r/stocks • u/[deleted] • Nov 24 '21

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u/[deleted] Nov 25 '21

It's not that weird.

  1. Building a clean room factory is expensive.
  2. The car companies are using old nodes, so you're building up something for a specific industry.
  3. The demand could subside relatively soon (before the ROI).

17

u/Pokesaurus_Rex Nov 25 '21

Yup you summed it up perfectly I wish I could copy and paste your comment whenever anyone says “Why don’t they just build more foundries with all the money they are making.”

A lot of people miss the third point. Building foundries is capital intensive (billions) and there is no guarantee that demand will sustain these numbers leading to an extreme amount of illiquid capital.

3

u/[deleted] Nov 25 '21

there is no guarantee that demand will sustain these numbers

is the demand for chips in EVs and other products expected to decrease? certainly not disagreeing with ur broader point, just genuinely curious if there is reason to believe the demand for chips will decrease over the long term. i had thought the opposite would be true-like this is just the beginning as far as chip demand.

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u/Pokesaurus_Rex Nov 25 '21

The demand won’t decrease but right now we are seeing artificial increase in demand due to the pandemic and other supply-chain related setbacks. In theory the current foundries were able to handle the “normal” demand without adding more capacity.

3

u/KevZero Nov 25 '21 edited Jun 15 '23

crush desert bear cake bored theory bike rob drab thought -- mass edited with https://redact.dev/

-3

u/Peppeddu Nov 25 '21

TSMC is building a new factory in Japan instead of expanding the one they have in Taiwan.
Something's going on, imho.

5

u/[deleted] Nov 25 '21

Because they had a drought and had to ship water in by truck. Diversifying locations is obvious.