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The more parsimonious explanation is that commercial jet engine production is downstream of commercial airbody production and China's currently limited by COMAC

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.

yourapostasy 3mo ago
> ...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.
- bluegatty 3mo ago
  Massive stimulus spending, everyone in the country highly motivated and oriented around a communitarian / natonalist goal. You can see it in ukraine right now - they are making drones in their basements in ways that no other country is. These are hard things to factor into economics just as they are very real. Undoubtedly some competition would help.
  - randsorex 3mo ago
    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.
irjustin 3mo ago
> All the money and talent in the world... 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.
runako 3mo ago
> 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.
- p_l 3mo ago
  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.
  - AnthonyMouse 3mo ago
    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.
    - masklinn 3mo ago
      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)
      - runako 3mo ago
        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.
csomar 3mo ago
> 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.
- rbanffy 3mo ago
  > 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.
  - pfdietz 3mo ago
    Directional solidification is a kind of additive manufacturing? You're carefully adding to macroscopic crystalline structure at a propagating melt/solid interface.
    - rbanffy 3mo ago
      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).
      - datadrivenangel 3mo ago
        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] 0 - https://www.asme.org/wwwasmeorg/media/resourcefiles/aboutasme/who%20we%20are/engineering%20history/landmarks/brochure-single-crystal-turbine-blade.pdf https://www.asme.org/wwwasmeorg/media/resourcefiles/aboutasm...
roenxi 3mo ago
> 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).
- bluegatty 3mo ago
  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.
alexashka 3mo ago
> The free market fundamentally doesn't have a good response to this problem Free markets don't exist. The problem isn't what you think it is. It's Dunning-Kruger effect and 99% of the population is living it loud and proud.
netcan 3mo ago
≥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.
- WillAdams 3mo ago
  That said, we're still running heavy presses: https://en.wikipedia.org/wiki/Alcoa_50,000-ton_forging_press https://en.wikipedia.org/wiki/Alcoa_50,000-ton_forging_press (which has made parts for pretty much every U.S. produced jet aircraft since the '60s) Interestingly, Tesla has invested in some largish presses: https://en.wikipedia.org/wiki/Giga_Press https://en.wikipedia.org/wiki/Giga_Press which makes for a large reduction in the quantity of parts (but also complicates repairs https://www.northwestautocollision.com/the-most-common-tesla-repairs/ https://www.northwestautocollision.com/the-most-common-tesla...)
wahern 3mo ago
> 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.
- mc32 3mo ago
  The A380 was killed for lack of demand as the airline industry changed. Boeing made the right bet. In addition even if had been engine-centric there is no way there was enough market to dedicate R&D for a new engine for this limited market.
  - wahern 3mo ago
    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. It's difficult to find non-paywalled sources, but see, e.g., https://www.forbes.com/sites/michaelgoldstein/2018/10/16/is-there-trouble-in-paradise-for-the-airbus-a380/ https://www.forbes.com/sites/michaelgoldstein/2018/10/16/is-...
AnthonyMouse 3mo ago
> 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. And don't let them buy each other again.
- notahacker 3mo ago
  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.
  - AnthonyMouse 3mo ago
    > 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.
Veedrac 3mo ago
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.
- nradov 3mo ago
  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.
  - coverband 3mo ago
    According to the article, the skills gained from decades of manufacturing experience and the yield capabilities are more critical than simple chemistry and metallurgy.
    - nradov 3mo ago
      The chemistry and metallurgy involved here are far from "simple".
    - fragmede 3mo ago
      Okay. Advanced chemistry and metallurgy then. What do you want to call it? Jetenginebuildingology?
      - vpcs111fm 3mo ago
        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?
ragebol 3mo ago
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.
- notahacker 3mo ago
  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)
  - ragebol 3mo ago
    > 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.
- Merad 3mo ago
  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).
  - 3mo ago
nradov 3mo ago
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. https://aviationweek.com/air-transport/aircraft-propulsion/boom-confirms-engine-thrust-growth-core-part-build-accelerates https://aviationweek.com/air-transport/aircraft-propulsion/b...
- guywithahat 3mo ago
  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.
  - nradov 3mo ago
    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.
philipallstar 3mo ago
> 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.
DANmode 3mo ago
> governments don't know how to mandate good corporate governance. General Motors? Could also try not giving them the money. Forcing others to do better - or not exist.
bgnn 3mo ago
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.

