The more parsimonious explanation is that commercial jet engine production is downstream of commercial airbody production and China's currently limited by COMAC's scaling woes. All the money and talent in the world can't replicate real users generating real data that you can use to improve.
I'd argue the opposite that jet engines have a market structure that's uniquely terrible for traditional free market societies. There's a few industries where structurally, companies can only exit the market but it's almost impossible for a new company to enter. Airframes, jet engines, CPU manufacturing, lithography etc.
What this dynamic doesn't make any company immune from though is corporate rot. You've seen the rot take down Boeing and Intel from the inside as a slow moving car wreck. There's no reason the rot can't take down ASML, TSMC or Airbus as well. The free market fundamentally doesn't have a good response to this problem, excess capital is taken out of these companies during good times and then they run to governments seeking bailouts during bad times but governments don't know how to mandate good corporate governance.
I think a lot of the jet engine manufacturers are seeing this same corporate rot process, the number of high profile scandals across the industry and reports of insiders on how the number crunchers are taking over the business are strangely reminiscent of what we heard out of Boeing and Intel.
> The free market fundamentally doesn't have a good response to this problem
The market may not for the most capital-intensive businesses, but US laws at least attempt to address the situation. In Boeing's case, for example, the McDonnell-Douglas merger likely could have been blocked under existing anticompetitive laws.
The US's longstanding refusal to apply antiticompetition law causes a number of harms to consumers, entrepreneurs, and the stability of our economy.
Condit would probably still set in motion the moves that enabled the rot - moving HQ, unrealistic targets for 7X7 (now known as 787), selling off portions of Boeing to skim just the cream at the top, and so on.
Not letting Boeing grab McDonnell-Douglas military projects might have stopped some of that, but it might have also accelerated it.
The reverse buyout story is popular, but totally ignores that a bunch of the decisions and policies were established under Condit who was "lifer" at Boeing, and in fact said policies were complained about by engineering from both Boeing and McDonnell-Douglas side, all before Condit was forced by procurement scandal to leave his position
Except that if it accelerated it then there would still be an independent McDonnel-Douglas to pick up the slack by getting into the passenger airliner business, and in turn the possibility of that would keep pressure on Boeing to clean up their act.
The reason MDD was merged into Boeing is MDD was in the process of failing: the MD10 was completely outdated, the MD11 was not competitive, and with the Cold War ending the infinite money tap of military projects was closing (it was already quite a ways there, the last supper was in 1993, by the time of the MDD merger half the major contractors were gone)
Even so, mergers foreclose options to promote competitiveness. For example: no well-capitalized companies from outside the immediate industry could buy MDD to enter the space (as RocketLab bought Iridium). A failing MDD could have limped along for a decade or more until a tech billionaire (say) decided to buy in and reinvigorate it. It could have been split up, allowing smaller entrants to buy parts of it. It could have been allowed to fail, so any of these types of transactions could have happened at smaller dollar amounts.
Basically, allowing it to merge with its largest competitor was the worst possible outcome for competitiveness and long-term health of the industry.
More to my point, though. There's no real reason our existing anticompetition laws should not have been enforced here. Our culture of selective enforcement of laws is a cancer that manifests in all kinds of negative ways. I strongly advocate that we move towards being a society governed by written laws.
That unlikely hypothetical scenario makes no sense. MDD was going to drop out of the airliner market no matter what. They simply weren't viable. If they hadn't merged with Boeing then it would have been with some other large aerospace or defense company like Raytheon or Lockheed Martin — possibly after a trip through bankruptcy. No "white knight" billionaire was ever going to save them.
I laid out a set of scenarios, and it's impossible to know what would have happened had US laws been enforced.
Bankruptcy is a legitimate option -- many companies with productive assets survive and thrive after restructuring. Even a liquidation tends to preserve functioning assets.
Regardless, the larger point stands that it's bad, actually, for the US to selectively enforce laws. In particular, anticompetition enforcement has been notoriously lax for a generation. Hard to make an affirmative case that regulators should continue to ignore existing laws the way they have been doing.
