Inflation

[sptrawler]

Should something happen to the world's chip supply then obviously the price of what can be manufactured will soar, only exacerbating inflation problems further. Ironically, if war does break out, those factories will, until the war is over, be used for military hardware manufacture, only reducing the civilian supply even more, only exacerbating the inflation problem even more.

My guess is that is why Pelosi visited Taiwan a while back, to talk about relocating the top level chip manufacturing to the U.S, then it removes a lot of the attractiveness for China to take Taiwan if the high level chip manufacturing has been removed.
A deal would have been done to relocate staff and equipment, plus give Taiwan execs easy access to relocate to the U.S, plus ongoing aid.
Then Taiwan just becomes another volcanic island in the Pacific that no one id interested in.
I can't understand why our Government hasn't been doing a deal with South Korea, for Samsung and LG to build battery giga factories in Western Australia, meanwhile we have closed down our battery grade nickel processing plant and put battery material mines on care and maintenance.
It makes you wonder if they are dinkum about actually building here, because we are ordering more and more grid batteries and solar equipment from China, when we could be building our own equipment.
Of course business wont be keen, much more profit in getting your gear from Aliexpress.
IMO we are much better off having inflation due to manufacturing here, than having inflation from paying unemployment benefits and cost of living subsidies, by printing money.

TSMC to make state-of-the-art chips in US after multibillion subsidy pledge

World’s most valuable chipmaker Taiwan Semiconductor to set up third facility in Arizona using funding from Biden policy

www.theguardian.com

Inside Taiwanese Chip Giant, a U.S. Expansion Stokes Tensions (Published 2023)

Employee doubts are rising about Taiwan Semiconductor Manufacturing Company’s $40 billion investment in an Arizona factory.

www.nytimes.com

 

[over9k]

My guess is that is why Pelosi visited Taiwan a while back, to talk about relocating the top level chip manufacturing to the U.S, then it removes a lot of the attractiveness for China to take Taiwan if the high level chip manufacturing has been removed.
A deal would have been done to relocate staff and equipment, plus give Taiwan execs easy access to relocate to the U.S, plus ongoing aid.
Then Taiwan just becomes another volcanic island in the Pacific that no one id interested in.
I can't understand why our Government hasn't been doing a deal with South Korea, for Samsung and LG to build battery giga factories in Western Australia, meanwhile we have closed down our battery grade nickel processing plant and put battery material mines on care and maintenance.
It makes you wonder if they are dinkum about actually building here, because we are ordering more and more grid batteries and solar equipment from China, when we could be building our own equipment.

TSMC to make state-of-the-art chips in US after multibillion subsidy pledge

World’s most valuable chipmaker Taiwan Semiconductor to set up third facility in Arizona using funding from Biden policy

www.theguardian.com

Inside Taiwanese Chip Giant, a U.S. Expansion Stokes Tensions (Published 2023)

Employee doubts are rising about Taiwan Semiconductor Manufacturing Company’s $40 billion investment in an Arizona factory.

www.nytimes.com

Chip manufacture is an extremely skilled process. A skill that this country doesn't have. You'd have to send thousands of people up to taiwan/south korea to learn how to do it and then bring them back here. It would be a more than 10 year process that would have to continue in some kind of strategic partnership with the best koreans/taiwanese coming over here to train people regularly as well.

And that's assuming you can even build the factories in the first place, another ultra-high-skilled task. They need to be over 10,000x cleaner than a hospital operating room. This country can barely build a cubby house any more. Just look at the clusterfuck every other infrastructure project in the last 15 years has been - the nbn, cross river rail, the tunnels in melbourne, the tullamarine to city rail link that's never materialised, you name it, this country has managed to at best case take an eternity to do the most basic of tasks and at worst, fcuk it up completely.

Point is, it's just beyond this country's capabilty. The smartest thing to do (and what they, thank god, have done) is to just let the americans take care of it and then give or do for them what they want to get them to sell us some of theirs.

Unfortunately it means that an opportunity to create an entire industry from literally nothing has been completely squandered (which could have had a fantastic knock-on effect to things like electric car manufacture and god knows what else) but this country is just too far behind the 8 ball now.

