US sues to break up military and space kit acquisition The US Department of Justice wants to bust an alleged monopoly by Microsemi, a California-based firm that sells high-reliability electronic kit to the government for military applications, satellites, and spacecraft. On Thursday, the DoJ filed a civil antitrust lawsuit against the company in the Eastern District of Virginia, …
So one company can't buy another one if it would "reduce competition" or increase cost for the DoD? So what happens if one of the companies goes bankrupt? Will the DoD and DoJ give it a huge wad of cash to continue operating? Oh, that's right, they would. We learned that from MCI.
What monopoly? The only reason they have a monopoly is because the USA won't buy from Asia if it's going into military or space equipment. Which is a joke as these components have absolutely no national security significance whatsoever. Now if they were buying telecomms equipment I'd understand, especially as most of the telecomms equipment made nowadays comes from China.
There's always the occasional need to break up de facto monopolies. In this case, the monopoly has ties to the Defense Department...and thus, national security. In this case, competition is definitely healthy since it keeps manufacturers on their toes (much as their constant one-upmanship keep ATI and nVidia in top shape). Since the DoD has abnormally high quality requirements (for reasons stated in the article), they need companies that can deliver. One thing complacent monopolies cannot do is deliver.
There is no national security issue here at all.
We are talking about semiconductor devices made in a manufacturing plant.
I very much doubt that the new company has changed the manufacturing processes to produce a lesser quality component. - which is what the letter from the lawyers seems to be suggesting.
These are 'basic' components, of very low complexity - single device in fact - and are turned out in their millions by numerous companies around the world, and they've been doing it for the last 40+ years.
Yes, the military does demand higher reliability components and this is achieved by testing the parts more thoroughly after manufacture. Where as a component sold to the commerical market may sell for 10 cents, the same component for military use will cost 10 times that, the component is the same, the manufacture of the component is the same, what's different is the amount of testing and the type of testing that is conducted on the part.
Military components are spec'ed over a much wider range of temperature and voltage supply.
They are burned in, heated in an over to weild out early-life failures, with the ones that haven't failed, unlikely to fail for quite a high number of years.
They're placed in an environment chamber and temperature cycled, down to typically, -40 degrees celcius and up to +125 degrees celcius.
The part is the same damn part! The test regime required to classify the product as military spec, is why the part costs so much more.
There are defense standards laid down which define the tests required, if a manufacturer produces parts which are tested to those standards and that's verified by the DoD then there is no reliability issue at all.
This issue is not about reliability of parts, it's about bullying, it's about the DoD not being happy with the situation, for whatever reason, and trying to break the company up.
This is no way for the DoD to act. As someone else said, I wouldn't be at all surprised the right people haven't been paid by the company.
You show a pretty good grasp of the process there. I used to do part of that job :)
However, not all semiconductors are the same, the point with this article was that because they only buy from US companies and there were only 2 companies making the components the merger resulted in a monopoly which the company then immediately abused by putting up it's prices to the DoD. How would you feel if suddenly every supermarket in the country was bought by Tesco creating a monopoly and then Tesco doubled the price of everything it sold overnight? You can't go abroad to buy your food, there's nowhere else to go. It's for this reason that monopolies are frowned upon.
to a musical buffoon
http://cgi.ebay.co.uk/ws/eBayISAPI.dll?ViewItem&item=150313284039&cguid=e297986711c0a0e202861986ffd7239b
you can fool some other non-scientific retards for a lot of the time, to the tune of whatever it takes to make a country really, really, really safe against everything (pat. pend)
There's nothing wrong with a monopoly. It's the abuse of monopoly power that is the problem. Microsemi buying Semicoa isn't a problem. Microsemi raising prices isn't a problem. It would only be a problem if Microsemi used its monopoly position to quash or prevent competition.
By raising prices, Microsemi has actually made the market more favourable to a competitor. Since they aren't the only semiconductor maker in the world, this leaves the door open to another maker (example, National Semiconductor) to manufacture military grade components.
Another competitor enters the market, prices come down, the market rules again.
Anti-competitiveness would be if Microsemi convinced its most-likely competitor not to enter the market, in return for concessions from Microsemi.
Steve, because Gil Amelio (or John the Baptist as we call him) used to head National Semiconductor.
... isn't that the government is worried about reliability, the government is pissed off that they're being forced to pay more for the same product than they did last time.
Gee. Welcome to stagflation, Uncle Sam! Who helped to create that? Oh, yeah, YOU DID!
There's no issue about lack of competition here. There is nothing stopping a new company to come in and offer to build the same parts at a lower price, especially if it means that the government will shift their buying preference to them because of the cost savings.What a load of crap.