> If they hadn't merged with Boeing then it would have been with some other large aerospace or defense company like Raytheon or Lockheed Martin
Which is kind of the idea. You then have Raytheon or Lockheed serving the part of the deep pocket who takes possession of their infrastructure instead of handing it to their only competitor. That company may then notice that they're in a position to take a piece of the huge commercial airliner market if they would make an R&D investment into the thing they just bought, and unlike MDD, they have the resources to do that.
Conversely, the buyer isn't interested in the civilian market at all and only buys them for the military assets and sells the civilian infrastructure at fire sale prices to whoever will take it. That still isn't allowed to be Boeing so you now have someone getting a couple billion dollars worth of infrastructure for 10% of its original creation cost, and that make them a viable company because they're starting off ahead by a large amount of capital infrastructure they didn't have to pay the normal price to get.
The simplest explanation is surely that China is new to having a highly educated workforce and the ‘failed for some fifty years’ claims the article makes don't mean much given it.
I don't think you need to entrain market arguments or whatnot to this, when it's only in the last decade China was a strong advanced manufacture player, and turbines are the kind of project that you probably wouldn't expect to go much faster than that regardless of the demand.
Exactly. Advanced turbine manufacturing is largely a chemistry and metallurgy problem. The Great Leap Forward and Cultural Revolution killed off China's intellectual capital so they had to start from scratch in 1976, and only really got moving in 1992. They've been way behind but will catch up eventually.
According to the article, the skills gained from decades of manufacturing experience and the yield capabilities are more critical than simple chemistry and metallurgy.
Quick question. Same issue in Japan. They have talents and capital -- why do you think they are not able to come up with a reliable turbine -- when they can manufacture almost everything else?
Economics. Japan has chosen to specialize in other areas and being a jet turbine engine manufacturer isn't where they've chosen to put resources in. The pay off simply isn't there. They're there in the supply chain, with IHI, MItsubishi, and Kawasaki being in the business of advanced titanium and nickel superalloys being used in wind, steam, and gas turbines for powerplants. It's just that the economics of commercial jet engines themselves isn't something they've chosen to pursue.
Because repression is a thing of the past in China? They continue to persecute investors and business executives who get too successful and to repress academic work they find politically objectionable. The communist party continues to exercise control over all intellectual endeavors.
And don't think it doesn't matter for jet engines. This article gets into how the open acknowledgment and dissection of engine failure in the West promotes quality and that China has clearly not adopted this culture. Of course not.
They'll catch up in the same way the Soviet Union used to - at unsustainable cost and on the way to falling behind yet again.
Persecuting or favoring investors on a political basis "and to repress academic work they find politically objectionable" has come to America. The only business people intellectually weak enough to not be a threat are real estate developers.
Not that the tech industry leaders who are way too comfortable with fascism are making such a good showing either.
So you think it’s just as bad as China here? Please state plainly instead of dodging around. Would you just as soon live there, have made your career there? You think you’d be able to publish your books and prosper there? You think we are fascist and so… your life will be miserable now?
I think you’re being absurd. You’ve had a great and largely unfettered career. How has repression hurt you in the slightest? Who repressed you?
Plainly, you’d much rather live here than there, and your equivalence is totally false. It’s a dictatorial repressive regime and much worse than here and you know it, and your comment is a corrosive disingenuous false equivalence.
It’s really a bizarre statement, a sort of narcissistic need to feel persecuted amidst a life of plenty in the wealthiest society ever known. They have forced sterilization of Muslim women in China, up until recently forced abortions under the one child rule, and you get disappeared for criticizing dear leader. And your cozy life is comparably miserable? Only in your mind.
> The free market fundamentally doesn't have a good response to this problem, excess capital is taken out of these companies during good times and then they run to governments seeking bailouts during bad times but governments don't know how to mandate good corporate governance.
Sounds like the free market hasn't been tried, a key plank of the free market on the supply side is that incompetent managers have to go bankrupt and lose their capital or otherwise get squeezed out. If the government is going to bail people out then obviously the companies will take adopt a ridiculously risky management strategy because they get the upside and dodge the downside, so they just have to maximise the potential upside at any cost. No surprise if after getting a bailout people do exactly what they did that led to the bailout until they need another bailout. Why change?
