7 ms·

The memory makers will not expand demand drastically. It is in the nature of their business to keep the market under-supplied, otherwise the following oversuppl

The memory makers will not expand demand drastically. It is in the nature of their business to keep the market under-supplied, otherwise the following oversupply will kill them. Instead, supply is just rerouted from less profitable segments such as mobile and personal computing.

jayd16 4mo ago
Apple could always decide to build their own fab or some such thing.
- simonh 4mo ago
  That’s not the Apple way, but they might fund a supplier to build out capacity in return for priority access. The thing is they tend to only do that when they can get a technological competitive advantage. The priority access gives them a locked in competitive edge, for a while. It’s not clear there is an opportunity like that in memory.
  - jayd16 4mo ago
    It wasn't their way to design CPUs until it was their way.
    - golem14 4mo ago
      Designing and producing are separate
    - nextaccountic 4mo ago
      Apple doesn't want to enter low margin business
ec109685 4mo ago
Supply and demand always balance out. There is no way manufacturers aren’t going to compete away these inflated margins, as long as they feel like this demand is sustainable.
- array_key_first 4mo ago
  There's very few manufacturers, I believe 3 globally? And there's a large moat. Nobody can compete with them in the next 10 years. It's really not hard to coordinate action between 3 companies.
  - KeplerBoy 4mo ago
    There are trillions to be made. That moat won't be as insurmountable in hindsight.
    - array_key_first 4mo ago
      There really aren't though. The reason there's only three is because memory is a commodity and margins are historically very low. It's not a very good business to be in, generally. In the past when memory supply was short and then rebounded, many companies went out of business because making memory was no longer profitable.
      - roenxi 4mo ago
        And margins will continue to be low, otherwise they'll discover they don't have a moat. Commodity markets being competitive is a self fulfilling prophecy. The companies have two choices. They either produce RAM cheaply and in large quantities, or they get replaced by someone who will produce RAM cheaply and in large quantities. Current incumbents are free to pick which of those two scenarios they prefer.
    - overfeed 4mo ago
      There used to be over 50 memory manufactures in the US alone. Everytime there was a bust (following a boom) there'd be bankruptcies. The lucky ones got bought out and consolidated. Empirically, attempting to capitalize on memory booms is a losing strategy.
- kristopolous 4mo ago
  You know there's other strategies? Companies can be more clever than naively undercutting each other... Memory in particular ... https://en.wikipedia.org/wiki/DRAM_price_fixing_scandal https://en.wikipedia.org/wiki/DRAM_price_fixing_scandal The entry-cost to getting into memory is on the order of $billions and years - you can do just about anything...
brandensilva 4mo ago
China is about to flood the market and prove this notion wrong. If there is demand they want to meet it with supply. But to your point, that is exactly how American companies like to play now. No one is stopping them from screwing over the consumer. I have a Micron near me and they are building another chip facility but we are years away still so I suspect China will beat them to the punch.
- esseph 4mo ago
  I suspect Chinese factories will get built first, but quality may take a few years to really nail down. Basically: China floods the market with cheaper but less QA'd parts, makes a gazillion dollars, is able to spend said money to fix yields / QA issues and streamline operations, by the time that happens Micron and maybe a few other existing players will have new memory production, and then we'll have a flood of cheap, reliable memory. 4yr, maybe?
  - ahartmetz 4mo ago
    It is not a law of nature that Chinese products are lower quality (cf. electric cars) and I don't see why they would go for that. They can just bin what they produce like everyone else and sell their products for what they have been tested to deliver.
    - nomel 4mo ago
      But it is a near law that the first to market attempts will fully embraces the deeply engrained culture of 差不多, until market forces beat it out of the product line.
      - fittingopposite 4mo ago
        What is 差不多?
        bendangelo 4mo ago
mlinsey 4mo ago
If the existing memory makers retains control of the market and don't defect from the optimal-long-term equilibrium for themselves, that's true. It just takes one player to defect for short term gains as we've seen with some past boom-and-bust cycles. Alternatively, it takes a sufficiently-resourced player with enough incentive to enter the market themselves (NVidia, Google, Amazon, the PRC government through one of many companies...)
itopaloglu83 4mo ago
Reminds me of how Samsung is giving out $340,000 per person bonuses. Shows you how much of a stronghold they have in market.
- zarzavat 4mo ago
  They did that to avoid losing even more money in a strike, not because they wanted to.