You're forgetting that with the higher priced DoD spec components also comes far more responsibility on the part of the component- if their diode fails to switch as fast as required when it's within limits then there will be financial problems for the company down the line- either their military contracts will dry up (to a degree related to the severity of the failure) or they'll be fined/sued.
As you said halfway through your post, the parts that are sold to the DoD are from batches that are unlikely to fail, due to the weaker batches weeded out. So there IS a difference and it's not the same component- it's a component with the same design but a far lower % failure rate.
If they used the "standard" off-the-shelf component then the weaker batches would be built into equipment. Would you really want to be the soldier with equipment that wasn't built to a decent quality spec? The pilot zipping along in an SR71 that has diodes nabbed from a school's supplies by one of the staff's kids? Okay, it's the same part number. But the chances of it being a bit crap or easily knackered are far higher.
I tell you what, we'll get some absolutely untested electronic components and have them run the in-flight functions on the next plane you're on. Would you be happy with that? Would you expect this aircraft to have an MTBF lower, the same as or higher than the "properly" built aircraft?
Various parts of industry also have a need for the higher-reliability components as well, so it's not only the DoD benefitting. And anyway, it's good to keep competition in a market. Otherwise people get sloppy.
For a computer analogy, look at the early Pentium 4s- they were bloody awful, and that was because there wasn't a great deal of competition in the processor market. As soon as AMD started clawing market share, intel's designs suddenly became a lot better.
For the obligatory car analogy, think of the car industry in the 70s. They were (mostly) all crap, so when the more reliable, cheaper and not-built-in-different-months-because-of-strikes Japanese cars started coming on the market, the british cars had to get better to stay in the market. Unfortunately, they didn't, so it's probably a bad analogy. The point is that competition is good, mm'kay?
Do you have any idea how long it takes to start producing parts from scratch?
You're talking a whole new production line, so that's a new clean room facility that needs building to start with.
Next is R&D, you can't just start copying another company's designs (unless you're China). So you have to design a whole new way of making the components.
Next you need to qualify the parts for military use, so that's months of production and testing, during which time the chances are you'll find the part isn't up to spec and you're back to designing again.
Finally after many months, possibly even a year you may have a part that you feel is robust enough. Now you can turn on all the machinery in your new clean room, and train the staff you now have to hire to build the parts. Now try selling your component. You can't undercut the competitor as you need to claw back the millions you've spent on factory space, R&D and staff, and all of a sudden the higher prices the military are paying seem a good idea.
Manufacturing is cheap, R&D is expensive. A new semiconductor manufacturing facility can be anywhere upto 50 million GBP (more if you're looking at ASICS). For an R&D facility making just plain old mosfets and igbts a company I worked for was looking at a spend of 20 million, without waferfab. All of a sudden becoming a competitor doesn't sound so good.
There is also the issue that components have to be made to the exact spec they were when the original equipment was designed so in some cases high prices are paid for small batch runs of what would now be obsolete parts.
There are companies which still source and maintain fab tools that no one now uses just so that certain military components can still be made the same way they were 15 years ago. The cost of what would seem inexpensive parts suddenly becomes very expensive when you have to do this, but still cheaper than redesigning and refitting an entire class of aircraft.
I realise my comments may have sounded glib, but I do have an inkling of how hard (and how much it costs) to get these things up and running. But I still don't think it's a good idea for the word "monopoly" to be chucked about every time a customer doesn't get what they want. There is 'monopoly' and the is 'abuse of monopoly power'. There is also collusion to distort markets, which has the same effect as abuse of monopoly power.
If the options are: force a manufacturer to make a product at a price a customer wants, or allow market forces to influence prices up and down, I think we're all better off with the latter. If the US military is the only customer for this in the whole world, then they are gointg to have to get used to the idea that they are going to be at a disadvantage.
The alternative for them is to start their own fabrication plants. Competition is good, but forcing competition is a slippery slope.
What is it with their components anyway? Are they the only people in the whole world that have spacecraft or aeroplanes?
I suspect the actual cause for action is that they don't deliver parts on time. From the lawsuit:
I. NATURE OF ACTION
2. As a result of the transaction, prices for the relevant products have increased and likely will continue to increase, delivery times have become less reliable, and terms of service likely will become less favorable. Accordingly Microsemi's acquisition of the Semicoa assets violated Section 7 of the Clayton Act, 15 U.S.C. § 18, and Section 2 of the Sherman Act, 15 U.S.C. 2.
Also note
JANTXV and JANS 5811 Diodes
34. After 2004, Microsemi's delivery times became very long. Customers who were unable to delay their programs further were forced to use less reliable commercial grade 5811 diodes at increased cost due to the need for additional testing. Microsemi produced almost all of the commercial grade products used by those customers.
In other words, the new monopoly is accused of throttling defence customers by failing to deliver parts they've ordered.
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