[m4x]

Isn't one of the points of the article that memory manufacturers leave demand unmet for their own financial safety? In which case, nobody (including Apple) is paying close to manufacturing costs. There isn't enough memory to go around and prices are extremely inflated.

You're talking about the "best" things Apple could do with their money, in terms of investment returns, but I think that misses the point that Apple literally can't buy enough memory at any price.

[mrandish]

> that misses the point that Apple literally can't buy enough memory at any price.

They can't buy enough today. I think I already explained this as well as I can in my second paragraph above. You seem to not be appreciating that every decision in this business has a 3.5+ year latency. And 3.5 years ago when Apple made the decisions they're living with now, Micron was selling their furniture (euphemistically speaking). Sinking billions into building RAM fabs would not only have gotten you laughed out of the boardroom, Apple shareholders would have rioted (for all the logical reasons I laid out in my prior two posts). The only scenario where the prudently balanced decision Apple made to not vertically integrate RAM manufacturing looks bad is the very unlikely scenario that actually happened this one time - but that 'bad look' is only temporary because the situation will probably look different 12 months from now (which is less than a third-of-a-fab-decision away)).

Back when I first became a strategist for a public F500 tech company whose products you probably use often, a very wise man took me to dinner and counseled me to never post mortem my decisions on the outcomes, but only on the decision process. In other words, knowing what I knew when I made the decision, did I choose the option most statistically likely to get the desired result - regardless if it worked or failed that time? In highly uncertain games, some bets don't pay off. In my work, if 60% of my decisions came out positively, I'd have been the greatest of all time (they weren't that quite that high). If strategists don't think this way we end up leading our companies to doom by "chasing black swans" (aka unlikely outlier outcomes).

> memory manufacturers leave demand unmet

That's not their plan or desire - it's just the inevitable result of trying to predict both future demand and future capacities of unbuilt fabs on new nodes (every new node is an adventure). Both are rough estimates with bell-curve probabilities and wide error bars. You might imagine the Chief RAM Strategist drags the center of the bell curve so the big bump in the middle is right over their best guess of what the fab yields and market demand will actually be three years from now - perfectly slicing the odds in the probabilistic middle. But they don't. Instead, being a smart, experienced strategist, they slide the bell curve a little bit to the low-side - because very profitably selling everything you can possibly make and regretting the 5 or 10% of demand you left unmet is a far, FAR better (and more survivable) problem to have than sitting on 5 or 10% unsold excess capacity from expensive fab space you paid to build but can't monetize. That extra capacity will often force you to take lower margins on ALL your capacity to ensure you sell through the extra 10%. This is how you speed run becoming an ex-strategist, sometimes of an ex-company.

In short, being wrong on the low side is the best kind of wrong you can be. But being wrong on the high side is the worst kind of wrong, and it's not linear. Every extra percent you go over costs significantly more than the last. If they do their job perfectly, it looks to consumers like "manufacturers leave demand unmet." If they do their job less than perfectly but pretty well, it looks like "RAM's too damn expensive and the idiots created a shortage - what were those morons thinking?" If they do their job catastrophically it looks to consumers like "Woohoo, RAMs dirt cheap. Look at me! I've got so many sticks I'm bathing in them like Scrooge McDuck!"

[m4x]

I'm not sure what you think I'm saying, but in case it needs clarifying, it is not that Apple should have built fabs 3.5 years ago, or today, or at any other point in time.

What I did say is that in a hypothetical world where Apple did invest in their own fabs, they'd have much better access to memory and could be selling machines with vastly more memory than their competitors today. Should they be doing this? I'm making no statement either way.

> a very wise man took me to dinner and counseled me to never post mortem my decisions on the outcomes, but only on the decision process

I appreciate this wisdom on one hand, but on the other it's comically misguided. You have no way to evaluate the decision process if the outcomes are not considered. Don't post mortem your decisions in a way that leads to self-blame or paralysis, but certainly post mortem them to see whether the process was suboptimal.

In this case, any board laughing at the idea of investment in memory 3.5 years ago should instead have been looking more closely at likely memory needs over the then-near-future, given the quite obvious upcoming demand for GPU memory. There's no magic bullet and they wouldn't have been able to make perfect decisions regardless, but clearly the process they followed at that time was suboptimal.

