It's funny how everyone (especially here on HN) accepted (and expected) extremely high profit margins from software businesses, but now that hardware companies are increasing their margins to match it is suddenly outrageous. The same was reflected in engineering salaries, with software engineering salaries being often a multiple of hardware engineering ones. All this despite the fact that software businesses is arguably much easier, less risky and less capital intensive.
For decades now we have seen the expectations that software businesses (and in particular FANGs) have pushed any hardware margnins to be more and more like commodities, while they were extracting all the value.
This exactly. The software industry has enjoyed lack of antitrust for decades now, and only complains now that others are able to ask any price against them.
This phenomenon of "hardware companies are increasing their markets" is just a consequence of the fact that the memory market is now dominated by quasi-monopolies.
Decades ago, when memory production still existed in many countries, no such margin increases would have been possible.
Even now, this would not have been possible without the US government actively suppressing competition in the memory market, by sabotaging the Chinese memory producers.
The so-called "sanctions" against the Chinese memory producers have started some years ago precisely in the moment when Micron was threatened to lose market share to the Chinese producers (e.g. when Apple was considering to switch to them as providers). Based on the "Cui prodest?" principle, it is extremely likely that Micron was the entity who lobbied the US government to sabotage the Chinese memory producers, creating the environment where companies like OpenAI could successfully drive the memory prices to record levels.
If you need to sponsor an event or something, you have to choose between an American big tech, another American big tech, another American big tech, or another American big tech
Yeah they're going to diversify... to one of the other two memory companies who will likely be raising their prices too, because why should they be suckers?
The suckers are those companies agreeing to this deal. 'Your margin is my opportunity' means prices will fall eventually once more production come on line. The invisible hand will slap their faces
"... involve a commitment to buy a certain quantity of product and pay for it in a pricing band that has a floor and a ceiling price. The floor price covers the historically high gross margins mentioned above, and the ceiling price means those who commit to an SCA are insulated if memory prices go even higher."
So clearly 16 large buyers consider it likely that prices will go even higher. How likely? >10% chance? Likely enough to sign an agreement.
"Eventually" doing a lot of work. Micron (and implicitly anyone signing this deal) are betting demand is going to outstrip capacity for several years, taking into account what new capacity can be brought online and when.
Well, apparently those companies believe memory prices will continue to rise, so they'd better lock in supply at the current (high) prices. We'll see if they're right...
nobody is agreeing to what the headline says. the SCAs are just a hedge against even higher prices. the agreements will be broken the second prices drop.
> To date, five manufacturers have pleaded guilty to their involvement in an international price-fixing conspiracy between July 1, 1998, and June 15, 2002, including Hynix, Infineon, Micron Technology, Samsung, and Elpida.
It is history; we have not learned; we are doomed to repeat it.
Well a couple Chinese RAM companies already did that a couple years ago & now they are getting the global consumer market handed on a silver platter due to the hubris and shortsightedness of the current RAM cartel.
Why? Part of the problem is that chip manufacturers (from tsmc to to memory makers) are reluctant to ramp up production as the AI bubble may pop and they would find themselves with huge over capacity, a scenario they have gone through many times.
By giving them stability of cash flows, the AI companies are enabling them to make those investments and to ramp up production. That's a good thing, not a bad thing. Over time it should ease the squeeze on chips.
It feels different this time. I bet there will be a generation of PC enthusiasts that are going to remember Crucial exiting the consumer market to chase AI dollars. And similar, when they hear Micron/Samsung/Sk Hynix, they'd be wary of the price gouging. Gamer's Nexus is doing really good job exposing the DRAM cartel.
PC enthusiasts aren't exactly sentimental when in front of a spec sheet and a price list. Plus where else are you going to go. All manufacturers are hiking up their margin if you believe their stock prices.
If the gaming community is any indication (nvidia, lootboxes and gatcha mechanics, pre-ordering etc.), most people won't care and will be just happy that prices are down again and FOMO will win.
Hey, I'm a PC enthusiast and I'm sentimental about Crucial exiting. They made some of the best memory and flash storage, and they didn't market it stupidly -- they were just reliable and dependable and that was it. They also didn't try to hide their components by packaging it into some flashy shell, which I incredibly appreciated. Of course, I've been going more TEAMGROUP lately anyway, but Crucial was tried and true, and now it's dead.
It lives with some of the other things I'm grieving due to the AI boom, like Apple's car project.
In all seriousness, the payoff of a real competitor not in the cartel entering at some time in the next five years would be huge. They would have business through the busts because people would go to them first. The challenge will be fighting corruption every step along the way. They would have to keep a sharp legal team on staff for all the litigating necessary to defend against anti-competitive practices and even then would only succeed in a legal and political environment accepting of anti-corruption enforcement.
For decades now we have seen the expectations that software businesses (and in particular FANGs) have pushed any hardware margnins to be more and more like commodities, while they were extracting all the value.