  - Dylan16807 4mo ago
    No company ever wants to give out big bonuses, but it's only 10% of their profits. So it still shows the scale of the money they're making right now.
- Viacol 4mo ago
  I think you're probably referring to SK Hynix. Samsung's situation was more about dealing with the fallout from the labor strike.
djeastm 4mo ago
Relevant article posted on HN about this a few days ago: https://davidoks.blog/p/ai-is-killing-the-cheap-smartphone https://davidoks.blog/p/ai-is-killing-the-cheap-smartphone
tooltalk 4mo ago
This is wrong. It is NOT in their nature to keep the market under-supplied -- eg, Samsung, the industry's largest company, was notorious for expanding their capacity during the industry downturn to gain market share while everyone else was cutting back to minimize loss. I'm guessing you are also probably unfamiliar with the terms like "chicken game" which refers to the cutthroat, high-stakes price wars where dominant semiconductor manufacturers intentionally overproduce and slash prices. This is literally how the industry went from dozens to just three majors today since the 80's.
- CGMthrowaway 4mo ago
  You're making the point for him. Undersupply in a boom, store cash to ramp up capacity in a downturn. Presevres capital and avoids overcapacity during the turning
  - roenxi 4mo ago
    This sounds like a plan to sell less when prices are high and more when prices are low. That is one of the stupidest strategies a company could adopt. I assure you, the RAM makers are pumping out as much as they can and increasing capacity as fast as they think the market can handle. I'm not sure what world we live in when the scheming capitalists are all hunched around their table working out how to dodge selling their products into an enormous price boom. Do they not like money all of a sudden?
    - Tuna-Fish 4mo ago
      Building new capacity takes years. The idea is that the market is reliably cyclical, so you should expand when there is a downturn, when costs are low and you can afford the short-term capacity hits that expansion causes (fe. when you divide productive teams in two and fill both halves to full strength with new hires).
      - roenxi 4mo ago
        If you prefer. But we seem to have gone from "undersupply in a boom" to a strategy of oversupplying so aggressively that manufacturers would finish ramping up supply well before the boom before it even happens. And that would be a better strategy.
dev1ycan 4mo ago
CXMT is scaling up incredibly fast, they are on a clock (south koreans) their monopoly will end relatively soon, although I'm guessing that the AI companies will crash before that anyways.
- topspin 4mo ago
  > their monopoly will end relatively soon Corsair DDR5 DIMM modules with CXMT RAM started appearing on Friday.
gimmeThaBeet 4mo ago
I struggle to think of a line of business as cyclical as DRAM, maybe like certain kinds of mining would be my only thought. The DRAM fabs have been on a roundabout for 40 years going from getting accused of price fixing and cartel behavior, to struggling to keep the lights on. And imo it's not really their fault, it's all the lead time of advanced semiconductors, combined with the commodity dynamics of oil. And the goal is to match that supply to the demand of everything from consumer electronics to more datacenters than you can shake a stick at. It's maddening to try and solve that, so at this point I really don't fault them for prioritizing survival.
- theshackleford 4mo ago
  > from getting accused of price fixing and cartel behavior "Accused" makes it sound like these things may still be up in the air, when they very much are not. I would choose instead the much clearer "A number of those involved in DRAM production have a proven history of cartel behavior and price fixing." For those who may not be familiar with some of the history in this area: https://en.wikipedia.org/wiki/DRAM_price_fixing_scandal https://en.wikipedia.org/wiki/DRAM_price_fixing_scandal
  - gimmeThaBeet 4mo ago
    I said accused mainly because the big 3 won their last antitrust suit in the US, sort of "what have you caught me for, lately?" approach. For all I know, maybe they are dumb enough to try and actually coordinate again, my hunch would be no, or they've tried something new and inventive. Like Matt Levine talked about how so many landlords were using the same software to set prices, that one was pretty shady. But it is interesting where it is popping up at the moment, like power transformers is another area. These companies have lived through these cycles before, and know there is no one to save them if they overleverage and get it wrong.
cromka 4mo ago
What you described only works if the manufacturers agree to price fix. Otherwise, in a free market, they'll race to increase their earnings by meeting the demand.
Ey7NFZ3P0nzAe 4mo ago
> It is in the nature of their business to keep the market under-supplied What?! If they did an anti competitive agreement sure. Otherwise no as each supplier is incentivized to produce more than its competitor and less than the demand, while divesting just enough to survive the oversupply risk.

