We know that Micro-Mechanics does not have visible IP such as patents, trademarks, copyrights...
We are also awked by its ability to generate >50% GP operating in China, USA etc too.
Yesterday, when I was watching Elon talking about a machine that builds a machine. I was trying to connect to Micro-Mechanics.
Granted that Micro Mechanics does not have a machine that makes a machine, however, it does had a machine that make precision custom parts for advanced manufacturing sector especially for it's semiconductor customers.
Elon also mentioned order or 2 order of magnitude designing a production plant for the products. It's easy to design a product, however, it will be 10x more challenging to design a production line for mass producing the same product.
He clarify further that it's relatively easy to build a prototype aka one piece and would be 10x more difficult to build 1,000 pieces says in one day.
What strikes me is he shared one of his experience in designing a product and the production line.
Elon had a chance to build a product and also production line.
Instead of focusing on the design of the product first, he decided to design the production line AND the product in parallel.
Based on the feedback of production line design, like some parts is more difficult to produce, the product (design) was adjusted so that it's simplify the manufacturing process.
Elon concluded that eventually, the product remains essentially the same, provide the same functionality, looks and feel and yet could be manufactured faster, cheaper with better quality.
In my mind, I connected Micro-Mechanics with it's clients (and eventually it's customers too). I thought that some valuebuddies assume that those engineers in the semicon factories prefers to use Micro-Mechanics because they had been working with Micro-Mechanics aka comfort zone. Of course, what valuebuddies implying is hence, this is not the most cost effective way for the semicon factories. Which further implies that if the management is aware that their engineer choose to work with Micro-Mechanics instead of another supplier (MM's competitor) to get a better price, then we would assume that these semicon factories management will have a wake up call and then their engineers would be forced to investigate alternatives and hence Micro-Mechanics will have to (force) cut it's price and take in a lower profit margin.
I agree and this would be a major risk to own Micro-Mechanics.
Of course, the way I mitigate the risk is to observe MM's published KPI and look out for this event.
However, after I heard what Elon explaining how by building a production line, in parallel to a product, yields the benefit of feedback on the product design, gives me a feeling that this is what had happened to Micro-Mechanics, supporting it's clients (and of course it's customers), too.
We know that Micro-Mechanics products need to be qualified/certified before use. Furthermore, likely Micro-Mechanics is engaged at a very early stage even at product (and production line) design stage.
If this is true, then definitely this would add to the stickiness of Micro-Mechanics when the production line started and the product is launched.
No wonder?
Stay home and stay safe, everyone.
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