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[SScorpio]

Do you think that we are going to manufacture consumer electronics (at least on the lower end), video game disks / packages, cell phones and so on in US?

Tariffs make sense to juice up certain industries. Blanket tariffs will result in higher cost to US consumers, higher inflation, lower GDP and more "fun" stuff like that.

But hey, we got the "BBB" passed so the top 1% can get even richer and tariff revenue can paper over at least some gaps, so it's a WIN, let's give ourselves a .

Disks are already still stamped and assembled in US based plants. That's why you can still get a new run of a popular disk stamped and packaged and sent out to retailers in a region without a month plus delay of doing it in China and then waiting for shipping or having an expense of air freight.

And while the instruments were created in China, the assembly of at least those early versions of Rock Band bundles were packaged in the US by Technicolor.

Decoupling electronics manufacturing will be much trickier just to the scale of supply lines in China. But an industry that has multiple plants spread through out the world is hardier and can prevent supply shocks like the PSU and HDD shortages that were caused by Singapore floods. And NVIDIA Blackwell chips are rolling off TSMC lines in Arizona. Tooling is still one of the most expensive parts of the manufacturing process. With advances we'll see what process changes will be possible in the future. https://videocardz.com/press-releas...facture-first-american-made-ai-supercomputers

 

[SScorpio]

Yeah buy from the good ol' US of A. Tinkertoys an American classic - just $35 will get your this huge 100 piece kit

And your kids will gasp in wonder when they open it up

Edit: not my pictures but my kids grandma bought them this set one Xmas. We returned it.

They're trying, they are cutting costs by switching to cheap plastic. What do you think those old wood ones grew on trees? Wait....

 

[poppabk]

They're trying, they are cutting costs by switching to cheap plastic. What do you think those old wood ones grew on trees? Wait....

Switch to cheap plastic but don't skimp on the box size even if you only fill 10% of it.

 

[Chukhopops]

They wouldn't be able to take that hit across the board if that is their operating margin on these products, sure, but that isn't the consideration here. I am assuming they are going to continue making these products with or without the US sales, which means many of their major expenses are not going to decrease at all if they lose their US sales. The first copy of a figurine must cost a lot more than each additional copy, and here (unlike when calculating the operating margin) we effectively only have to consider how much the additional copies cost, not the first one..

If they (and by they I mean the entire supply side combined) lose the 20% of sales (or whatever it happens to be) which currently go to the US, that isn't going to reduce their expenses by 20% and probably not by anything close to it. If they lose 20% of their income and their expenses subsequently only decrease by <20%, that will make their operating margin worse not better.

I mentioned this earlier in the thread, but for a somewhat similar example consider regional pricing on games. MGS Snake Eater (at least on Steam according to steamdb) is priced 50% lower price in some regions than in others. Konami's operating margin is not >50% and they could not take 50% lower prices across the board. However, they still choose to go for a lower price in those regions -which amounts to eating a tariff in those regions- because $35 x some sales is more than $70 x no sales. Assuming they are going to be making the game with or without the sales from those regions, then this is viable so long as the variable cost is lower than the sale price in those regions. Granted in this case the variable cost will always be lower than the sale price as it's effectively determined backwards as a % of it, but apart from that the same principle applies for the 'eating tariffs on figurines' scenario: they can do it so long as the variable cost is lower than the sale price.

I'm saying that as far as the seller is concerned, using a lower-than-normal price in a given region due to people being poorer amounts to exactly the same thing as 'eating a tariff' there.

In the example I gave (a 50% lower price in a region due to poorness), it is the equivalent of 'eating' a 100% import tariff. Whether the seller has lowered their price from their standard $70 to $35 because people are poor and can't afford the normal price, or lowered it from their standard $70 to $35 so that once the tariff is applied the total cost to the consumer is still $70, the seller is receiving $35 either way.

If the 'but operating margin' comments were correct, then this practice should not be viable either, and yet it is happening. It can happen because the variable cost is low enough to allow it.

