This is Capitalism working as intended - resources (RAM) are allocated to those which can extract most value from them (AI labs)
Micron locks in historically high memory prices for five years
21–30 of 81 posts
Re: Micron locks in historically high memory prices for five years
#22There is a futures market for DRAM and NAND for exactly this purpose.
Why not just sell on the open market, and let traders and financiers and all their prediction models give you the best possible price?
Re: Micron locks in historically high memory prices for five years
#23Earlier quoted context omitted.
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.
Re: Micron locks in historically high memory prices for five years
#24Predatory. I hope the tech community remembers this and diversifies away from companies that behave this way
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.
Re: Micron locks in historically high memory prices for five years
#25Earlier quoted context omitted.
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. https://www.youtube.com/watch?v=jVzeHTlWIDY
What are they going to do about it? Start their own DRAM fab?
With blackjack and hookers.
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.
Re: Micron locks in historically high memory prices for five years
#26This is Capitalism working as intended - resources (RAM) are allocated to those which can extract most value from them (AI labs)
You mean those who can pay the most for them? Value is not in the picture here.
Re: Micron locks in historically high memory prices for five years
#27Predatory. I hope the tech community remembers this and diversifies away from companies that behave this way
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 argua…
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.
Re: Micron locks in historically high memory prices for five years
#28Predatory. I hope the tech community remembers this and diversifies away from companies that behave this way
How do you want them to behave?
There is more demand than production. How would they choose who to sell to at lower prices? Organize a lottery?
Re: Micron locks in historically high memory prices for five years
#29Huh. It looks like Micron managed to lock in these contracts because companies are scared that prices will continue to rise. But in doing that, Micron has managed to lock themselves in a comfortably high floor price, potentially for longer than the boom is going to last. Big win for Micron.
Re: Micron locks in historically high memory prices for five years
#30Huh. It looks like Micron managed to lock in these contracts because companies are scared that prices will continue to rise. But in doing that, Micron has managed to lock themselves in a comfortably high floor price, potentially for longer than the boom is going to last. Big win for Micron.
The article says they locked in floor prices, so they can even continue to climb is what I understood. So maybe they are buying capacity instead.