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by Nevermark 199 days ago
No they are making higher margins, but not getting as much profit as they could have.

Look at the standard Econ 101 supply-demand curve.

If they could make and sell twice as many chips, it would not cut there margins anywhere near half. They would be making much more.

When demand spikes up and down there will be pain. Because booms are not predictable, in timing, size or duration. And accelerating supply expansion is very expensive, slow, and risky.

Many boom prompted RAM supply expansions have ended in years of unprofitable over capacity.
1 comments
Dylan16807 199 days ago
> If they could make and sell twice as many chips, it would not cut there margins anywhere near half. So they would be making much more.

You really think that? I would expect their margins to drop down to a small percentage if they doubled production. Maybe even less.

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Nevermark 199 days ago
Price spikes like we are seeing reflect tremendous pent-up/increased demand.

Any price increase reduces purchases by many customers. This tends to keep prices stable. With only small changes in price relative to regular changes in demand.

Yet prices have gone way up.

Which means that many people and businesses are cancelling, delaying, or scaling back their RAM purchases. And yet new demand is incredibly high.

To get prices down, supply would have to grow tremendously. Enough to soak up even more purchases from the very motivated, and to cover all the purchasers that have currently pulled back.

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Dylan16807 199 days ago
There's room for making more, but I don't think doubling makes sense from a profit point of view.

Especially because the demand curve that's skyrocketing right now is the RAM that isn't in long-term contracts. Doubling all production would much more than double the RAM available for normal purchases.

> To get prices down, supply would have to grow tremendously. Enough to soak up even more purchases from the very motivated, and to cover all the purchasers that have currently pulled back.

Is "down" here back to normal levels?

But normal levels are like a tenth of the profit margin. They'd make significantly less money doing that.

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