yourapostasy 3mo ago

> ...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.

bluegatty 3mo ago
Massive stimulus spending, everyone in the country highly motivated and oriented around a communitarian / natonalist goal. You can see it in ukraine right now - they are making drones in their basements in ways that no other country is. These are hard things to factor into economics just as they are very real. Undoubtedly some competition would help.
- randsorex 3mo ago
  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.

irjustin 3mo ago

> All the money and talent in the world... 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.

runako 3mo ago

> 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.

p_l 3mo ago
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.
- AnthonyMouse 3mo ago
  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.
  - masklinn 3mo ago
    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)
    - runako 3mo ago
      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.

csomar 3mo ago

> 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.

rbanffy 3mo ago
> 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.
- pfdietz 3mo ago
  Directional solidification is a kind of additive manufacturing? You're carefully adding to macroscopic crystalline structure at a propagating melt/solid interface.
  - rbanffy 3mo ago
    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).
    - datadrivenangel 3mo ago
      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] 0 - https://www.asme.org/wwwasmeorg/media/resourcefiles/aboutasme/who%20we%20are/engineering%20history/landmarks/brochure-single-crystal-turbine-blade.pdf https://www.asme.org/wwwasmeorg/media/resourcefiles/aboutasm...

roenxi 3mo ago

> 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).

bluegatty 3mo ago
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.

alexashka 3mo ago

> The free market fundamentally doesn't have a good response to this problem Free markets don't exist. The problem isn't what you think it is. It's Dunning-Kruger effect and 99% of the population is living it loud and proud.

netcan 3mo ago

≥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.

WillAdams 3mo ago
That said, we're still running heavy presses: https://en.wikipedia.org/wiki/Alcoa_50,000-ton_forging_press https://en.wikipedia.org/wiki/Alcoa_50,000-ton_forging_press (which has made parts for pretty much every U.S. produced jet aircraft since the '60s) Interestingly, Tesla has invested in some largish presses: https://en.wikipedia.org/wiki/Giga_Press https://en.wikipedia.org/wiki/Giga_Press which makes for a large reduction in the quantity of parts (but also complicates repairs https://www.northwestautocollision.com/the-most-common-tesla-repairs/ https://www.northwestautocollision.com/the-most-common-tesla...)

wahern 3mo ago

> 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.

mc32 3mo ago
The A380 was killed for lack of demand as the airline industry changed. Boeing made the right bet. In addition even if had been engine-centric there is no way there was enough market to dedicate R&D for a new engine for this limited market.
- wahern 3mo ago
  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. It's difficult to find non-paywalled sources, but see, e.g., https://www.forbes.com/sites/michaelgoldstein/2018/10/16/is-there-trouble-in-paradise-for-the-airbus-a380/ https://www.forbes.com/sites/michaelgoldstein/2018/10/16/is-...

AnthonyMouse 3mo ago

> 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. And don't let them buy each other again.

notahacker 3mo ago
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.
- AnthonyMouse 3mo ago
  > 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.

Veedrac 3mo ago

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.

nradov 3mo ago
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.
- coverband 3mo ago
  According to the article, the skills gained from decades of manufacturing experience and the yield capabilities are more critical than simple chemistry and metallurgy.
  - nradov 3mo ago
    The chemistry and metallurgy involved here are far from "simple".
  - fragmede 3mo ago
    Okay. Advanced chemistry and metallurgy then. What do you want to call it? Jetenginebuildingology?
    - vpcs111fm 3mo ago
      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?

ragebol 3mo ago

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.

notahacker 3mo ago
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)
- ragebol 3mo ago
  > 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.
Merad 3mo ago
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).
- 3mo ago

nradov 3mo ago

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. https://aviationweek.com/air-transport/aircraft-propulsion/boom-confirms-engine-thrust-growth-core-part-build-accelerates https://aviationweek.com/air-transport/aircraft-propulsion/b...

guywithahat 3mo ago
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.
- nradov 3mo ago
  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.

philipallstar 3mo ago

> 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.

DANmode 3mo ago

> governments don't know how to mandate good corporate governance. General Motors? Could also try not giving them the money. Forcing others to do better - or not exist.

bgnn 3mo ago

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.