Even if someone signed a $10 billion cheque to get samsung and/or TSMC to set up at least one plant here it is no exaggeration to say that it wouldn't actually get properly online until the 2040's.

 

[TimeISmoney]

Chip manufacture is an extremely skilled process. A skill that this country doesn't have. You'd have to send thousands of people up to taiwan/south korea to learn how to do it and then bring them back here. It would be a more than 10 year process that would have to continue in some kind of strategic partnership with the best koreans/taiwanese coming over here to train people regularly as well.

And that's assuming you can even build the factories in the first place, another ultra-high-skilled task. They need to be over 10,000x cleaner than a hospital operating room. This country can barely build a cubby house any more. Just look at the clusterfuck every other infrastructure project in the last 15 years has been - the nbn, cross river rail, the tunnels in melbourne, the tullamarine to city rail link that's never materialised, you name it, this country has managed to at best case take an eternity to do the most basic of tasks and at worst, fcuk it up completely.

Point is, it's just beyond this country's capabilty. The smartest thing to do (and what they, thank god, have done) is to just let the americans take care of it and then give or do for them what they want to get them to sell us some of theirs.

Unfortunately it means that an opportunity to create an entire industry from literally nothing has been completely squandered (which could have had a fantastic knock-on effect to things like electric car manufacture and god knows what else) but this country is just too far behind the 8 ball now.

Even if someone signed a $10 billion cheque to get samsung and/or TSMC to set up at least one plant here it is no exaggeration to say that it wouldn't actually get properly online until the 2040's.

There's only one machine in the world that can make the micro boards and it's run by an independent company working in Taiwan, the machine is so complex it can't even be copied, and they have an independent crew that operates and repairs it, I think they're from the Netherlands by memory and no one else is allowed to touch the machine.

 

[over9k]

There's only one machine in the world that can make the micro boards and it's run by an independent company working in Taiwan, the machine is so complex it can't even be copied, and they have an independent crew that operates and repairs it, I think they're from the Netherlands by memory and no one else is allowed to touch the machine.

Right, hence the whole "you can't just build another one over here in 20 minutes" post.

For the yanks, they already had *some* manufacturing capability onshore. They basically just made the companies build enough extra plants to make the united states entirely self sufficient rather than only partially.

Point is, the capabilities to both build and run/staff the plants was already there. Intel, TSMC etc just needed to do it a few times again. It was genuinely just a case of "You know that shiny new plant you finished last year? Build another one".

That's not the case with aus. With aus, it would all have to be done from scratch. Which would be an absolutely herculean task. I wasn't exaggerating when I said it would take until the 2040's.

 

[over9k]

Point is, it's not a supply problem that could be fixed by just onshoring it. If it was something like oil, well, this country already has *some* oil production. When at least a small amount of something already exists it's generally pretty easy to just scale it up as you usually just need to repeat something you (and your people) have done before. It's literally just "ok do it again".

But if it takes years just to learn how to build the plant then unless you can bring in the guys that already know how to do it then you've got to add the years of learning how to build it onto the years of time it takes to build it.

 

[over9k]

 

[Smurf1976]

This country can barely build a cubby house any more. Just look at the clusterfuck every other infrastructure project in the last 15 years has been - the nbn, cross river rail, the tunnels in melbourne, the tullamarine to city rail link that's never materialised, you name it, this country has managed to at best case take an eternity to do the most basic of tasks and at worst, fcuk it up completely.

I'm conscious that this is getting away from what was intended on this thread but I'll say this.

Big things can be done.

Put competent people in charge and give them authority to, among other things, employ other competent people and to keep incompetent people well away.

Between myself and others on this forum we've seen plenty from the inside in terms of big projects, construction, heavy industry, utilities and so on. Spotting the wrong people is pretty easy, they tend to become visible pretty quickly. Finding the right ones is harder but suffice to say it's more about track record and ability than formal qualifications. Find someone who knows inside and out what they need to do and who's motivated to do it - that's the key criteria. Real knowledge and competence. Put them in the job, keep out of their way and let them do things.

