Obviously you have to be big enough but there are no other drawbacks
The other drawbacks are that you lack the competency, the talent, or the patience and investment to develop it. And then the whole thing turns into an expensive debacle.
For instance, take Qualcomm and Samsung. They both used to design their own CPU cores, but ended up killing those programs in favor of licensing ARM's cores. When you're in the SoC business and you have to license somebody else's CPU cores, that's
not vertical integration!
The minute you rely on outsource companies you lose the ability to innovate and you’re at their mercy. They can raise prices for any reason or no reason at all and you’re screwed
That's really a statement about lack of competition among your suppliers, rather than outsourcing in general. Sure, in a situation where you have little/no leverage over your suppliers, then DIY becomes more attractive.
And by doing this themselves they’re not relying on TSMC who is already overburdened.
Exactly
who are you saying isn't relying on TSMC? Do you think Tesla
fabs its own chips, too??
Do you see what I’m getting at with this? Is it really that hard to understand? Now they’re not constrained by other companies. Do you still not get it?
That last statement causes me to wonder how much you really know about this stuff. I mean, probably 90% of the components in a Tesla car are sourced from other companies. Do you think Tesla makes its own airbags? What about all the thousands of sensors in its cars? How about all the wires or the foam in their seats?
And
true & complete vertical integration would have them mining their own iron, producing their own vulcanized rubber, and making their own tires. And why not? ...because they're strategic, not dumb. They know where they're trying to add value or competitive advantage.
I completely dis agree with you on every point you’ve made.
Cool. When you start a successful business, be sure to let us all know.
And please provide links for what you say about SpaceX because I don’t believe they’re outsourcing all that much. Basically you fell for a LOAD OF HOGWASH and obviously still believe it. Sad.
https://www.ft.com/content/4961bd6f-bb4b-4ffd-8de8-9b65aebccfd3
"The second part of the Silicon Valley formula involved a disruptive economic model. The secret of SpaceX’s success has been its command of fixed-price contracting, a new technique that a cash-strapped Nasa has used to stretch its budget further. Space contractors brought up in the previous cost-plus world have struggled to adapt. A Nasa study credited SpaceX with leaner staffing, fewer levels of management and a new supply chain that didn’t depend on the automatic mark-ups contractors applied in the past.
The extent of this economic disruption is likely to reverberate through the space sector for years. Nasa calculated that SpaceX’s Falcon 9 rocket took under $400m to develop, less than a tenth of what it would have cost to create the rocket under its traditional contracting method."
Tesla Obviously knows the market they’re competing in, and they are the most successful EV company out there
You can't overlook their first-mover advantage.
I’m talking about Tesla and there’s no reason they shouldn’t vertically integrate. They are making tons of money, they are a money making machine and they are huge and they plan to be gigantic and they will be
Another thing you need to understand about businesses is profit margins. If doing something in-house can save enough money, then sure. But, it has to be done well, and in the highly-regulated automotive world, that can be a high bar - which means requiring lots of investment to get it right. That's why they don't develop tires, airbags, or even the chips powering the entertainment consoles in their cars, which are made by AMD.
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