[Stitch4223]

If there is no agreement, then the magic term is "tacit collusion."

Why not ask the same ridiculous amount of money your competitors do? People seem to be paying for it. Their fault. If suppliers have sufficiently different products, they can make some more expensive, others cheaper; on average, everybody pays more. A high barrier to entry might help such practices.

That doesn't mean I'm saying this is what is happening. Sometimes things just suck, and somebody bought the world's supply of RAM wafers to use as frisbees.

https://en.wikipedia.org/wiki/Tacit_collusion

[brookst]

Yeah your qualifier is important. If I have zyngots and suddenly the price goes through the roof, it is not collusion or illegal for me to raise my prices.

Tacit collusion requires at least signaling. There has to be some intent. Like in the US rental market where Realpage coordinates tacit collusion.

But if there is legitimately demand for far more memory than can be produced, it seems silly to claim collusion to raise prices.

[itopaloglu83]

As George Carlin once said, these people know what’s good for them, they all went to same schools, and hang out at same places, they don’t need to have a secret meeting to collide.

[omgwtfbyobbq]

Does conscious parallelism require signaling?

But yeah, if there's demand a limited supply, price increases from that are legit.

[AnthonyMouse]

> Why not ask the same ridiculous amount of money your competitors do? People seem to be paying for it. Their fault.

That's not how commodity markets work. This stuff is essentially sold at auction with the price set by supply and demand. The way they would fix the price is by constraining supply so that people have to outbid each other on a smaller amount of inventory.

But that's not that hard to measure -- are they producing less than they were before prices went up? The answer is actually that they're producing more. The reason prices went up anyway is the huge increase in demand.

You would then have to make the case that it's not just that they're reducing supply but that they're not increasing it fast enough. That's theoretically possible but it's also very plausible that building new fabs just takes time, so if someone's theory is that they're colluding then they need to present some evidence.

[freefaler]

It's strange how people search for cartels where the basic laws of supply and demand are at work. It seems to me, that such a simple concept should be better understood, especially in any market economy, where most of the people has sold something online and priced it somehow. But alas, that's not what's happening, is this because of the discourse of "if I don't like something it's because of some evil corporation tries to squeeze me"? (many examples of those, but not all markets are Apple Iphones)

[thewebguyd]

> but that they're not increasing it fast enough

That also isn't illegal. A business can choose to artificially restrict supply if they want, there's no mandate that they must meet demand.

It only crosses into illegal territory if multiple companies get together and secretly agree to cap production to keep prices high. Then it becomes collusion. It also becomes illegal if there's a monopoly power that is intentionally constricting supply to specifically stop a smaller competitor or lock them out of the market.

The hard part is how do you prove Samsung, SK Hynix, Micron are acting as a unified cartel when there obviously isn't going to be a paper trail for secret meetings.

[AnthonyMouse]

> A business can choose to artificially restrict supply if they want, there's no mandate that they must meet demand.

There is, however, no incentive to do this when prices are high unless you expect competitors to do likewise, since otherwise you're just handing the business to the others when they increase production. Which strongly implies that if that's what everybody is doing, they're colluding.

> The hard part is how do you prove Samsung, SK Hynix, Micron are acting as a unified cartel when there obviously isn't going to be a paper trail for secret meetings.

Which is the problem when that's what's happening, and why we should maybe change the law to infer the collusion from the outcome in cases where prices are high yet nobody is responding by increasing their market share.

[steveBK123]

> Which is the problem when that's what's happening, and why we should maybe change the law to infer the collusion from the outcome in cases where prices are high yet nobody is responding by increasing their market share.

No one has a crystal ball. Soviet planners figured that out eventually. You cannot punish people for lack of crystal ball outcome foresight.

Are we going to punish Micron for not planning a new fab 3 year ago when they had no margin and Apple was squeezing them to the bone? Do we co-indict Tim Apple?

Or wait, they were already trying to build one in Upstate NY that is stuck in NIMBY red tape. Do we co-indict Kathy Hochul?

[AnthonyMouse]

> Are we going to punish Micron for not planning a new fab 3 year ago when they had no margin and Apple was squeezing them to the bone?

This is why you expect the response to happen over a short period of years rather than absolutely instantaneously.