The trick to "mandating" of good corporate governance is not to bail them out. Then at least the corporations will be governed in a way that they aren't likely to go bankrupt. Maybe even make things people want and sell them at a profit.
> here's a few industries where structurally, companies can only exit the market but it's almost impossible for a new company to enter. Airframes, jet engines, CPU manufacturing, lithography etc.
Is there actual evidence for this, or are the companies involved just doing a good enough job that the market doesn't see a need for new entrants? Because it actually seems a bit implausible that these technologies could just disappear or even become less available under a free market. What we actually see is the likes of NVidia or ASML, where other players can't catch up because the market leader is just pushing the cutting edge forward too quickly (spare a thought for Intel, who was the unbeatable colossus once).
The free market works fine - the problem is at that scale, we can only afford a few key players, they're strategic so they end up having subsidies other considerations.
Put differently: if the population of the earth were 50 Billion people instead of 8 Billion - then we'd have markets with enough competition to allow free market dynamics.
In that context, then we'd have 'Space companies' being subsidized.
We'd have a hotel on the Moon and we'd easily be on Mars already.
Those aircraft are on the 'edge of our resource capabilities' - huge companies at the top of the pyramid.
If we had a massively bigger economic pyramid, they would be more like car companies.
I'm not sure if a bigger population would really justify more jet manufacturers.
Outside of general aviation (hobbyists/business jets), the potential buyers for jet aircraft are going to trend towards natural oligopoly.
Military craft, there's basically one buyer per country, at most a handful of different decision makers behind the same basic chequebook.
Civilian craft, does the number of airlines scale with population? There are a finite number of viable routes, airport slots, and market segments, so would it actually support a hundred new airlines, or would we just end up with a Big Southwest buying 1,000 737s instead of 100?
Even if you had more airlines, would they want to diversify their fleets? Running the same few types of planes, especially if they're the same types of planes as their competitors, unlocks efficiencies. How much would it cost a random American or European airline to retrain their pilots to fly the Comac C919, and how much would they spend extra on adaptations (stocking new spares, retraining maintenance staff, retooling processes for different floorplans)? I also suspect there's a very strong CYA/risk aversion mindset that would make it very hard to sell a new player into the market.
Regional flag carriers have political excuses to support a buy-local policy at some cost, but that still only justifies a handful of manufacturers per economic hegemon.
So you think U.S. would be better at airplane manufacturing had Boeing gone bankrupt at some point in the past?
It's a pretty strong claim and I would like to see some theoretical justification, other than belief in the magical free market.
In my country, IIRC, we let Aero Vodochody to crash and be bought by Boeing. We are not better at making airplanes, honestly probably the worst than at any other point in history.
Well, no I think something subtly different. I think if you look at the quality of life in Czechia before and after Aero Vodochody went bankrupt it probably rose, all else equal. And the quality of the corporate governance would have been better than in an alternative. It'd be interesting to check the price and quality of the aircraft that were available for use; those two things probably moved in a helpful direction. That last move isn't guaranteed by basic economics, but it seems quite likely in this case.
> ...governments don't know how to mandate good corporate governance...
For a very brief moment, under the existential crisis condition of total war in WW2, the US government was somehow able to corral corporate governance towards a semblance of common purpose (survival). As I understand it from historians malfeasance was still widespread, but we arguably maybe got a good enough outcome?
This is the corporate equivalent of the shirtsleeves to shirtsleeves in three generations problem. And if that corollary is true, then I suspect the remedy is similarly not entirely amenable to deterministic antiseptic metrics and processes; they're necessary but not sufficient conditions.
Exactly. Nothing motivates and unites a society like the physical death involved in war.
I think if you zoom out on a society, you have to have a war regime and a peace regime.
There are going to be coordinating aspects that a war regime can achieve that a peace regime simply can not because the stakes involved fundamentally can't be the same by definition.
> All the money and talent in the world can't replicate real users generating real data that you can use to improve
Basically, China excellence in EVs and Solar was driven by the market being new. It's hard (almost impossible?) to outrank an incumbent very entrenched in a big market. You need a paradigm shift (ie: iphone vs nokia) to make the change.
> You need a paradigm shift (ie: iphone vs nokia) to make the change.