jayd16 4mo ago

Apple could always decide to build their own fab or some such thing.

simonh 4mo ago
That’s not the Apple way, but they might fund a supplier to build out capacity in return for priority access. The thing is they tend to only do that when they can get a technological competitive advantage. The priority access gives them a locked in competitive edge, for a while. It’s not clear there is an opportunity like that in memory.
- jayd16 4mo ago
  It wasn't their way to design CPUs until it was their way.
  - golem14 4mo ago
    Designing and producing are separate
  - nextaccountic 4mo ago
    Apple doesn't want to enter low margin business

ec109685 4mo ago

Supply and demand always balance out. There is no way manufacturers aren’t going to compete away these inflated margins, as long as they feel like this demand is sustainable.

array_key_first 4mo ago
There's very few manufacturers, I believe 3 globally? And there's a large moat. Nobody can compete with them in the next 10 years. It's really not hard to coordinate action between 3 companies.
- KeplerBoy 4mo ago
  There are trillions to be made. That moat won't be as insurmountable in hindsight.
  - array_key_first 4mo ago
    There really aren't though. The reason there's only three is because memory is a commodity and margins are historically very low. It's not a very good business to be in, generally. In the past when memory supply was short and then rebounded, many companies went out of business because making memory was no longer profitable.
    - roenxi 4mo ago
      And margins will continue to be low, otherwise they'll discover they don't have a moat. Commodity markets being competitive is a self fulfilling prophecy. The companies have two choices. They either produce RAM cheaply and in large quantities, or they get replaced by someone who will produce RAM cheaply and in large quantities. Current incumbents are free to pick which of those two scenarios they prefer.
  - overfeed 4mo ago
    There used to be over 50 memory manufactures in the US alone. Everytime there was a bust (following a boom) there'd be bankruptcies. The lucky ones got bought out and consolidated. Empirically, attempting to capitalize on memory booms is a losing strategy.
kristopolous 4mo ago
You know there's other strategies? Companies can be more clever than naively undercutting each other... Memory in particular ... https://en.wikipedia.org/wiki/DRAM_price_fixing_scandal https://en.wikipedia.org/wiki/DRAM_price_fixing_scandal The entry-cost to getting into memory is on the order of $billions and years - you can do just about anything...

brandensilva 4mo ago

China is about to flood the market and prove this notion wrong. If there is demand they want to meet it with supply. But to your point, that is exactly how American companies like to play now. No one is stopping them from screwing over the consumer. I have a Micron near me and they are building another chip facility but we are years away still so I suspect China will beat them to the punch.

esseph 4mo ago
I suspect Chinese factories will get built first, but quality may take a few years to really nail down. Basically: China floods the market with cheaper but less QA'd parts, makes a gazillion dollars, is able to spend said money to fix yields / QA issues and streamline operations, by the time that happens Micron and maybe a few other existing players will have new memory production, and then we'll have a flood of cheap, reliable memory. 4yr, maybe?
- ahartmetz 4mo ago
  It is not a law of nature that Chinese products are lower quality (cf. electric cars) and I don't see why they would go for that. They can just bin what they produce like everyone else and sell their products for what they have been tested to deliver.
  - nomel 4mo ago
    But it is a near law that the first to market attempts will fully embraces the deeply engrained culture of 差不多, until market forces beat it out of the product line.
    - fittingopposite 4mo ago
      What is 差不多?
      - bendangelo 4mo ago

mlinsey 4mo ago

If the existing memory makers retains control of the market and don't defect from the optimal-long-term equilibrium for themselves, that's true. It just takes one player to defect for short term gains as we've seen with some past boom-and-bust cycles. Alternatively, it takes a sufficiently-resourced player with enough incentive to enter the market themselves (NVidia, Google, Amazon, the PRC government through one of many companies...)

itopaloglu83 4mo ago

Reminds me of how Samsung is giving out $340,000 per person bonuses. Shows you how much of a stronghold they have in market.

