From a US perspective, it's a strange mix of these two things( from consumer electronics):
- We don't open more chip factories here, because labor/regulation/land/etc is too expensive
- We don't have enough logistics workers (docks, truks, etc) because it doesn't pay enough.
Right? Am I seeing this wrong? Because what I keep reading is that we have ships just waiting in California to be unloaded but not enough dock workers to unload them and truck drivers to move the goods out?
That sounds right to me. The press has tried to push all sorts of narratives, but buried in the previous Bloomberg article on the ports we learn that 30% of truck appointments go unfilled. The WSJ article yesterday quoted Long Beach port guy saying only 60% of their truck appointments are being utilized.
- Yes, many older truckers retired instead of dealing with COVID. This applies to many other sectors, most notably in my area school bus drivers. Other countries (notably, UK and EU fuel truck drivers) are also facing shortages of truck drivers. Nursing, retail, hospitslity have all been in the news recently for the same issue. Recent reports show 12 million open positions and only 8 million people seeking employment (estimsted, of course)
- physical layout only allows for so much throughput at a time. The bigger the jam, the longer it'll take to clear
- yes and no. Rail doesn't (directly) go to most places, and those that it could, often don't have distribution logistics in place from the customers since they already have their chain configured for trucks
- it is a net loss all around for everyone. Any higher prices on goods are offsetting losses from reduction in volume. Theres no evil fairy tale villain to blame.
I recently heard (second hand, so take with some salt) that there are two causes of problems:
First, California passed a law that trucks had to be newer than 10 years, or else face an expensive refit for pollution control. (At least, I think it was pollution control.) Point is, the average truck was 14 years old. The obvious-in-retrospect consequence is a shortage of trucks that can legally work in California.
Second, there was this recent law that required Uber to treat drivers as employees, not contractors. Well, a lot of the truck drivers are owner-operators, and they fell under that law. The consequence: You can't just contract with an owner-operator to move your container.
As I said, I don't know any of this first-hand, so take with some salt.
I have an insider's info about the airline shortages, I suspect trucking is the same way.
When the pandemic was going on and everything was shut down many of the older staff decided to just retire. You cannot quickly spawn up new pilots or ATCs. Some small percentage of workers are facing a medical mandate they may be unwilling to comply with and so are using any sick days that they may lose after being fired when the mandate hits. The ones that remain are so overworked they are exhausted and unable to work more and/or are getting sick due to stress and exhaustion.
Some of my relatives are halfway joking about quitting their jobs, getting their CDLs, and becoming truck drivers. At least, I'm pretty sure they are joking. One of them has a PhD in economics, so I think he is joking.
'80s in Poland. Math professor at Warsaw university finds out he would earn more money if he worked in a shipyard, so he quits his job and find a job in the docks. And indeed he earns more money.
One day he overhears that there is an evening school and every worker who will attend will receive 10% bonus, so he signs up for it. First day in this evening school, very first class is math. But they have such a trivial topics that professor became bored and reads newspaper under the table. Teacher notices it and call him up to calculate the area of a circle.
Professor is so surprised that he suddenly can't remember the formula, so he converts it in his head to polar coordinates and uses integral to calculate the area, and then write the formula on the table:
S = -PI * r * r
Then he scratches his head and start thinking where the minus came from when suddenly someone shouts from the back row: "flip the interval of integration, colleague!".
Like in the article, did the guy say the appointments were going unfilled after they raised the pay a bunch and made it easy for the driver, or did he just say they were going unfilled?
With delays, but.. yes, Samsung has chosen Austin as it's location for a 3nm chip plant, and 2nm chips coming after 2025 [0].
The truth is that Bitcoin was actually one of the few Industries that was spurring on chip manufacturing in the US, Butterfly labs was one of the few that could challenge Bitman in the early day but had to give it up due to increasing regulatory red-tape and an ever greater monopoly in Schenzen.
As both a former SCM and a Bitcoiner I think that the US had to go through the shock doctrine before it realized it was playing Russian Roulette with it's Supply Chain, and it's Value Chain for decades as every CEO and exec with an MBA from an Ivy League decided to gut the manufacturing Industry.