I imagine the manufacturing breakthrough for high temperature jet turbine blades could be additive manufacturing where you grow the crystalline structure layer by layer instead of casting and carefully nurturing it. Mature markets with few incumbents focus on local maxima and have difficulty to move from one maxima to another, while a new manufacturer can start from a different position and search for other maxima.
Directional solidification is a kind of additive manufacturing? You're carefully adding to macroscopic crystalline structure at a propagating melt/solid interface.
It kind of is, but it happens within the molten part, so it's harder to control (and, considering how hard, I'd say the science behind it is still poorly understood).
They get perfect enough single crystal superalloy blades every time ... after throwing out the half that fail. The science is well understood, even if it's fiendishly hard [0]
You can steal ‘know’ but you can’t so easily steal ‘knowhow’. I could easily find all the information that I theoretically need to make a wooden chair. But to actually make it successfully would require years of practice at carpentry. At first, I can expect results comparable to
Homer Simpson’s spice rack.
When I was at uni in the 90s I remember hearing one of our lecturers tell stories about visitors to British Aerospace being caught wearing shoes with sticky soles to try and capture small amounts of swarf for industrial espionage.
Something important to remember if you come across it, never pick it up with a bare hand because it can be razor sharp and never wear gloves when using a machine tool like a lathe unless you want to loose a hand... or worse.
As an engineer in semiconductors in the Netherlands, I hear from a lot of my friends working at ASML the typical red flags of the rot. They have a very thick middle management layer. Nobody feels like they are working at a high tech company with cutting edge solutions. I believe the customer support roles are very dynamic and satisfying.
≥jet engines have a market structure that's uniquely terrible for traditional free market societies.
A lot of the theoretical concepts behind this... They need updating to account for the last generation of experience. For the most part, the concepts were developed in the context of the industrial revolution(s) and manufacturing.
We are talking about manufacturing here, but the US economy in the last generation is a story about software, services, non-manufacturing firms and manufacturing firms the side step (as best they can) the core paradigm of manufacturing economics.
Competitive pricing, substitutes and alternatives, a strategic paradigm governed by market prices, marginal costs, and manufacturing quality... This is relatively marginal paradigm in the US economy, certainly in terms of market cap. In china, it is their bread and butter.
Low margin, highly competitive components manufacturing... Is that really a forte a free market societies in 2026? We outsource the "commodity value add" parts of the process. We certainly do not put them at the center of corporate strategy.
I agree about "corporate rot." I don't think anyone has a good answer to this either. China included. In practice, the best solution appears to be young vibrant companies. VW or Ford vs Tesla & BYD. VW and Ford exist because of history. Tesla & BYD exist because they perform well.
Schumpeter's free market solution was creative destruction... But, we've never really had a system for promoting this.
Part of the problem is that in a global market, allowing a company to fail creates room in the market for renewal, but there's no guarantee that your country will fill it. If Germany had come down hard on VW after the turbo diesel scandal... They probably would have just ceded market share to Korea or China or the US or something.
Boom Supersonic is entering the turbine engine market using private funding (they have received some limited government contracts and tax incentives). It seems like the free market is responding pretty well, although they still might fail.
That was my thought too. You can absolutely enter the industry, and big players do as the industry becomes profitable enough to sustain more competitors, it's just not available to the average person in the same way the average person can easily compete in the todo app industry.
It's available to the average person if they're willing to put in the work necessary to attract investors. Blake Scholl was a regular engineer before he founded Boom Supersonic. He had made some money on previous jobs but wasn't super wealthy or connected.
> I think a lot of the jet engine manufacturers are seeing this same corporate rot process, the number of high profile scandals across the industry and reports of insiders on how the number crunchers are taking over the business are strangely reminiscent of what we heard out of Boeing and Intel.
And there's the opening for China. The 90s and early 2000s saw alot of innovation by engine manufacturers. Boeing and Airbus built their planes around the next generation of engines coming out. But over the past 10 or so years all the major engine manufacturers decided to stop investing in new civilian engines and maximize their dividends on existing models. That's what killed the A380--the A380 engines are 90's tech, and all the engine manufacturers declined to build a new engine for an upgraded A380, not even one that utilized the current tech, and not even if Airbus backstopped potential losses.
