VOL. XCIV, NO. 247

MOAT TYPE BREAKDOWN

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Tuesday, December 30, 2025

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Supply moat

Capacity Moat Moat

18 companies · 21 segments

A supply-side moat where scarce, well-sited, or highly specialized capacity is hard to add quickly. The incumbent earns advantages because demand cannot be met without them, especially in peak periods or constrained geographies.

Domain

Supply moat

Advantages

5 strengths

Disadvantages

5 tradeoffs

Coverage

18 companies · 21 segments

Advantages

  • Pricing power in tight markets: scarcity allows higher prices, longer contracts, or better terms.
  • Cost and yield edge: scale and learning curves lower unit costs and improve quality over time.
  • Share stability: customers lock in supply to reduce risk, increasing switching friction.
  • Deters entry: high capex, long payback, and execution complexity discourage challengers.
  • Cycle upside: incumbents capture outsized profits during capacity crunches.

Disadvantages

  • Utilization risk: when demand drops, fixed costs crush margins and returns.
  • Overbuild risk: industry expansions can turn scarcity into glut quickly.
  • Technology leapfrog: new processes can make old capacity less valuable or obsolete.
  • Know-how diffusion: suppliers, talent movement, and consultants can spread process knowledge.
  • Input and logistics shocks: energy, labor, raw materials, or shipping constraints can erase the edge.

Why it exists

  • Long lead times: permitting, construction, qualification, and ramp take years.
  • High capital intensity: large upfront spend plus execution risk limits entrants.
  • Bottlenecks: a single constrained step (equipment, skilled labor, approvals) caps industry output.
  • Location and timing: the right site, logistics, or grid access is difficult to replicate.
  • Customer qualification: buyers require certified capacity (quality audits, long-term validation).

Where it shows up

  • Semiconductor manufacturing and critical tools (fabs, advanced packaging, lithography)
  • Specialty chemicals and materials with qualification cycles (battery materials, high-purity inputs)
  • Energy and infrastructure (pipelines, LNG terminals, transmission, data centers in power-constrained areas)
  • Transportation chokepoints (ports, rail, aircraft slots, warehouses near key hubs)
  • Healthcare and regulated production (biologics CDMOs, sterile manufacturing)

Durability drivers

  • Structural constraints (permits, environmental limits, grid interconnects, scarce land/real estate)
  • Deep process expertise and continuous improvement (yields, uptime, defect reduction)
  • High switching/qualification costs for customers (multi-quarter validation, audits)
  • Long-term contracts with take-or-pay or capacity reservation fees
  • Integration with ecosystems (supplier networks, co-location, proprietary tooling)

Common red flags

  • Moat depends on a short-lived shortage rather than structural constraints
  • Aggressive industry capex waves with many credible entrants expanding simultaneously
  • Capacity is not differentiated (commodity output) and buyers can multi-source easily
  • High leverage or fixed obligations that require high utilization to break even
  • Technology transitions that strand legacy plants or require massive retooling

How to evaluate

Key questions

  • Is the capacity actually scarce at the right time/place, or is it globally fungible?
  • How long does it take (and cost) to replicate the capacity to comparable quality?
  • Are customers locked in by qualification, contracts, or supply-chain integration?
  • What happens to economics at 70% vs 90% utilization?
  • Is the moat tied to a specific technology node/process that could be leapfrogged?

Metrics & signals

  • Capacity utilization and sensitivity of margins to utilization changes
  • Lead times / backlog duration and trend (tightening or easing)
  • Capex intensity and maintenance capex as a % of revenue
  • Yield, scrap/defect rates, uptime, and throughput improvements over time
  • Contract structure: reservation fees, take-or-pay, duration, inflation pass-through
  • Customer concentration and qualification depth (number of qualified buyers per line)
  • Industry capacity additions vs demand growth (glut risk indicator)

Examples & patterns

Patterns

  • Capacity reservation and long-term supply agreements during tight markets
  • Learning-curve-driven cost declines and yield improvements that widen the gap
  • Location-constrained assets earning scarcity rents (slots, interconnects, permits)
  • Specialized capacity that requires lengthy customer qualification

Notes

  • A true capacity moat is structural (time, permits, qualification, capex), not just “we built a lot.”
  • The key test is downside behavior: strong moats still earn acceptable returns through mid-cycle utilization.

Examples in the moat database

Curation & Accuracy

This directory blends AI‑assisted discovery with human curation. Entries are reviewed, edited, and organized with the goal of expanding coverage and sharpening quality over time. Your feedback helps steer improvements (because no single human can capture everything all at once).

Details change. Pricing, features, and availability may be incomplete or out of date. Treat listings as a starting point and verify on the provider’s site before making decisions. If you spot an error or a gap, send a quick note and I’ll adjust.