To be clear that's not saying put me in charge. It's saying put competent people in charge as relevant to whatever's being done.

 

[over9k]

I'm conscious that this is getting away from what was intended on this thread but I'll say this.

Big things can be done.

Put competent people in charge and give them authority to, among other things, employ other competent people and to keep incompetent people well away.

Between myself and others on this forum we've seen plenty from the inside in terms of big projects, construction, heavy industry, utilities and so on. Spotting the wrong people is pretty easy, they tend to become visible pretty quickly. Finding the right ones is harder but suffice to say it's more about track record and ability than formal qualifications. Find someone who knows inside and out what they need to do and who's motivated to do it - that's the key criteria. Real knowledge and competence. Put them in the job, keep out of their way and let them do things.

To be clear that's not saying put me in charge. It's saying put competent people in charge as relevant to whatever's being done.

Not to sound prickly: It was a deep dive into why any supply problems for australia will not be solved by simply onshoring production like the yanks have done with semiconductors. So definitely on topic.

 

[qldfrog]

Not to sound prickly: It was a deep dive into why any supply problems for australia will not be solved by simply onshoring production like the yanks have done with semiconductors. So definitely on topic.

And we miss the brain/ people to design, operate, select
The only sizable skills we have in Australia are mining related:
So we have people able to do civil engineering, conveyor belts, and a few process/plc skills for the washplant, port facilities, chemical plants maybe? etc
And we can repair but not build engines and turbines
Any sizeable reshoring would require so much more it is not funny.
Forming proper engineers is a 5 year process,then getting these new graduates efficient and experienced enough 5 years if we gave mentors..probably sending them O/S for that..
If they come back,that is 10y before you can start building these factories..in a country where it takes 2 y to build a 3 bedroom house..but let's assume there is no more BS secret site, water or lizard protection, just looking at existing skills, with money no object, no taxation disincentive etc, in the ideal environment: 2 decades at least before simpler processing factories..like maybe battery building indeed, or face mask , electric motors , perhaps solar panels could be build at scale.
And that would mean a complete education, taxation, IR, government rethink....
For chip manufacturing,this would be unthinkable in my opinion.
Took half a century to build that industry in taiwan/USA.
The US can do reshoring especially if including Mexico,but we are far too gone.
So inflation it will be potentially compounded by the AUD fall vs rest of the world

 

[sptrawler]

Chip manufacture is an extremely skilled process. A skill that this country doesn't have. You'd have to send thousands of people up to taiwan/south korea to learn how to do it and then bring them back here. It would be a more than 10 year process that would have to continue in some kind of strategic partnership with the best koreans/taiwanese coming over here to train people regularly as well.

And that's assuming you can even build the factories in the first place, another ultra-high-skilled task. They need to be over 10,000x cleaner than a hospital operating room. This country can barely build a cubby house any more. Just look at the clusterfuck every other infrastructure project in the last 15 years has been - the nbn, cross river rail, the tunnels in melbourne, the tullamarine to city rail link that's never materialised, you name it, this country has managed to at best case take an eternity to do the most basic of tasks and at worst, fcuk it up completely.

Point is, it's just beyond this country's capabilty. The smartest thing to do (and what they, thank god, have done) is to just let the americans take care of it and then give or do for them what they want to get them to sell us some of theirs.

Unfortunately it means that an opportunity to create an entire industry from literally nothing has been completely squandered (which could have had a fantastic knock-on effect to things like electric car manufacture and god knows what else) but this country is just too far behind the 8 ball now.

Even if someone signed a $10 billion cheque to get samsung and/or TSMC to set up at least one plant here it is no exaggeration to say that it wouldn't actually get properly online until the 2040's.

I actually didn't suggest doing chip manufacturing here, I suggested doing battery manufacturing here in W.A where we already process all the ingredients for batteries.

From my post: #7,421
I can't understand why our Government hasn't been doing a deal with South Korea, for Samsung and LG to build battery giga factories in Western Australia, meanwhile we have closed down our battery grade nickel processing plant and put battery material mines on care and maintenance.

The only reference I made to chip manufacturing was that the U.S may look at relocating the plant/staff and technology to the U.S.