As for the shipping costs, I'm assuming shipping is normally charged to the customer on these physical products. If that has now risen, it pretty much goes in the same basket as the tariff: it can be passed on or it can be eaten, if the variable cost allows for it.

But digital has negligible variable production costs, distributing 2M downloads is only marginally more expensive than distributing 1M.

For physical products this is not the same, and in fact regional pricing does not apply to physical products which are usually even more expensive in countries like Brazil or Turkey.

A better question is why would they lower their margin and eat the tariff when:
- their products cannot be substituted with other, locally produced ones. They don't sell soybean or corn or anything that can be produced in the US;
- their customers are considered to have high disposable income (10pt under average likely to have a partner or children), so demand is likely to be price-inelastic (until someone decides to put a 100% tariff or more I guess);
- they don't depend that much on US sales, under 10% exposure for Bandai Namco for example:

 

[calico]

If you can't see a difference between distributing a digital item and a physical product, there is nothing left to discuss.

Doesn't that mean there is something left to discuss? For instance you could explain the relevant difference between a digital product with a low variable cost and a physical product with a low variable cost which makes them incomparable, instead of vaguely asserting that there is one.

But digital has negligible variable production costs, distributing 2M downloads is only marginally more expensive than distributing 1M.

Production, yes, distribution... not necessarily. In the example I gave total variable cost will probably be around 25% of the sale price. The important part is that it is lower than the sale price (though obviously you might not bother unless it is significantly lower).

A better question is why would they lower their margin and eat the tariff

Only if the alternative is they lose the US sales and they are a significant part of their business. Ofc I agree that if the consumer proves willing to pay the higher price then they would have no reason to eat the tariff. If that proves to be the case they possibly should have been charging more already.

Whether that ~9% would transfer directly to something like these figurines I'm not sure. Probably varies a lot by property I would assume. Whatever % it is, if they don't mind losing some or all of those sales then yeah it doesn't matter either way. My expectation is they would mind.

The products may not have substitutes, but (unlike corn etc.) they can very easily just not be bought.

 

[StereoVsn]

Disks are already still stamped and assembled in US based plants. That's why you can still get a new run of a popular disk stamped and packaged and sent out to retailers in a region without a month plus delay of doing it in China and then waiting for shipping or having an expense of air freight.

And while the instruments were created in China, the assembly of at least those early versions of Rock Band bundles were packaged in the US by Technicolor.

Decoupling electronics manufacturing will be much trickier just to the scale of supply lines in China. But an industry that has multiple plants spread through out the world is hardier and can prevent supply shocks like the PSU and HDD shortages that were caused by Singapore floods. And NVIDIA Blackwell chips are rolling off TSMC lines in Arizona. Tooling is still one of the most expensive parts of the manufacturing process. With advances we'll see what process changes will be possible in the future. https://videocardz.com/press-releas...facture-first-american-made-ai-supercomputers

High priced GPUs are an ideal target for local manufacturing. They don't require a lot of labor, have high margins and while they do require a lot of electricity to produce, that's one thing which is usually decently priced in US compared to say Europe or Japan (water is another story). I do wonder about chip packaging. Does TSMC handle it locally, send it to another US firm or are wafers shipped to Malaysia or whatnot for that?

Packaging (card boxes not computer chips ) consumer items in US doesn't really matter other than save on shipping perhaps as you can cram more stuff into a container. They will still get hit by tariffs for goods value.

However actually manufacturing labor intensive electronics, especially lower margin ones is unlikely to happen until more automation is available (better robotics AI is coming certainly).

 

[SScorpio]

High priced GPUs are an ideal target for local manufacturing. They don't require a lot of labor, have high margins and while they do require a lot of electricity to produce, that's one thing which is usually decently priced in US compared to say Europe or Japan (water is another story). I do wonder about chip packaging. Does TSMC handle it locally, send it to another US firm or are wafers shipped to Malaysia or whatnot for that?

Packaging (card boxes not computer chips ) consumer items in US doesn't really matter other than save on shipping perhaps as you can cram more stuff into a container. They will still get hit by tariffs for goods value.

