sheer hell. Only slightly less then actually being one.
Best,
Stitch
Global Strategy and Population Level Learning in the Hard Disk Drive Industry
Paper No. 97-05, October 1997
David McKendrick, Allen Hicken
Sustaining Competitive Advantage in Global Industries: Technological Change and Foreign Assembly in the Hard Disk Drive Industry
Paper No. 97-06, November 1997
David McKendrick
www-irps.ucsd.edu |
