editor's blog
Subscribe Now

Monopoly as the Efficient Model

Mentor CEO Wally Rhines gave a keynote presentation at the recent U2U event and, once you connected all the dots in the presentation, he seemed to make a startling suggestion: that industries with monopolies are more efficient than those with many competitors.

Of course, that’s not exactly how he said it. Rather than talking in terms of monopoly versus competition, he worded it as specialization versus generalization, and the point is that specialization is more efficient.

He used Alcoa as an example. At one time, there was no one but Alcoa for aluminum. Then Kaiser and Reynolds came into the picture, and he showed a graph indicating that production cost reductions – couched as “learning” – slowed once there were multiple significant players. And he said there were numerous such historical examples.

He was making this point while addressing the aftermath of the Japanese earthquake. Because of increased specialization – that is, less industry redundancy and increased single-company dominance – a single missing critical component or material could conceivably jeopardize an industry. And he voiced a concern that companies might take a lesson from the event and back off of the high levels of specialization in the industry today.

He proceeded to showed how, in EDA, each specialty is dominated by one particular player (no segment had a top supplier with less than 40% share), and, in most cases, the dominant guy was one of the big 3. In fact, together, the big 3 hold 73% share overall. The sense was that “this is a healthy setup.”

It seems to me like there are two levels at which this discussion holds. An individual company might decide to specialize – or focus – on a single segment. And you can debate whether that’s good for the company (and I’ll leave that for another time). Then there’s the industry as a whole: is it better with one specialist, or will things be more efficient with more than one player (with each of those players possibly being a specialist)?

I’m sure that there are examples of benevolent monopolies. In the case of Alcoa, apparently the competition with non-aluminum alternatives like copper served to goad them on to greater efficiency. But, given the abuses of monopolists of the robber-baron past (not to mention the much more recent too-big-to-fail calamities), it’s hard for me to believe that too much dominance is good for anyone but the monopolist in the long term. No one can look at an unguarded cookie jar for that long without deciding that it’s really okay to have one… or perhaps another… Someone pays the price, whether customers or taxpayers.

Leave a Reply

featured blogs
Jun 18, 2021
It's a short week here at Cadence CFD as we celebrate the Juneteenth holiday today. But CFD doesn't take time off as evidenced by the latest round-up of CFD news. There are several really... [[ Click on the title to access the full blog on the Cadence Community sit...
Jun 17, 2021
Learn how cloud-based SoC design and functional verification systems such as ZeBu Cloud accelerate networking SoC readiness across both hardware & software. The post The Quest for the Most Advanced Networking SoC: Achieving Breakthrough Verification Efficiency with Clou...
Jun 17, 2021
In today’s blog episode, we would like to introduce our newest White Paper: “System and Component qualifications of VPX solutions, Create a novel, low-cost, easy to build, high reliability test platform for VPX modules“. Over the past year, Samtec has worked...
Jun 14, 2021
By John Ferguson, Omar ElSewefy, Nermeen Hossam, Basma Serry We're all fascinated by light. Light… The post Shining a light on silicon photonics verification appeared first on Design with Calibre....

featured video

Reduce Analog and Mixed-Signal Design Risk with a Unified Design and Simulation Solution

Sponsored by Cadence Design Systems

Learn how you can reduce your cost and risk with the Virtuoso and Spectre unified analog and mixed-signal design and simulation solution, offering accuracy, capacity, and high performance.

Click here for more information about Spectre FX Simulator

featured paper

Choose a high CMTI gate driver that cuts your SiC switch dead-time

Sponsored by Maxim Integrated

As GaN and SiC FETs begin to replace MOSFET and IGBT technologies in power switching applications, this paper discusses the key considerations when selecting an isolated gate driver. Maxim explains the importance of CMTI and propagation delay skew and presents an isolated gate driver IC ideal for use with these new power transistors.

Click to read more

featured chalk talk

Thermocouple Temperature Sensor Solution

Sponsored by Mouser Electronics and Microchip

When it comes to temperature monitoring and management, industrial applications can be extremely demanding. With temperatures that can range from 270 to 3000 C, consumer-grade temperature probes just don’t cut it. In this episode of Chalk Talk, Amelia Dalton chats with Ezana Haile of Microchip technology about using thermocouples for temperature monitoring in industrial applications.

More information about Microchip Technology MCP9600, MCP96L00, & MCP96RL00 Thermocouple ICs