This allowed for Amazon's rise in dominance, and has pretty much disrupted the traditional fulfillment, and distribution system and made it entirely it's own: every business I've interviewed for since COVID now follows freight, air routes that were optimized by Amazon.
It's personally appalling that a company that makes nothing has been able to supplant SC and Logistics to this degree, but it's firther proof that Big Tech [Software] has in fact eaten the World.
As for the low pay, I think what also needs to be noted is how damaging it is to do warehouse work, working injured is the norm not the exception, couple that with many weeks without breaks and swing shifts (now also the norm, not the exception due to all of these delays) no amount of money is enough to get me back. I had an interview in Supply Chain Management that was teasing high 5 figures, to low 6 figures but was very upfront that I'd have to commit to 70+ hour work weeks, swing shifts, and 40-50 days without a day off.
You can rise fast if you're competent, and even faster if you have a background in tech but the truth is I'm over that phase in my Life and SCM as a job is never ending so I decided to just focus on the Software side of things and focus on using ML and AI in Logistics and Supply Chain and went back to school for a degree in CompSci after a career in fintech and a short-stint at IBM where I was trying to resolve this issue within the Ag/Food Industry;s logistics and Supply Chain without much success.
It's sad we had so much interest from Megacorps and IBm could have been a leader in this space, instead it has been broken up and remains a shell of it's former self that played a critical role in the Apollo Missions.
Butterfly Labs was basically using the customer paid rigs to mine Bitcoin for themselves before they shipped customers obsolete devices. They only sent me mine after I called my CC company, disputed the charges & reported the non-delivery as fraud...magically, my rig showed up a week later.
> Butterfly Labs was basically using the customer paid rigs to mine Bitcoin for themselves before they shipped customers obsolete devices. They only sent me mine after I called my CC company, disputed the charges & reported the non-delivery as fraud...magically, my rig showed up a week later.
And you don't think Bitmain did the same thing?
Again, I'm not advocating the business models of either corp, and to be honest I think open-hardware is where we should be focusing on our collective attention during this supply chain disruption in order to make some actual progress.
But it's still worth noting that ASIC development was concentrated in Shenzhen with no competitors to speak of prior to Butterfly labs. Still, this is all to say we have don ea poor job despite all the red flags until it all came crashing down and now Mega corps are likely to cash in on this and the infrastructure bill to 're-shore' the same manufacturing they and their predecessors fought like hell to offshore in the 80-90s.
I think you’re partly wrong on chip factories. While most new plants have been opened in Asia in the past few years, there are major plants under construction in the US by both Intel and TSMC [0]. Additionally, the US still has a large number of fabrication plants [1]. And US-based semiconductor companies handled around 48% of the global market share in 2019 [2].
So I think it’s not true to say that US had completely lost its edge with semiconductors, nor that the US moved all its manufacturing capacity to Asia. The US has been and is still competing to be one of the largest players in the semiconductor industry, even if it might not be first place anymore.
And I think it’s fair to question whether the US needs to be in absolute first place. Asian countries have significantly more population and therefore need for semiconductors compared to the US, so it makes sense that eventually, manufacturing capacity would be more relative to local population levels.
Thanks for the correction on the chip factories, and I agree with your last point about "needing to be in first place" but this pandemic has surely made it more evident how quickly we can be disrupted by either an Act of God or a country just waking up one day and deciding they no longer want to sell us things.
It takes years to open a new chip factory. And the kinds of chip factories that get opened here in the US are unlikely to be the kind required to solve the problem that the car manufacturers are having, because they’re looking at old technology commodity chips that no one here in the US would want to make.
That is unless you’re wiling to pay 10-100x more for them, through contracts that require you exclusively make and supply them here in the US, much like the US military does for chips that they really care about.
But then it would take years for those kinds of contracts to make their way through all the various intermediaries, and third, fourth, and fifth parties, etc….
There’s lots of problems inside this “Perfect Global Multi-Year Hurricane” of supply chains.
It's well more than the median income in the area. People are taking jobs that pay less. So it clearly has more to do with other factors like the work conditions or training requirements or such. Companies not willing to pay for training is a common story...
Chip making is technologically difficult, even if you can buy all the same machines TSMC uses. It is evident from previous failures that a nation can't just say "we need on-shore chip capacity" and pay to get it. in the US, Intel fell behind TSMC and GF can't catch up. The situation is more dire most other places.