I actually brought the chip manufacturing issue up years ago, when the China Taiwan conflict was mentioned a few years back and said that it was probably the reason that China was interested in taking control over Taiwan again.

I'm not meaning to be pedantic, but it is important you are accurate.

 

[divs4ever]

I actually didn't suggest doing chip manufacturing here, I suggested doing battery manufacturing here in W.A where we already process all the ingredients for batteries.

From my post: #7,421
I can't understand why our Government hasn't been doing a deal with South Korea, for Samsung and LG to build battery giga factories in Western Australia, meanwhile we have closed down our battery grade nickel processing plant and put battery material mines on care and maintenance.

The only reference I made to chip manufacturing was that the U.S may look at relocating the plant/staff and technology to the U.S.

I actually brought the chip manufacturing issue up years ago, when the China Taiwan conflict was mentioned a few years back and said that it was probably the reason that China was interested in taking control over Taiwan again.

I'm not meaning to be pedantic, but it is important you are accurate.

well Samsung decided to hedge against ( all the manufacturing eggs in ) China by building facilities in Vietnam , only to run into issues of a rapidly developing economy ( logistics bottlenecks and rising costs )

i imagine it might even be worse here ( with all sorts of red tape just to get started ) Lynas chose to process in Malaysia for a reason

 

[divs4ever]

if battery manufacture in Australia was viable WES would have had the facility half built by now , they are willing if the numbers are attractive the attempted take-over of LYC showed that

 

[mullokintyre]

My daughter in laws father had a woolpressing business until very recently, he said the wool industry these days is a cottage industry compared to what it was 40 years ago, but back then we had wool mills etc and synthetics were in their infancy.
It is hard to fathom where Australia is going to get a viable industry up and running, input costs are just ridiculously high.

One of the issues with synthetics is that they are chemical byproducts from the refining industry.
So if the world shifts from extracting fossil fuels, then another base organic will be required.
Whether that shift is due to idealogical/politcal decisions or just because the fossil fuels are running out is immaterial, its the end result that counts.
At the moment, the most likely place that base organic will come from is synthetic oils from renewable agricultural/horticultural feedstock.
Australia can be in a position to supply that feedstock,
The alternative is a shift back to non oil based products such as wool and cotton.
Once again, Australia can step to supply those products.
Mick

 

[TimeISmoney]

Right, hence the whole "you can't just build another one over here in 20 minutes" post.

For the yanks, they already had *some* manufacturing capability onshore. They basically just made the companies build enough extra plants to make the united states entirely self sufficient rather than only partially.

Point is, the capabilities to both build and run/staff the plants was already there. Intel, TSMC etc just needed to do it a few times again. It was genuinely just a case of "You know that shiny new plant you finished last year? Build another one".

That's not the case with aus. With aus, it would all have to be done from scratch. Which would be an absolutely herculean task. I wasn't exaggerating when I said it would take until the 2040's.

The company that makes the A-grade chip has subsidiaries also in South Korea, but they make the second grade chip like they're making in the US. The whole advantage of the smallest chip is for warfare, where the weight and size matter like planes and rockets. You can still make powerful computers by having second grade chips to do the same work as the smaller powerful chips but there's a weight and size penalty.

China wants Taiwan for its geographical position, if there's ever an attack on China it will be done by sea or air, it's trying to seal its borders. The last thing China wants is for a foreign power to set up a base right next to its shores to shoot down missiles and spy. Whether the US and Taiwan are getting ready to jump ship with the A-grade chip manufacturing is yet to be seen, which could be a possibility in the worst case, but they'll just leave the specialised machines behind that no one can do anything with.

Australia is so far retarded with manufacturing that they wouldn't even be able to make a mechanically operated washing machine at a profitable price. Anyone who has any brains gets snapped up by overseas giants, there is not enough compensation to keep those people here. Australia is a beautiful country to live in but if you have any brains, financially you're best off going overseas for work where you're well rewarded for your efforts.

 

[IFocus]

Yep this was set in motion quite some time ago. A huge part of it is semiconductor (microchip) manufacture.