> Or wait, they were already trying to build one in Upstate NY that is stuck in NIMBY red tape. Do we co-indict Kathy Hochul?

Yes, definitely.

[brookst]

> There is, however, no incentive to do this when prices are high unless you expect competitors to do likewise

This imagines a world where water production can be dialed up and down instantly, at no cost, with no risk.

It doesn’t work that way though. Hiring people, scaling up factories, converting to 24/7 all have costs and risks.

Just google (or Claude, or whatever) memory companies that went backrupt overbuilding to meet a spike in demand. There are many. You probably don’t even know their names. Because Micron/etc stood pat and survived.

[AnthonyMouse]

> This imagines a world where water production can be dialed up and down instantly, at no cost, with no risk.

It only images a world in which the profit-maximizing amount of wafer production is higher when demand is higher, which is a completely reasonable premise to take as the default.

> Just google (or Claude, or whatever) memory companies that went backrupt overbuilding to meet a spike in demand. There are many. You probably don’t even know their names. Because Micron/etc stood pat and survived.

Those long forgotten companies like Intel, Toshiba, Texas Instruments, IBM, etc. that are all now bankrupt and no longer exist. Except that they still do exist, they just sold their DRAM divisions to the current incumbents. Even the divisions that went bankrupt -- for Qimonda (Infineon) it was the 2008 housing crash that did them in.

Predicting events like that isn't reasonably possible. What Micron actually did to survive it was keep a large reserve of cash to survive the lean years, not refuse to build fabs. The South Korean companies did the equivalent by being subsidiares of giant conglomerates.

[brookst]

Wafer production is almost entirely fixed cost. Running a factory at 30% utilization costs about 80% of running at full capacity (source: former Intel).

And let’s not forget Elpida.

Here’s a good article on the economics of the industry and why huge swings in margins make capital investment risky: https://www.mckinsey.com/~/media/McKinsey/Industries/Semicon...

[to11mtm]

There's also the factor that AFAIK a cost optimal DRAM fab is a bit different than a General purpose IC fab, Again naive level of knowledge here but NAND fabs I think are the closest, but that's also in very high demand.

[observationist]

I mean, if they're dumb enough to try to game the system blatantly - and there are plenty of execs that are - they're dumb enough to write down their super secret criminal collusion plans in a group text, or a lengthy email chain. That level of stupidity among white collar criminals is shockingly common.

If there's no evidence to be found, that might be a good indicator that either A.) nothing illegal occured or B.) the senior leadership involved are competent, intelligent, and discrete

Given the number of companies involved, all it takes is one idiot, so if it's collusion, I expect we'll see evidence. If not, number go up.

[mywittyname]

We have to decide what part is damaging to society: the actual physical agreement, or the effects of the agreement?

If it's the actual physical agreement that's the problem - the system is working as intended.

But if we are looking to prevent the negative outcomes associated with price fixing and collusion, our system is failing us.

They are never going to find proof of conspiracy. The people involved covered their tracks, and doing so is trivial. So the best we can do is punish the appearance of collusion. And if the goal is to actually prevent harm to customers, that's a better solution anyway, since it encourages leaders of companies to behave in a manner that's the opposite of collusion.

[Stitch4223]

You'll have to create a case that harm is taking place. Harm does not mean a PlayStation 5 is now $200 more expensive or that inflation exists.

I would look at questions regarding what harm is created: Is it discriminatory? Are parts of society shutting down, and is that unreasonable? Are groups of people now unable to afford a living? Does it move the poverty line? Is that permanent? And how do you prove this is exclusively due to the price increase of tech components, and RAM specifically?

It needs to be unfuzzy in some way in order to make sense, but that's just my opinion.

I do agree prices are insane and wish for them to come down today. I liked the ubiquitous amounts of RAM any system could have. In those days, forums were also filled with how insanely expensive 32 gigabytes of RAM was, about $100 :)

[AnthonyMouse]

> You'll have to create a case that harm is taking place. Harm does not mean a PlayStation 5 is now $200 more expensive or that inflation exists.

"Things cost more because of collusion" is always a harm. It doesn't matter if the product is maize or gold-plated haute couture, competitors are supposed to compete.