Notably, no Chinese company has been able to match the top tier capabilities of TSMC and Samsung so far. Even though Beijing is certainly interested in achieving technology parity at least.
I don‘t think salary of the workers is the problem here. It is more about regulatory/union obstacles that prevent ports from competing and being automized
You mean robots, or other ports being used? There were a lot of stories this morning about "Florida being open for business" but of course that comes with a ship that is currently in CA going to FL.
Container shipments are up like 20% from pre covid levels. It isn’t that there is a shortage so much as people haven’t adapted to the increased demand for goods.
Dockworkers being poorly paid is definitely not true. It's been a while since I lived in Long Beach, but these were among the most desirable jobs you can get. Any time the union announced it was hiring, they needed to do a lottery to even get the opportunity to apply. Whatever the reason it is that not enough people have this job, it isn't that they don't want it or that it doesn't pay enough.
Trucking pays pretty well, too, but comes with a different set of challenges. You have to be willing to live on the road, sleeping at truck stops or in your own cabin, never seeing your family if you even have one, sitting for 8-12 hours a day and destroying your spine orthopedically. It takes a special kind of person to want that job no matter how well it pays.
Hard to say if that would actually be effective. I can imagine there would be some improvement if you had assigned some drivers from the national guard's motor pool. But it could also be the case that throwing more people at the problem actually makes things worse, almost like in the Mythical Man Month. I imagine there is probably a ton of skill and "lay of the land" around trucking at a specific port and that kind of experience needs time to cultivate.
Who's going to pay for that? Have government subsidise the ports by providing them with free labour? Has capitalism failed so immediately that there's no other way to get workers?
The port is a government operation already, so that doesn't seem like much of an argument.
While I have no particular expertise as to where the bottlenecks lie, I don't think capitalism has any special solution to a limited pool of existing skilled labor, a large increase in demand, and a long lead time to train new skilled labor.
And at least some of the bottleneck occupations in question are regulated (and for good reason) about how long they can work, removing one of the most obvious ways to immediately get "new" labor - pay the existing labor whatever it takes to get them to agree to work more hours.
The downside of not calling them out? Stuff doesn't get off of ships in time for everybody to have their dream Christmas.
The upside is that the National Guard gets to remain available to be the National Guard, instead of a trucking company. You know, so they can be available if we need them?
Look into the provision of free aid (usually goods, sometimes services) in areas.
For a short-term measure, this can make sense. In the long term, it's a market distortion by introducing a free alternative to local production. Much as price or wage controls are argued as preventing the market from working properly, utilising an idle or contingent commandable labour force (army or national guard) to solve what is in large part a market problem only amplifies the market problem.
If that is done, businesses aided by such services should be charged, and I'd make a strong case for above-market rates, perhaps with extended credit but also superior claims (such that other creditors are subordinate in the event of liquidation of the business). Such a strategy would address the immediate emergency but price in the previously ignored latent risk, and encourage entry to that specific labour market.
The National Guard Transportation Corps does have units qualified to load and unload container ships that can be called up in the event of a true emergency, but I doubt this qualifies. They still have regular full-time jobs. The active duty military can't be used for something like this unless we're actually at war.
Of course, me saying I "doubt" this qualifies is a personal opinion. As far as I know, it's pretty much up to the governor of each state to decide what counts as an emergency worthy of activating the Guard. I don't think it's ever been done as a response to somewhat higher than average inflation rates, though. It's usually natural disasters and long-running riots that the police can't control.
Remember how there were stories from pretty much all mainstream media telling you how lumber price are sky high and inflation etc etc? ( Not arguing for or against inflation, just pointing out that usage as data point may not paint a good picture )
It may be wise to look at the price of lumber [1] within 1 year time frame to get a sense of how commodity works.
Well they are not wrong. Lumber price was sky high. Change the time scale to 10 years and that peak was still unprecedentedly high. Inflation was and is still high. The mainstream media are reporting the truth, as far as I can tell.
Well for starters you'd be eating nothing but canned vegetables and jerked meat for most of the winter if you live far enough north to regularly get snow.
I don't think meat would have really a problem. Coming from country in north which is quite self-reliant on that side. But vegetables and fruit are much harder to handle.