A large part of that new money following to construction of manufacturing is funded by the US government (huge increase by Biden) as you say to shore up and secure the supply chain for defense and critical domestic components which I assume is relatively benign inflation wise.

Construction costs are generally the smallest part, equipment and installation costs still to come are far larger again I assume is relatively benign inflation wise.

The US is also looking at raw material and processed material supply coming from friendly allies which they are willing to help fund (Australian government are not at the moment) massive opportunity for Australia companies some with submissions in the mix.

 

[TimeISmoney]

A large part of that new money following to construction of manufacturing is funded by the US government (huge increase by Biden) as you say to shore up and secure the supply chain for defense and critical domestic components which I assume is relatively benign inflation wise.

Construction costs are generally the smallest part, equipment and installation costs still to come are far larger again I assume is relatively benign inflation wise.

The US is also looking at raw material and processed material supply coming from friendly allies which they are willing to help fund (Australian government are not at the moment) massive opportunity for Australia companies some with submissions in the mix.

Even Germany is spending money here, a Brisbane company is building German tanks.

https://www.9news.com.au/national/a...This will be one,told reporters on the tarmac.

 

[IFocus]

Even Germany is spending money here, a Brisbane company is building German tanks.

https://www.9news.com.au/national/anthony-albanese-germany-to-buy-100-aussiemade-military-vehicles-in-largestever-defence-deal/71cf91d4-6723-4c65-93c3-a589756288c6#:~:text=Australia will export more than,will secure around 1,000 jobs.&text="This will be one,told reporters on the tarmac.

TBH I don't really understand this as the Germans run rings around us in manufacturing basically anything.

 

[over9k]

but we are far too gone.

My point exactly frog. Good summary

And you're bang on about the AUD dumping and only compounding the problem.

 

[JohnDe]

Recession, not inflation, is the fear causing markets to tank at the moment.

ASX 200 dives 3pc in $77bn sell off as US recession fears spark widespread losses​

​

Australian investors have seen $77bn wiped off the local sharemarket in early Monday trade, after fears that the powerhouse US economy could be drifting towards recession sent equities tumbling across Asia.​

Supply is no longer an issue, and the cost of goods are slowly coming down. This is helping to reduce the inflation numbers as noted by current figures.

However, government taxes, fees and levies keep increasing the cost of doing business. That and wage growth are keeping inflation in the higher levels. It is not a supply issue.

Consumers are reducing their spending on discretionary goods and services, economic fear is building and causing people that have disposable income to be cautious. The fear of inflation has been taken over by fear of recession.

If the RBA holds the interest rate at the current number, they are showing that inflation is not what they are concerned about. If the RBA reduces the interest rate, they are showing recession is their concern.

The bad thing about an interest rate cut is that the government will run with the theme that their economics is working and call an election instead of repairing the taxation system.

The government is steering the ship, while the RBA man the bilge pump.

 

[Dona Ferentes]

A large part of that new money following to construction of manufacturing is funded by the US government (huge increase by Biden) as you say to shore up and secure the supply chain for defense and critical domestic components which I assume is relatively benign inflation wise.

Construction costs are generally the smallest part, equipment and installation costs still to come are far larger again I assume is relatively benign inflation wise.

The US is also looking at raw material and processed material supply coming from friendly allies which they are willing to help fund (Australian government are not at the moment) massive opportunity for Australia companies some with submissions in the mix.

playing that theme, a bit more. And yes its US govt money to large extent,
.
From Wolf Richter at Wolfstreet.com

“Companies invested a record $19.7 billion in June in the construction of manufacturing facilities, up by 18.6% from the already surging levels in June 2023, up by nearly 100% from June 2022, and up by 209% from June 2019, according to the Census Bureau today.

“The investment totals here only cover the actual construction costs of the facilities, not the costs of the manufacturing equipment and installation that can dwarf the construction costs of the building. The total cost of a big chip plant might reach $20 billion, but the construction costs are the smallest part of it. So the total amounts invested in manufacturing plants, including the equipment and installation, are much higher. But here, the amounts only refer to the construction of the plants and can be seen as a directional indicator of total investment in manufacturing.”