However actually manufacturing labor intensive electronics, especially lower margin ones is unlikely to happen until more automation is available (better robotics AI is coming certainly).

From the article I linked:

NVIDIA Blackwell chips have started production at TSMC's chip plants in Phoenix, Arizona. NVIDIA is building supercomputer manufacturing plants in Texas, with Foxconn in Houston and with Wistron in Dallas. Mass production at both plants is expected to ramp up in the next 12-15 months.

The Al chip and supercomputer supply chain is complex and demands the most advanced manufacturing, packaging, assembly and test technologies. NVIDIA is partnering with Amkor and SPIL for packaging and testing operations in Arizona.

Within the next four years, NVIDIA plans to produce up to half a trillion dollars of Al infrastructure in the United States through partnerships with TSMC, Foxconn, Wistron, Amkor and SPIL. These world-leading companies are deepening their partnership with NVIDIA, growing their businesses while expanding their global footprint and hardening supply chain resilience.

Sounds like TSMC wafers -> Amkor and SPIL packaging -> PCB, case, etc for complete ready to ship to "consumer" ready super computers with Foxconn and Wistron in Texas.

The new push for modular nuclear reactors will hopefully meet the AI and manufacturing needs of the US for the coming future. And if you haven't been watching the NVIDIA keynotes, the advanced automation you mentioned as needing appears to be very close to rolling out.

With the right environment incentivizing development, can lead to major leaps. Hopefully the dot bomb into the social media brain drain is over. That preformed packaging grown from fungus, along with the fake fungus based leather that's starting to appear in cars is mind blowing. And I have a feeling it could just be the tip of the iceberg with a very different looking future not appearing to be a distant pipe dream.

 

[StereoVsn]

From the article I linked:

NVIDIA Blackwell chips have started production at TSMC's chip plants in Phoenix, Arizona. NVIDIA is building supercomputer manufacturing plants in Texas, with Foxconn in Houston and with Wistron in Dallas. Mass production at both plants is expected to ramp up in the next 12-15 months.

The Al chip and supercomputer supply chain is complex and demands the most advanced manufacturing, packaging, assembly and test technologies. NVIDIA is partnering with Amkor and SPIL for packaging and testing operations in Arizona.

Within the next four years, NVIDIA plans to produce up to half a trillion dollars of Al infrastructure in the United States through partnerships with TSMC, Foxconn, Wistron, Amkor and SPIL. These world-leading companies are deepening their partnership with NVIDIA, growing their businesses while expanding their global footprint and hardening supply chain resilience.

Sounds like TSMC wafers -> Amkor and SPIL packaging -> PCB, case, etc for complete ready to ship to "consumer" ready super computers with Foxconn and Wistron in Texas.

The new push for modular nuclear reactors will hopefully meet the AI and manufacturing needs of the US for the coming future. And if you haven't been watching the NVIDIA keynotes, the advanced automation you mentioned as needing appears to be very close to rolling out.

With the right environment incentivizing development, can lead to major leaps. Hopefully the dot bomb into the social media brain drain is over. That preformed packaging grown from fungus, along with the fake fungus based leather that's starting to appear in cars is mind blowing. And I have a feeling it could just be the tip of the iceberg with a very different looking future not appearing to be a distant pipe dream.

If packaging and rest of assembly stays local, that is great. I wonder if they will go downstream from these $50K - $300k plus boxes to something more consumer oriented.

Hopefully that will happen as well.

 

[SScorpio]

If packaging and rest of assembly stays local, that is great. I wonder if they will go downstream from these $50K - $300k plus boxes to something more consumer oriented.

Hopefully that will happen as well.

Hopefully, these are the big ticket items that generate the most revenue. But I also wonder if they are spinning up additional operations in other countries as well.

We likely don't see any Blackwell consumer GPUs created there, but in two years maybe we'll see Rubin or Feynman. It's likely down to if they have capacity to spare. I can see AMD, Apple, and Intel all wanting to produce their wafers there where they don't be hit with the 20% tariff on Taiwan.