zarzavat 4mo ago
They did that to avoid losing even more money in a strike, not because they wanted to.
- Dylan16807 4mo ago
  No company ever wants to give out big bonuses, but it's only 10% of their profits. So it still shows the scale of the money they're making right now.
Viacol 4mo ago
I think you're probably referring to SK Hynix. Samsung's situation was more about dealing with the fallout from the labor strike.

djeastm 4mo ago

Relevant article posted on HN about this a few days ago: https://davidoks.blog/p/ai-is-killing-the-cheap-smartphone https://davidoks.blog/p/ai-is-killing-the-cheap-smartphone

tooltalk 4mo ago

This is wrong. It is NOT in their nature to keep the market under-supplied -- eg, Samsung, the industry's largest company, was notorious for expanding their capacity during the industry downturn to gain market share while everyone else was cutting back to minimize loss. I'm guessing you are also probably unfamiliar with the terms like "chicken game" which refers to the cutthroat, high-stakes price wars where dominant semiconductor manufacturers intentionally overproduce and slash prices. This is literally how the industry went from dozens to just three majors today since the 80's.

CGMthrowaway 4mo ago
You're making the point for him. Undersupply in a boom, store cash to ramp up capacity in a downturn. Presevres capital and avoids overcapacity during the turning
- roenxi 4mo ago
  This sounds like a plan to sell less when prices are high and more when prices are low. That is one of the stupidest strategies a company could adopt. I assure you, the RAM makers are pumping out as much as they can and increasing capacity as fast as they think the market can handle. I'm not sure what world we live in when the scheming capitalists are all hunched around their table working out how to dodge selling their products into an enormous price boom. Do they not like money all of a sudden?
  - Tuna-Fish 4mo ago
    Building new capacity takes years. The idea is that the market is reliably cyclical, so you should expand when there is a downturn, when costs are low and you can afford the short-term capacity hits that expansion causes (fe. when you divide productive teams in two and fill both halves to full strength with new hires).
    - roenxi 4mo ago
      If you prefer. But we seem to have gone from "undersupply in a boom" to a strategy of oversupplying so aggressively that manufacturers would finish ramping up supply well before the boom before it even happens. And that would be a better strategy.

dev1ycan 4mo ago

CXMT is scaling up incredibly fast, they are on a clock (south koreans) their monopoly will end relatively soon, although I'm guessing that the AI companies will crash before that anyways.

topspin 4mo ago
> their monopoly will end relatively soon Corsair DDR5 DIMM modules with CXMT RAM started appearing on Friday.

gimmeThaBeet 4mo ago

I struggle to think of a line of business as cyclical as DRAM, maybe like certain kinds of mining would be my only thought. The DRAM fabs have been on a roundabout for 40 years going from getting accused of price fixing and cartel behavior, to struggling to keep the lights on. And imo it's not really their fault, it's all the lead time of advanced semiconductors, combined with the commodity dynamics of oil. And the goal is to match that supply to the demand of everything from consumer electronics to more datacenters than you can shake a stick at. It's maddening to try and solve that, so at this point I really don't fault them for prioritizing survival.

theshackleford 4mo ago
> from getting accused of price fixing and cartel behavior "Accused" makes it sound like these things may still be up in the air, when they very much are not. I would choose instead the much clearer "A number of those involved in DRAM production have a proven history of cartel behavior and price fixing." For those who may not be familiar with some of the history in this area: https://en.wikipedia.org/wiki/DRAM_price_fixing_scandal https://en.wikipedia.org/wiki/DRAM_price_fixing_scandal
- gimmeThaBeet 4mo ago
  I said accused mainly because the big 3 won their last antitrust suit in the US, sort of "what have you caught me for, lately?" approach. For all I know, maybe they are dumb enough to try and actually coordinate again, my hunch would be no, or they've tried something new and inventive. Like Matt Levine talked about how so many landlords were using the same software to set prices, that one was pretty shady. But it is interesting where it is popping up at the moment, like power transformers is another area. These companies have lived through these cycles before, and know there is no one to save them if they overleverage and get it wrong.

cromka 4mo ago

What you described only works if the manufacturers agree to price fix. Otherwise, in a free market, they'll race to increase their earnings by meeting the demand.

Ey7NFZ3P0nzAe 4mo ago

> It is in the nature of their business to keep the market under-supplied What?! If they did an anti competitive agreement sure. Otherwise no as each supplier is incentivized to produce more than its competitor and less than the demand, while divesting just enough to survive the oversupply risk.