[hodder]

Forgive me because I do not understand the supply chain for memory. With Micron et al effectively scalping their customers with an oligopoly on probably the lowest intellectual IP in the chain, does this not guarantee 10 years from now a) We are either overbuilt as hyperscalers cut capex, or b) hyperscalers vertically integrate. Or is it truly that hard to make memory? And if that is not true, perhaps it isn't really a commodity at all.

Honestly Jassey, Zuck and Tim Apple are prob on the phone with Donnie. If oil companies are “gouging,” what is 85% margins on memory, threatening the whole bull run and raising compute, Killing AI, and raising iPhone/computer pricing? Countdown to DOJ antitrust case is ticking.

To be clear: I understand how markets work, Im just quoting Donald Trump's tweet from yesterday calling oil companies gouging, and I predict government intervention and polital pressures regardless of economic realities.

[arpinum]

Building a new memory fab takes 3-4 years, extremely capital intensive. Micron is spending $25B+ on Capex and more than half of that is for new memory capacity, a 3x increase over 2 years.

It is a very risky business, overestimate demand by too much and you go bankrupt. And yes, it is hard, especially HBM. Fabs are scaling up, but it is hard to estimate demand in 2029, and it may be better to not overshoot.

They also need to get in line to buy ASML EUV tooling, and ASML has to deal with scaling for their suppliers as well. There are tons of bottlenecks and complexities.

It is a commodity in that there are standards, not that there are many firms that can hit the standards.

This isn't gouging, this is bidding on fixed quantities and bidders having a high willingness to pay. Think of it like an auction.

[rnxrx]

It *is* hard to make memory, especially HBM (...which is what the AI market wants, and is what the manufacturers are focusing on) and bringing on new capacity takes years. There's the additional wrinkle that the manufacturers we have left are the ones who survived periods where the market was glutted with oversupply in the wake of previous shortages.

These decisions play out on the order of trillions of dollars and 3+ year horizons. They're also incredibly sensitive to other geopolitical issues (Taiwan, issues with Chinese tech capability vs export/import controls, etc).

There are a lot of valid discussions to be had about how we got to this state of oligopoly: Taiwan's consistent sponsorship of its semiconductor capabilities and the subsequent concentration of technology (expertise, capacity, etc), the lack of investment/support (and ceding of technical leadership) in Western countries, the various rivalries with China and the implications of it becoming a first-class producer of semiconductors at scale, etc. None of those discussions and none of their potential outcomes can substantively change that we're going to continue in this situation (massive price increases, spotty availability, etc) for at least the next 18-24 months.

[FireBeyond]

I mean lets not pretend that Apple hasn't done this for years. I had a cheesegrater Mac Pro 2019, but I had a choice with memory - I could upgrade from the base 32GB to 192GB one of two ways - pay Apple $3,000 for 160GB, or get the base 32GB model, and buy 192GB of the exact same sticks of memory (same manufacturer, timings, etc.) from OWC for $1,050. And I could sell the 32GB if I wanted.

Same with SSD. I could pay another $3,000 to Apple for 7TB of SSD (go from 1TB to 8), or I could get the 1TB, use that as a system drive, and then buy a 4xM.2 NVMe PCIe chassis, and put in 4x2TB Samsung 990 drives from Amazon and OWC for $1,100, and have 9TB of usable storage, and for bonus points, the chassis was about 400MB/s faster.

[gruez]

>If oil companies are “gouging,” what is 85% margins on memory, threatening the whole bull run and raising compute, Killing AI, and raising iPhone/computer pricing? Countdown to DOJ antitrust case is ticking

Antitrust =/= gouging. Jacking up prices during a shortage (eg. electric generators just before a hurricane) might be considered gouging, but it doesn't fall under antitrust. It's just supply and demand.

[SoftTalker]

It's not exploitative either. It's just supply and demand.

[hodder]

I agree man. I’m just quoting Donald.

[HPsquared]

It all depends on how much they're investing in increasing capacity.

[philipkglass]

Quite a bit:

https://www.micron.com/us-expansion/ny

https://www.micron.com/us-expansion/id

The first Idaho project is starting soon: "Micron has already achieved key construction milestones on its first Idaho fab with DRAM output scheduled to begin in 2027."

[porridgeraisin]

https://www.wsj.com/tech/apple-raises-prices-on-macs-ipads-b...

Micron executives, who typically offer cautious projections about the boom-bust memory business, said on their earnings call that “tight conditions” will persist beyond 2027. Just three months ago, they had projected tight conditions going only beyond this year.

In an interview Wednesday night, Micron Chief Business Officer Sumit Sadana said the company couldn’t make investments during the memory market’s last downturn, when Micron’s gross profits went negative, in part because certain customers took advantage to pay rock-bottom prices.

“We told a couple of the customers who were being very aggressive with pricing at that time that this is not constructive,” he said, without naming Apple, adding that low prices discouraged capital investments. “A lot of the industry investments got shut down in 2023 because of really poor pricing and really poor margins.”

The iPhone-maker is well known for using its huge memory and storage purchases as leverage to secure the lowest prices, say analysts and former memory company executives.

[panarky]

Good luck applying your US antitrust law against Samsung and SK Hynix which have 75% of the market.

Maybe instead of antitrust the US could go back to tariffs, the universal cure for high prices.

[adolph]

As I understand it, the dynamics are similar to generic drugs where there is a large capital hurdle to new production facilities and a likelihood that prices will soon drop to a point that a new facility will lose money.

https://www.asianometry.com/p/the-semiconductor-bust-still-c...