Threat of Chinese Overcapacity Looms Over Memory Chips

[ltlee1]

"Chinese overcapacity" is a common term repeated by Western media many
times.

Question: Does this kind statement make sense?

[ltlee1]

According to the Law of supply and demand taught in every Economic 101
class, demand is not static. Rather the demand curve would shift
according to various factors such as the presence or absence of
competing goods and economic environment.

If the economy is contracting and consumers are cutting back on certain
merchandise, one could make the prediction aggregated supply for that
merchandise will be larger than aggregated demand. Still, one cannot
really tell Chinese, American or country X overcapacity until the
results are in.

[ltlee1]

Another approach to demonstrate the meaninglessness of concepts like
"Chinese overcapacity" is the rule of profit maximization.

"The profit maximization rule formula is. MC = MR. Marginal Cost is the
increase in cost by producing one more unit of the good. Marginal
Revenue is the change in total revenue as a result of changing the rate
of sales by one unit. Marginal Revenue is also the slope of Total
Revenue. Profit = Total Revenue - Total Costs."

https://www.intelligenteconomist.com/profit-maximization-rule/

Implication: Any firm, would increase production until MC=MR. And
conversely, decrease production until MC=MR.

Again, the production capacity is not a fixed value. Firm, or firms
collectively, would adjust their capacity and production upward or down
to maximize profit.

[ltlee1]

In conclusion, Chinese over capacity is a fake issue. The real issue is
Chinese firms are likely to out compete currently established firms and
eat into these firms' profit.

[ltlee1]

In addition, nation or nations involved in similar production have
little confidence to compete with Chinese manufacturing. Hence Newspeak
such as Chinese overcapacity would used. To hide their incompetence and
to blame China.