Fundamentally, the theory of trade is that there are comparative advantages in different areas. At the time the theory was introduced, the early 19th century, by David Ricardo, much of that advantage was in agricultural products. Goods such as timber, cotton, wool, grain, tobacco, sugar, hemp, silk, and spices were either much more readily grown in certain areas, or were highly specific to specific climates. We see much of this today still.
Extractive commodities also are very specific as to location, with tin, copper, gold, and silver particularly notable in ancient times. In the industrial era, this is dominated by fuels: coal, petroleum, and natural gas most especially, as these are both 1) highly concentrated energy sources and 2) very unevenly distributed geographically. Strategic minerals --- non-fuel resources which are vital to advanced manufacturing but are not widely distributed, are another concern, and was first recognised by the US during World War I (see the "Harbord List").
Another set of inequalities emerges though in the sense of regulations and power-balance between specific economic sectors, most especially capital and labour, though also of environmental regulations. One view of China is that it's been exporting not only hugely disadvantaged cheap labur, but a tolerance for accepting tremendous long-lasting economic damage without pricing that into the cost of its goods and services.
There's an argument that manufacturing, if all extermalities and labour differences are priced in, should not be a geographically differentiated service, in general. Specific sectors of expertise might emerge (a discussion on its own), and there's the question of being able to motivate or redirect a massive workforce on short order (again, a strength of China's, though one India or Indonesia might also be able to match, eventually Nigeria as well if its population continues to rise).
That would leave us with some locally-provisioned goods and services, and some imports. Overall the world might look more like the late 19h century through mid 20th, where local advantages in natural production account for some global trade, but most food and finished-goods production is relatively local.
68 comments
[ 4.5 ms ] story [ 139 ms ] thread- We don't open more chip factories here, because labor/regulation/land/etc is too expensive
- We don't have enough logistics workers (docks, truks, etc) because it doesn't pay enough.
Right? Am I seeing this wrong? Because what I keep reading is that we have ships just waiting in California to be unloaded but not enough dock workers to unload them and truck drivers to move the goods out?
Surely whatever a driver transports is worth much more than the paycheck they get?
B) are there bottlenecks at the ports that prevent more trucks?
C) can rail be used to move boxes?
D) who is making money by things NOT moving?
- physical layout only allows for so much throughput at a time. The bigger the jam, the longer it'll take to clear
- yes and no. Rail doesn't (directly) go to most places, and those that it could, often don't have distribution logistics in place from the customers since they already have their chain configured for trucks
- it is a net loss all around for everyone. Any higher prices on goods are offsetting losses from reduction in volume. Theres no evil fairy tale villain to blame.
First, California passed a law that trucks had to be newer than 10 years, or else face an expensive refit for pollution control. (At least, I think it was pollution control.) Point is, the average truck was 14 years old. The obvious-in-retrospect consequence is a shortage of trucks that can legally work in California.
Second, there was this recent law that required Uber to treat drivers as employees, not contractors. Well, a lot of the truck drivers are owner-operators, and they fell under that law. The consequence: You can't just contract with an owner-operator to move your container.
As I said, I don't know any of this first-hand, so take with some salt.
Do our representatives not realize literally EVERYTHING we have access to depends on trucking?
When the pandemic was going on and everything was shut down many of the older staff decided to just retire. You cannot quickly spawn up new pilots or ATCs. Some small percentage of workers are facing a medical mandate they may be unwilling to comply with and so are using any sick days that they may lose after being fired when the mandate hits. The ones that remain are so overworked they are exhausted and unable to work more and/or are getting sick due to stress and exhaustion.
One day he overhears that there is an evening school and every worker who will attend will receive 10% bonus, so he signs up for it. First day in this evening school, very first class is math. But they have such a trivial topics that professor became bored and reads newspaper under the table. Teacher notices it and call him up to calculate the area of a circle.
Professor is so surprised that he suddenly can't remember the formula, so he converts it in his head to polar coordinates and uses integral to calculate the area, and then write the formula on the table:
S = -PI * r * r
Then he scratches his head and start thinking where the minus came from when suddenly someone shouts from the back row: "flip the interval of integration, colleague!".
Which apparently isn't anything new (2015): https://archive.kpcc.org/news/2015/06/02/52126/for-truck-dri...