So now is probably the best time since the 1980s for China to play catch-up. But the biggest problem is as you pointed out--engines and airframes are developed together, and both Airbus and Boeing also decided to stop new aircraft development and instead coast and reap dividends for the next decade or two, so there's no market for China to break into. There's still development happening in the defense space, but that's not a market open to China, either. Their only potential market is primarily domestic, and it's not capable of incentivizing and demanding dogged innovation in the same way the international market could.
Modern high bypass jet engines are already pretty close to maximum possible thermodynamic efficiency, given realistic constraints such as weight, wing clearance, noise, and so on.
Even if all constraints were relaxed, the absolute limit might be another halving of fuel consumption. (with trillions of R&D)
And beyond that, there literally can never be jet engines significantly more efficient, until the end of the universe.
And for short flights, battery electric or hybrid power could boost efficiency even further. Although that will depend on developing batteries with better safety and power density characteristics.
Yes and no. Had there been more demand it would still be around, of course. But one of the reasons (albeit a lesser reason) there wasn't much demand was because of the antiquated engine tech. The poor A380 fuel efficiency competitiveness had less to do with it having 4 engines than that those engines were 1990s tech, same generation as on the 777, despite the first delivery of the A380 being more than 10 years after the 777. The 787 and A350 were favored by the industry not only because of point-to-point, but because their engines had far better fuel efficiency. (Even at the same generation, ETOPS aircraft would have slightly better fuel efficiency, but maintenance and overall operational cost is significantly higher because of the power envelop and reliability margins required, keeping the quadjet A380 cost competitive.)
Both Airbus and Emirates were willing to keep the A380 alive. Emirates was making money on it, and Airbus believed the market would eventually turn as airports reached takeoff/landing capacity. But Emirates wanted upgraded engines, so for several years there were negotiations between Emirates & Airbus on the one hand, and the big 3 engine makers on the other. IIRC, circa 2018 Emirates & Airbus were very close to a binding agreement with Rolls-Royce for an upgraded engine, but then Rolls-Royce faced costly issues with its existing programs. At the same time, prospective investment in the engine industry had already started winding down, and Rolls-Royce didn't want to be spending cash on a new program while GE and Pratt & Whitney were passing through profits to shareholders. So in 2019 Rolls-Royce walked away, and shortly thereafter (weeks if not days), Airbus and Emirates agreed to terminate the A380.
> The free market fundamentally doesn't have a good response to this problem, excess capital is taken out of these companies during good times and then they run to governments seeking bailouts during bad times
This isn't a free market problem. Companies move money out to avoid corporation tax, and government bailouts are what stop the free market from operating as it should.
I'd expect the competition for these companies to come in not from someone using the same technology, but a different technology that serves the same purpose. Eg. what happened to Kodak and Nokia.
For jet engines, the only thing that comes to mind is electric aircraft. No single-crystal turbine blades needed at all.
I may have picked a bad example, but the principle stands.
EDIT: China has an extensive high-speed rail network. While those don't quite cover intercontinental flight, it is the sort of paradigm shift I mean.
The problem with fully electric airliners is physics: to achieve useful range you either need batteries with energy density that seems unfeasible or some sort of power beaming infrastructure which has its own set of enormous challenges. So if Western turbofan manufacturers' moat lasts until electric aviation is ubiquitous, they can be very, very happy.
(Now sure, you can substitute electric aircraft with open rotor jet engines which require different institutional knowledge to modern high bypass turbofans, but they're still really sensitive to how the blades are manufactured)
> I may have picked a bad example, but the principle stands.
I know electric aircraft are not quite feasible on the same scale as airlines.
On the other hand, China has an extensive high-speed rail network for inland travel. OI have no idea how often the Chine fly inside the country vs how often they use aircraft, but this is the sort of different technology for the same purpose I mean.
"For jet engines, the only thing that comes to mind is electric aircraft. No single-crystal turbine blades needed at all. I may have picked a bad example, but the principle stands."
