It's holiday and wish all valuebuddies a nice trip.
For those not travelling, a relax and meaningful holiday.
Feel like reading more on MM?
(link to a fool - Sudhan post on MM published 30 Aug 2019)
Why would a customer contact MM when they start a new production line, new factory or new product (sub 10nm wafer)?
There are many reasons and let me try:
1. I think that most global semi con company who need to use MM product is already MM client. If they don't call MM then they will need to perform the job internally (aka without getting the parts from MM).
2. I think that these company unlikely will call another supplier to provide the parts that they had been getting from MM because there is a long qualification/certification stage (at least 1 year) before the part can be use in the factory. A new supplier might unnecessarily lengthen the burn-in process.
3. I think that there is some synergy in different companies (in the same industry) to use the same parts provided by MM. The specification, the price and the process would be very similar and would be efficient and effective. Of course, MM parts is needed by all of them, it's a common denominator.
4. I feel like MM is pricing it's goods cheap. This gives it's customer the feeling that there is no need to look for alternatives. Trust MM and involve them in the setup as early as possible. Safer to work with MM than others.
Just my thought. As I witness the result of a high profit, high cashflow and zero bad debt highly repeatable business operating in China.
MM vision allow it to keep minimum inventory.
Recall JIT.
MM customers do not need to stock up large inventory in their warehouse.
MM will provide them with the right parts at the right time (factory location, SCM integration, etc).
It is also very common for suppliers to build a large pool of inventory, ahead of customers order.
This is so that whenever customer order, there are ready products (kept as inventory in the supplier warehouse) to be delivery to customer factory.
This common practise of stocking up inventory (for projection of customer order) is easy to understand and do.
However, the downside is when the anticipated order did not come in, these inventory will need to be write-down/off.
MM choose not to do this.
Instead, MM choose to tightly integrate with customer with minimum stock up.
It's inventory is actually not stock ready for customer order.
It has minimum stocks.
It's inventory is actually spare parts for it's machine (in MM's factory).
The machine will breakdown.
Instead of waiting for parts to change, MM kept the spare parts as inventory.
So what?
(again, I leave it as a thinking exercise for you)
MM also have a very different supplier payment policy.
Strange in first glance as it violated all industrial best practice.
However, on second thought, it just been prudent.
Building a rock solid, value generation machine.
Enjoy: "The laptop of tomorrow" - also do not have any MM parts inside too.