Are advanced components overpriced?

[Samuel_Tuffstein]

After a 8 year break I have decided to give EVE another shot. Back in the days I ran a relatively successful manufacturing operation in WSpace/HighSec and the supply chain management / margin optimization aspect drew me back to EVE.

Before reactivating my accounts, I did some math and read up on the changes, and it seems like manufacturing hasn’t changed fundamentally while I was gone.

The one anomaly I encountered doing my research were the prices of advanced components:
I have not found a piece of T2 ship/equipment that could compete with the raw ISK/hour I would get from manufacturing (certain) advanced components. I haven’t calculated the ISK/hour for every T2 ship and piece of equipment in the game, but in general the profit margins from advanced components are significantly better.

This seems odd, considering that the barrier to entry is much lower for advanced components and it’s a lot easier to set up production. This begs the question: Why are there not more people producing advanced components?

I know that Roleplay is a factor. Producing ships and guns is more attractive than manufacturing intermediate products. Consequently more people gravitate towards it, even when they could be making more profit elsewhere. But is this the only factor or am I missing something fundamental?

*Edit: I hope this is not perceived as a whine, I would prefer to build ships and guns, but I don’t mind producing say … Quantum Microprocessors for now. I just want to understand the current market a bit better.

[Xeux]

I think the problem you will run into is that there is not much trade volume in most of those advanced components. It is mostly just for people who are too dumb to realize that they are losing money trying to make their own T2 stuff in highsec.

[Zhalyd_Lyehin]

It makes no sense to use prefabricated T2 components to produce T2 items. Buying these components costs you a lot more than buying the materials to build them yourself.

[Samuel_Tuffstein]

@Zhalyd_Lyehin

It makes no sense to use prefabricated T2 components to produce T2 items. Buying these components costs you a lot more than buying the materials to build them yourself.

But why manufacture the T2 items at all, when the components yield a better return for the time invested?

@Xeux

I think the problem you will run into is that there is not much trade volume in most of those advanced components. It is mostly just for people who are too dumb to realize that they are losing money trying to make their own T2 stuff in highsec.

That’s a good point, the volume of sale for those items is comparatively low, but that’s in part due to the noncompetitive prices. It’s also not true for all advanced components, Fernite Carbide Composite Armor Plate for example sell below their production value.

[Scoots_Choco]

@Samuel_Tuffstein

But why manufacture the T2 items at all

Because… you can… use them?

[Samuel_Tuffstein]

Money can be exchanged for goods and services.
_{Homer J. Simpson}

That is to say, you can always use ISK to buy the items you want, but you are better off producing the item with the highest rate of return.

[Scoots_Choco]

@Samuel_Tuffstein

you are better off producing the item with the highest rate of return.

If all you care about is ISK, then sure.

But there are other players out there who serve as mass industrialists to produce modules, ship, etc. to supply their corp/alliances’ doctrines.

[Terak_Romaller]

As someone that uses T2 manufacturing in hi-sec as my only significant form of ISK I thought I’d throw my tuppenny worth in. I enjoy the business/supply chain analysis stuff - it takes all sorts.

Now for the rambling post - the last paragraph is the relevant bit:

Look at the entire supply chain and what profits are made in manufacturing each part you need, and importantly how long that item will take to produce and whether that time could be more profitably used.
Generally there’s profits to be found in manufacturing the Advanced Components rather than just buying them direct from Sell orders. Buying using a buy order is a different matter, they are normally at, or below the manufacturing break-even.
You are paying for the convenience of being able to just say “I want x NOW!”

Also, with many items I can produce more than I can sell - the turnover on many items is modest and you are in competition with others. The recent brokerage charges have encouraged small and often feeding the market rather than big order and 0.01 ISK it downwards (my opinion: good change). I have excess manufactruing capacity so using that to manufacture supply chain items is a good idea.
I can save 7-8% on the manufacturing cost of a Mega Beam Laser II by making rather than buying the Laser Focusing Crystals. That’s the difference between “loss” and “negligible profit”.
But you need to be looking on a case by case basis, and recognise that there are occasions where “just buy things” is a perfectly good option.

When you start down this path you’ll find that the Advanced Component manufacturing can be a bottleneck - the manufacture of the Component volumes you need is longer than the time needed to make the final T2 items. You may want to pay the premium to buy those items instantly because of a opportunity for a major profit from the finished product. You may want a stockpile of Components for the same reason, but that’s capital tie-up.
Some of the T2 component PI products can be made on a factory planet more cheaply than just buying them, that’s an option for profit in the supply chain.

How Value Add works in a supply chain is very interesting.

In answer to the “Are advanced components overpriced?” - No, because there are people willing to pay that price. And that “what someone else will pay you for them” is the absolute definition of “value” of an item. You may not like paying that price because you can make 'em cheaper. But that’s how you value those items. Value isn’t absolute.