[Chapter 875: The Industrial Chain]
To be honest, American consumers really had incredible purchasing power. Many Americans did their best to support domestic products, which became particularly evident in the automotive market.
Not lacking in technology, foundational industries, or a consumer base, the big three U.S. car manufacturers should have soared but instead floundered surprisingly.
If William White had suggested that people had a knack for self-destruction, it would have been hard to argue. General Motors had a chance to pull themselves out of the mire, but unfortunately, there was no hope as politicians pushed for the company to move production back to the U.S. Meanwhile, union pressures arose and without wage increases, strikes occurred.
The results were disheartening. By the time General Motors escaped the web of political interference, they were left watching their deficits mount. No matter how profitable their plants abroad became, they couldn't stem the tide of losses back home. Just as they turned a profit, the company fell into another financial crisis.
Most absurd of all might have been the claims that General Motors could produce a large number of ventilators.
"General Motors has no clue how to pivot from cars to medical equipment; they're out of their depth," one industry analyst might have scoffed.
Transforming an automotive factory? Then one might as well be suggesting an impossible dream. These factories were primarily design centers and assembly lines. From stamping metal parts to electronic control systems, how many components were designed in-house? Replacing car manufacturing with ventilators seemed ludicrous compared to just building a new factory.
William White, along with BHP, Rio Tinto, and Vale, dominated globally as suppliers of iron ore.
What about the Great Lakes? Who knew that it might just be the world's largest iron ore producing region? With their own steel mills, there was a certain dynamic where competitors also doubled as clients. If given a choice, who would buy iron ore from the competition?
Shifting focus from iron ore and automobiles, one would be shocked to discover the world's intricate divisions of labor. Trying to integrate the whole industrial chain seemed nearly impossible.
Did Samsung not make phone chips? American companies had dealt with that predicament before. If it weren't for Apple's outstanding position, they would certainly face more scrutiny.
"Selling phones is simple, but you can't dabble in chips and panels. It's just the way it is; no matter how stubborn you are, they will take you down," echoed the executive.
Samsung later found themselves forced to slow down chip development due to insurmountable pressure. If over half the phones produced in the world came from their factories, it's not like others could survive off scraps.
"Sir, Motorola has notified us that in the next supply period, chip prices will significantly drop," one employee reported.
"Significantly? Weren't they in high demand?" the executive replied, skeptical. "What's the inventory like for our J27 models?"
The DVD's position in Japan was somewhat awkward. Although it could sell over a hundred thousand units a year, it still couldn't compete with the sheer sales of video recorders. This was especially true for Panasonic, the behemoth of video recorders.
"Sir, we have an inventory of 150,000 units, which is already a very low level," the staff informed.
"The reason for the price adjustment by Motorola is that Taiwan can already mass-produce them. They will adjust their chip prices to $75."
"That's impressive! Are sales good in the U.S.? I can't say I have seen it," the executive mused, quite perplexed.
"Sales data here shows the U.S. figures are similar; video recorders still lead," the employee explained. "Taiwan is somewhat different; reports indicate they could sell at least 300,000 units this year."
The boss staggered, having never accepted that Taiwanese sales could surpass their own in the U.S.
"What's going on? We're only at about 20,000 units for Panasonic?"
"Uh, well, there are more than 20,000, with many shipped to Hong Kong that mysteriously found their way to Taiwan. We have an issue where Motorola's decoders are region-locked. The few sent to Hong Kong quickly end up in Taiwan."
William White's regional encoding matched the content providers' demands perfectly, which was why he could easily take down MPEG.
But for an international enterprise like Panasonic, it presented considerable complications. They had intended to set one model for all markets, but now had to segregate into multiple regions.
"Even so, these sales must be more widespread. Are we too overpriced, or is there another cause?" the boss pressed.
"Well, the Taiwanese manufacturers haven't followed the agreed-upon conditions. Sir, cracking the DVD region codes isn't particularly difficult, but we need to be cautious about the impact. That's not the case with those OEM products exported to the U.S., which still adhere strictly to this standard."
"Why is that the case?"
"We don't know, and the DVD Consortium has shown no interest in pursuing it. As for those content providers, they aren't making money in Taiwan, either."
The boss, visibly frustrated, understood William White's ambitions. They were simply lowering chip prices by 25% now, but soon enough, in a year's time, prices would drop below fifty dollars.
Then the price of DVD players would dip below one hundred dollars. Semiconductor prices always fell within a year and in three to five years, selling for over a hundred dollars would be near impossible.
"We must strictly control the inventory of video recorders now; it cannot exceed 50,000 units. Also, let's assess whether our Taiwan factory can expand manufacturing."
"Understood, boss. I'll arrange that immediately. Should we leverage some pressure through the DVD Consortium?"
"That would be useless. If William White started production himself, it would be a different story, but that's clearly unfair competition. As of now, he isn't even the actual controller at Motorola."
"America really can be cunning," voiced the employee.
"Come on, get moving!" the boss barked, causing a flurry.
The employee could care less about the scorn. In Japan, hierarchy was taken seriously; being rebuked by the boss felt oddly prestigious. If he felt stifled, he could always take it out on subordinates.
Japan had an unusual nature; if the company president was a real jerk, it was unlikely that anyone would find someone decent inside.
"Isn't that a violation? Haha, Filson, our laws can't constrain them. Do you honestly think we can avoid them cracking the codes?"
Filson understood well; in fact, he knew the boss purposely allowed slack during negotiations.
"Um, Panasonic has a few minor concerns," came the candid reply.
"No worries, they haven't gotten to the good part yet. If I dominate the terminal market, they will definitely unleash their fury, but since we are sharing profits now, they ought to understand the give-and-take.
Sigh, the mid-high end market remains dominated by Japan. In this industrial chain, we reap the benefits of patents and chips while they must rely on their own efforts," Filson thought, realizing that price drops were making them uneasy.
If prices kept plummeting, every American household would add one more home appliance to their collections.
Originally priced over two hundred dollars now seemed excessive, but once it hit one hundred fifty, it looked quite reasonable. If it dipped below a hundred, buying a TV would mean getting a DVD for free.
Since last year, America began promoting digital video distribution, a trend everyone could see unfolding before their eyes. The life cycle of VCRs was nearing its end, and the future surely belonged to digital media.
Digital content would naturally require digital TVs. Once the resolution of these TVs increased, who would still watch videos? After digital VCRs appeared, traditional machines would soon become obsolete electronic waste.
*****
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