I understand the idea you wanted to convey and that commenting on the technical detail is not something we're supposed to do, but the technical side of your example is just too glaring to ignore. A people-carrying aircraft, be it of electric propulsion, or of other type, is heavy. Like, several tons (at minimum) heavy. To acquire the necessary portance, the aircraft has to be accelerated (on its inert wheels) on the runway up to the take-off speed and then to be able to hold the cruising speed, using engines capable of generating such thrust by only moving the air. That's a lot of force right there, and the engine that has to do this, will have to be pretty tough. Regardless of the fact that the source of the on-board energy is electric or not, that same air will have to be moved, somehow, at the needed speeds, and it will be by an engine that will look and work pretty much the same way the current jet engines do, since the shape is dictated by the aerodynamics and the internal design is given by the (air) fluid dynamics it has to work with. The single-crystal turbine blades are just an optimization. Weaker (regular fine-grained casting) materials can be used, but that will mean limiting the performance to lower tolerance levels (and most likely be heavier as well, to compensate for the lower mechanical strength).
Serious electric aircraft are really gated behind major advancements in battery technology or some alternative power storage tech. The energy density of batteries is an order of magnitude less than fossil fuels, and you have to carry the heavy batteries with you the entire trip (vs burning off fuel as you fly).
"The energy density of batteries is an order of magnitude less than fossil fuels, and you have to carry the heavy batteries with you the entire trip (vs burning off fuel as you fly)."
It's even worse. Nowadays, in order to land, the aircraft needs to be almost empty, otherwise the mechanical structure that supports the stress of impact with the runway may break. So, heavier (as with batteries included) aircraft landing will mean the need to design sturdier landing gear, and stronger landing gear will most likely mean heavier materials as well.
One nitpick, all the money in the world would be able to achieve the goal by simply giving rides away for free.
Overall, I agree that any industry that is extremely optimized requiring ultra high precision+knowledge in multiple verticals makes the barrier to entry beyond difficult. It just requires too much up front cash.
> governments don't know how to mandate good corporate governance.
The correct answer to this is to break up consolidated markets with antitrust. Are there only two airframe manufacturers left? Then chop them into smaller pieces so there are more. Reduce vertical integration so that it gets easier for new entrants to compete at any given part of the supply chain without needing to duplicate the entire thing themselves. Let each of the spin offs start with a non-exclusive license to the no longer existent parent company's technology so they all have the chance to iterate on it and compete for providing it.
Problem with antitrust hammers is that once you've chopped Boeing into bits you don't end up with a competitive market with lots of new aircraft designs, you end up with a global Airbus monopoly on aircraft over 150 seats and the few surviving bits of Boeing competing to sell into its supply chain...
Airframers really aren't that vertically integrated as companies go. But it turns out the business of designing, certifying and selling an aircraft (and managing complex multinational supply chains) is hard, and airlines don't want 6 competing types of narrowbody in their fleet, they want one type of narrowbody in their fleet with an abundance of type-rated pilots, multiple maintenance options and a robust aftermarket.
> airlines don't want 6 competing types of narrowbody in their fleet, they want one type of narrowbody in their fleet with an abundance of type-rated pilots, multiple maintenance options and a robust aftermarket.
Which is in itself a regulatory problem. Why is the government certifying only a specific company's design, granting them a lock on the market for everything to do with it?
Certifications should work in one of two ways. Either the industry comes together to submit a royalty-free design IETF style and then anybody can make it, or they certify a specific company's patented design and that company is prohibited from making it themselves and can only license it in exchange for a fixed fee per-plane, no license restrictions other than the payment of the fee, and a requirement to publish the uniform fee and charge the same amount to all producers. Then you get a company that designs planes but a competitive market for producing and maintaining them. And a requirement that Airbus do the same thing, because why should foreign companies be exempt from antitrust laws when they want to sell to the domestic market?
Notice also that the traditional 737, 757 and 777 are all over 20 years old, which is the term of a patent. In the absence of some chicanery that means they should all correspondingly be available for anyone to produce by now or design variants of which share parts and should only need partial rather than full recertification.
There is no reason it needs to work the way it does other than regulatory capture.
What a silly idea. Design and manufacturing of something as complex as an airliner is inextricably coupled. There's no way for one company to design the whole aircraft and then just hand it off to others. We're not talking about toasters here.