[mrandish]

> What I did say is that in a hypothetical world where Apple did invest in their own fabs, they'd have much better access to memory and could be selling machines with vastly more memory than their competitors today.

Okay, I understand your point. I've always taken it as given that vertically integrating DRAM fabs was one of many options available to any very large manufacturer with sufficient cash flow. However, I think your point was inaccurate. If Apple invested in their own fabs, they would not have better access to memory today, unless they ALSO did something quite irrational and overbuilt their fab's capacity by a factor of 2X or more. In terms of greater capacity, at Apple's massive scale of consuming more than a "one fab" amount of output, owning their own fabs vs ordering from fabs owned by others still requires pre-ordering their expected RAM needs ~3.5 years in advance. Regardless who owns the fab, no fab can make significantly more chips without that long lead time. The difference in lead time, total capacity and margin between a self-owned fab you started building 3.5 years ago and "pre-buying most of a fab's output 3.5 years in advance" is minimal enough to be virtually immaterial. This entire area of strategic analysis is broadly called "Build vs Buy", but it has more to do with financial and tax metrics around cash on hand, capex, amortization and return on capital. The problem we're focused on here is lead-time or supply elasticity (eg how quickly can we get a lot more DRAM than we thought we'd need and at what cost delta). And, at this scale, those dynamics aren't fundamentally changed whether you Build or Buy.

> Should they be doing this? I'm making no statement either way.

Given the dynamics, I assumed you weren't just stating that acting irrationally is always an option, but that doing so was a rational option strategically. But it's not. Even in your scenario it wouldn't have changed anything UNLESS you imagine Apple of 3.5 yrs ago was psychic and built two fabs for every one they actually expected to need - but that would have been insane. And if they were that insane, they could have accomplished very nearly the same thing by pre-buying 2X their expected RAM needs from their 3rd party suppliers. At Apple's scale, 3rd party suppliers are what we call 'virtually captive'. You're such a large customer, you're practically funding the supplier's capex. This is a serious strategic problem for such suppliers (but great for Apple).

> I appreciate this wisdom on one hand, but on the other it's comically misguided. You have no way to evaluate the decision process if the outcomes are not considered.

Yes, of course you consider the outcome as one data point. But I said you don't assess by the outcome, meaning we don't judge the decision process's ultimate validity only (or even mostly) by the outcome. It's just one element. The reason is that for highly uncertain decision spaces with unknowable key externals, you can have NOT just: 1. Optimal decision-making / successful outcome, and 2. Sub-optimal decision-making / failed outcome but ALSO: 3. Optimal decision-making / failed outcome, and 4. Sub-optimal decision-making / successful outcome. Understanding the ramifications of this matrix is crucial - especially the last two.

A key example, is the hypothetical where a crazy strategist consults an astrologer, pre-commits to 2X the projected need for fab output (whether by building/owning fabs directly or just indirectly by pre-buying one or more fab's entire output in advance). If the astrologer says "build 2X what you think you'll need" and there's an unforeseeable confluence of events 3 years later that causes a worldwide shortage of RAM, then if you overweight the outcome in assessing if your strategic planning process is optimal, you'd always just do what the astrologer says. In short, in high-risk domains, sometimes a sub-optimal decision-making process can randomly result in a successful outcome - but that's a spurious signal.

If I'm the Apple VP responsible for DRAM supply chain strategy, the question I might ask my demand-side forecasting team is to run a post mortem study of whether any data sources might have existed at the time we locked in our DRAM capacity commit which could have predicted the DRAM bubble with sufficient certainty that we would have made a different decision back then. However, I'm virtually certain the answer is "No". At Apple's scale and longevity, their teams on this are already very good. If the answer was "Yes", they'd already have done it. I understand you think "this AI thing was knowable 3.5 years ago" but hindsight is always 20/20. If you haven't done such rigorous forecasting and post mortem analysis in complex, high-risk domains with thousands of variables, not just 'known unknowns' but many 'unknown unknowns', with billions of dollars at stake - it's difficult to appreciate the full scope of the challenge. The trick is the question is not just a true/false binary of "AI will cause a run on DRAM." The real question is multiple choice and the choices are numbered 1 through 5,000 (at least). And "AI will cause a run on DRAM" is just 'possible future scenario' #3,462.