Like in the article, did the guy say the appointments were going unfilled after they raised the pay a bunch and made it easy for the driver, or did he just say they were going unfilled?
The truth is that Bitcoin was actually one of the few Industries that was spurring on chip manufacturing in the US, Butterfly labs was one of the few that could challenge Bitman in the early day but had to give it up due to increasing regulatory red-tape and an ever greater monopoly in Schenzen.
As both a former SCM and a Bitcoiner I think that the US had to go through the shock doctrine before it realized it was playing Russian Roulette with it's Supply Chain, and it's Value Chain for decades as every CEO and exec with an MBA from an Ivy League decided to gut the manufacturing Industry.
This allowed for Amazon's rise in dominance, and has pretty much disrupted the traditional fulfillment, and distribution system and made it entirely it's own: every business I've interviewed for since COVID now follows freight, air routes that were optimized by Amazon.
It's personally appalling that a company that makes nothing has been able to supplant SC and Logistics to this degree, but it's firther proof that Big Tech [Software] has in fact eaten the World.
As for the low pay, I think what also needs to be noted is how damaging it is to do warehouse work, working injured is the norm not the exception, couple that with many weeks without breaks and swing shifts (now also the norm, not the exception due to all of these delays) no amount of money is enough to get me back. I had an interview in Supply Chain Management that was teasing high 5 figures, to low 6 figures but was very upfront that I'd have to commit to 70+ hour work weeks, swing shifts, and 40-50 days without a day off.
You can rise fast if you're competent, and even faster if you have a background in tech but the truth is I'm over that phase in my Life and SCM as a job is never ending so I decided to just focus on the Software side of things and focus on using ML and AI in Logistics and Supply Chain and went back to school for a degree in CompSci after a career in fintech and a short-stint at IBM where I was trying to resolve this issue within the Ag/Food Industry;s logistics and Supply Chain without much success.
It's sad we had so much interest from Megacorps and IBm could have been a leader in this space, instead it has been broken up and remains a shell of it's former self that played a critical role in the Apollo Missions.
0: https://www.gizchina.com/2021/10/07/samsung-delayed-the-impl...
https://www.theverge.com/2014/9/23/6833047/bitcoin-conspirac...
And you don't think Bitmain did the same thing?
Again, I'm not advocating the business models of either corp, and to be honest I think open-hardware is where we should be focusing on our collective attention during this supply chain disruption in order to make some actual progress.
But it's still worth noting that ASIC development was concentrated in Shenzhen with no competitors to speak of prior to Butterfly labs. Still, this is all to say we have don ea poor job despite all the red flags until it all came crashing down and now Mega corps are likely to cash in on this and the infrastructure bill to 're-shore' the same manufacturing they and their predecessors fought like hell to offshore in the 80-90s.
1. https://www.cnbc.com/2021/03/23/intel-is-spending-20-billion...
2. https://www.cnn.com/2020/05/15/tech/tsmc-arizona-chip-factor...
3. https://austonia.com/samsung-chooses-taylor
4. https://www.cnet.com/tech/mobile/intel-investing-3-5b-in-new...
So I think it’s not true to say that US had completely lost its edge with semiconductors, nor that the US moved all its manufacturing capacity to Asia. The US has been and is still competing to be one of the largest players in the semiconductor industry, even if it might not be first place anymore.
And I think it’s fair to question whether the US needs to be in absolute first place. Asian countries have significantly more population and therefore need for semiconductors compared to the US, so it makes sense that eventually, manufacturing capacity would be more relative to local population levels.
- 0: https://www.allaboutcircuits.com/news/semiconductor-fabs-dot..., https://asia.nikkei.com/Business/Tech/Semiconductors/Intel-b...
- 1: https://en.wikipedia.org/wiki/List_of_semiconductor_fabricat...
- 2: https://www.semiconductors.org/wp-content/uploads/2020/07/20...
That is unless you’re wiling to pay 10-100x more for them, through contracts that require you exclusively make and supply them here in the US, much like the US military does for chips that they really care about.
But then it would take years for those kinds of contracts to make their way through all the various intermediaries, and third, fourth, and fifth parties, etc….
There’s lots of problems inside this “Perfect Global Multi-Year Hurricane” of supply chains.