> There's no way for one company to design the whole aircraft and then just hand it off to others.
This is exactly what they do anyway whenever they subcontract any part of the production. You don't need a single company that makes the entire plane and don't even have that now. You can have companies that make engines, other companies that make the passenger seats, other companies that make the fuselage, other companies that do final assembly, etc.
There is nothing stopping the designer from talking to the manufacturing companies while creating the design. They could even be one of the manufacturing companies, they would just have to spin off the design licensing company into an independent entity at the point the design is certified.
Considering the design and certification is the expensive bit that needs thousands of sales to break even (want certification to be cheaper? Well I guess if you like more crashes) I'm not sure what some artificial separation of design and systems integration to create the illusion of a competitive market achieves, except perhaps worse safety as suddenly you've got a lot of companies selling the same licenced design manufactured by the same supply chain competing only on how many QC corners they can cut to reduce prices...
> Considering the design and certification is the expensive bit that needs thousands of sales to break even
What does that have to do with it? The design licensing entity is going to get a fee per-plane from every company doing final assembly. They're going to set the fee high enough to cover their costs but not so high that people go to a different design from another company instead.
> the illusion of a competitive market
How about an actually competitive market, because anyone can get the design on the same terms and can't use an exclusive right to foreclose competition in parts of the supply chain other than the one which is supposed to be under patent.
> competing only on how many QC corners they can cut to reduce prices...
As opposed to the monopolist whose customers can't even switch to a competitor when the supplier has a safety scandal, yet operates under the same profit incentive to cut costs?
> What does that have to do with it? The design licensing entity is going to get a fee per-plane from every company doing final assembly. They're going to set the fee high enough to cover their costs but not so high that people go to a different design from another company instead.
It means that there's no incentive to be a "design licensing entity" that takes on all the cost and risk of designing, prototyping certifying an airframe and then shares the returns on making that airframe with a bunch of competitors that take on no such risk. Either the royalties are set very high in which case you're creating massive chaos for no meaningful price reduction, or you've made new aircraft development in the United States commercially unviable and accidentally given Airbus a global monopoly on 150+ seat airliners...
> How about an actually competitive market, because anyone can get the design on the same terms and can't use an exclusive right to foreclose competition in parts of the supply chain other than the one which is supposed to be under patent.
It's the illusion of market competition because the only way a company licenses IP it spends billion dollars a year updating and testing so that other manufacturers can undercut it on sales is if the government steps in and sets the price and decides who should and shouldn't be licensed 787 integrators (otherwise the answers are "too high for anyone to get involved" and "no, you guys that didn't coinvest in its development can't have licenses to sell anything more valuable than PMA parts"). And in practice not only do you get the government determining who is allowed to build 787s at what price, but also needing to underwrite the development costs, since "invest several billion in complex technology innovation; government will then determine the royalties you are entitled to earn from it" is not really an attractive proposition
> As opposed to the monopolist whose customers can't even switch to a competitor when the supplier has a safety scandal, yet operates under the same profit incentive to cut costs?
Yes, monopolists care more about maintaining the reputation of technology they've spent billions designing than random new market entrants established to manufacture others' IP more cheaply than them. Funnily enough subcontractors with little stake in the 737 specifically and the resulting diffusion of responsibility was the cause of the emergency door defects, and they're not going to do anything to solve MCAS either...
I'd argue the opposite that jet engines have a market structure that's uniquely terrible for traditional free market societies. There's a few industries where structurally, companies can only exit the market but it's almost impossible for a new company to enter. Airframes, jet engines, CPU manufacturing, lithography etc.
What this dynamic doesn't make any company immune from though is corporate rot. You've seen the rot take down Boeing and Intel from the inside as a slow moving car wreck. There's no reason the rot can't take down ASML, TSMC or Airbus as well. The free market fundamentally doesn't have a good response to this problem, excess capital is taken out of these companies during good times and then they run to governments seeking bailouts during bad times but governments don't know how to mandate good corporate governance.
I think a lot of the jet engine manufacturers are seeing this same corporate rot process, the number of high profile scandals across the industry and reports of insiders on how the number crunchers are taking over the business are strangely reminiscent of what we heard out of Boeing and Intel.