The question is, what's the best way to tell the difference between tacit collusion and just normal supply and demand?

It's not that easy, but here's a decent test: It's tacit conclusion if 1) net margins have been high for e.g. 3 years and 2) no new companies have entered the market in that period of time, or were acquired by an incumbent if they did.

Notice that this works for everything. Even if you're making luxury goods, the price may be high, but so are production costs, and there is a lower volume to amortize fixed costs over, so long-term net margins should be the same as they are anywhere else or you should see new entrants. If you don't, it's reasonable to infer collusion and leave it on the companies to prove otherwise.

[gruez]

>1) net margins have been high for e.g. 3 years

That breaks down for industries with long investment cycles. It takes years to build a fab, so the fact that DRAM prices have been high for 1-2 years isn't too suspicious, considering they've been burned by boom and bust cycles before.

>Notice that this works for everything. Even if you're making luxury goods, the price may be high, but so are production costs, and there is a lower volume to amortize fixed costs over, so long-term net margins should be the same as they are anywhere else or you should see new entrants. If you don't, it's reasonable to infer collusion and leave it on the companies to prove otherwise.

I can't tell you don't buy luxury goods ;)

People don't pay $10k+ for a Hermes bag because they want something that carries stuff 100% (or even 1%) better than a normal bag. They're buying it for the brand image/history. That's not something that can be replicated by a new entrant with some money to splash out on R&D or even marketing.

[AnthonyMouse]

> That breaks down for industries with long investment cycles. It takes years to build a fab, so the fact that DRAM prices have been high for 1-2 years isn't too suspicious, considering they've been burned by boom and bust cycles before.

Indeed, it takes around 3 years to build a fab, which is why it's not weird to see this at 1-2 years. And meanwhile not only are the incumbents building more fabs, so are the challengers. CXMT and Nanya are both building fabs too. Because that's what's expected to happen when prices go up in the absence of collusion, you get more supply and new entrants.

> People don't pay $10k+ for a Hermes bag because they want something that carries stuff 100% (or even 1%) better than a normal bag. They're buying it for the brand image/history.

You're talking about Veblen goods in particular, not luxury goods in general. Veblen goods are bonkers, but they also don't fail the test, because then there will be plenty of other companies offering similar products at lower margins without the brand name, and then you don't have an industry you suspect of collusion over everyone having suspiciously high margins because many of them don't.

[Stitch4223]

I see the logic in your reply, thanks :)

[windexh8er]

They've done this in the past. Between 1998 and 2002, DRAM manufacturers conspired to fix prices and were sued by the DoJ. The companies included Samsung, Hynix, Infineon, Micron, and others. They coordinated through phone calls and meetings to set prices and limit supply and that directly caused harm to consumers [0]. Curious what we get out of the lawsuit discovery, but now we only have 4 players so hopefully it will be obvious if they're playing the same game. Price fixing seems seems like the easy button when you look at the margins per product over the last couple of years.

Gamers Nexus has done a lot of reporting on it as of late [1][2].

[0] https://en.wikipedia.org/wiki/DRAM_price_fixing_scandal [1] https://youtu.be/R1jsbfouRQY?is=PZnyIjUjSK5UuGpL [2] https://youtu.be/jVzeHTlWIDY?is=PZOHQaaqb49hcBs9

[fennecbutt]

>Harm does not mean a PlayStation 5 is now $200 more expensive or that inflation exists.

Yes it does lmao. If consumers can't get access to devices then they cannot be used for work or education. It's counterproductive.

How many "attention is all you need" papers aren't being written because as soon as there's a sniff of money the rabid suit and tie MBA fucks leap onto any opportunity like a dog in heat and fuck it to death.

[stasomatic]

Not directly addressing your points, but I fail to see how this whole situation can be viewed as cartel price fixing. There is no oversupply. The strange thing is that we are at the mercy of 3 corps.

[eddythompson80]

> The strange thing is that we are at the mercy of 3 corps.

Wait until you discover TSMC, ASML, Carl Zeiss, Intel and AMD, or even Nvidia.

[laughing_man]

Isn't it difficult to win on tacit collusion if you can't find some kind of document or email to show they were deliberately taking advantage?