Ergo, it must really be difficult.
Trucking pays pretty well, too, but comes with a different set of challenges. You have to be willing to live on the road, sleeping at truck stops or in your own cabin, never seeing your family if you even have one, sitting for 8-12 hours a day and destroying your spine orthopedically. It takes a special kind of person to want that job no matter how well it pays.
Can the army be called up to help out for a short duration?
Every time I go to a store, they are sold out of something. The answer I always get is that it is stuck on a ship.
https://www.dailynews.com/2021/10/13/biden-to-announce-that-...
I don't actually know, just speculating.
While I have no particular expertise as to where the bottlenecks lie, I don't think capitalism has any special solution to a limited pool of existing skilled labor, a large increase in demand, and a long lead time to train new skilled labor.
And at least some of the bottleneck occupations in question are regulated (and for good reason) about how long they can work, removing one of the most obvious ways to immediately get "new" labor - pay the existing labor whatever it takes to get them to agree to work more hours.
Sure, call them out in an emergency. This isn't one.
The upside is that the National Guard gets to remain available to be the National Guard, instead of a trucking company. You know, so they can be available if we need them?
I don't celebrate Christmas and I get why you're being flippant here, but it can have a significant impact on the economy.
> You know, so they can be available if we need them?
I think they'd still be available if something higher priority came up, no? Like I said earlier, they're already driving school busses in some states.
For a short-term measure, this can make sense. In the long term, it's a market distortion by introducing a free alternative to local production. Much as price or wage controls are argued as preventing the market from working properly, utilising an idle or contingent commandable labour force (army or national guard) to solve what is in large part a market problem only amplifies the market problem.
If that is done, businesses aided by such services should be charged, and I'd make a strong case for above-market rates, perhaps with extended credit but also superior claims (such that other creditors are subordinate in the event of liquidation of the business). Such a strategy would address the immediate emergency but price in the previously ignored latent risk, and encourage entry to that specific labour market.
However getting your new iPhone a couple of days late doesn't constitute such an emergency.
Of course, me saying I "doubt" this qualifies is a personal opinion. As far as I know, it's pretty much up to the governor of each state to decide what counts as an emergency worthy of activating the Guard. I don't think it's ever been done as a response to somewhat higher than average inflation rates, though. It's usually natural disasters and long-running riots that the police can't control.
It may be wise to look at the price of lumber [1] within 1 year time frame to get a sense of how commodity works.
[1] https://www.nasdaq.com/market-activity/commodities/lbs
We have centuries of observations confirming this.
Fundamentally, the theory of trade is that there are comparative advantages in different areas. At the time the theory was introduced, the early 19th century, by David Ricardo, much of that advantage was in agricultural products. Goods such as timber, cotton, wool, grain, tobacco, sugar, hemp, silk, and spices were either much more readily grown in certain areas, or were highly specific to specific climates. We see much of this today still.
Extractive commodities also are very specific as to location, with tin, copper, gold, and silver particularly notable in ancient times. In the industrial era, this is dominated by fuels: coal, petroleum, and natural gas most especially, as these are both 1) highly concentrated energy sources and 2) very unevenly distributed geographically. Strategic minerals --- non-fuel resources which are vital to advanced manufacturing but are not widely distributed, are another concern, and was first recognised by the US during World War I (see the "Harbord List").
Another set of inequalities emerges though in the sense of regulations and power-balance between specific economic sectors, most especially capital and labour, though also of environmental regulations. One view of China is that it's been exporting not only hugely disadvantaged cheap labur, but a tolerance for accepting tremendous long-lasting economic damage without pricing that into the cost of its goods and services.
There's an argument that manufacturing, if all extermalities and labour differences are priced in, should not be a geographically differentiated service, in general. Specific sectors of expertise might emerge (a discussion on its own), and there's the question of being able to motivate or redirect a massive workforce on short order (again, a strength of China's, though one India or Indonesia might also be able to match, eventually Nigeria as well if its population continues to rise).
That would leave us with some locally-provisioned goods and services, and some imports. Overall the world might look more like the late 19h century through mid 20th, where local advantages in natural production account for some global trade, but most food and finished-goods production is relatively local.
On the upside you'll also have more money after the logistic issues end!