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Micron locks in historically high memory prices for five years

theregister.com

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Re: Micron locks in historically high memory prices for five years

#31

Post by adrian_b »

cycomanic wrote: post #24
digitaltrees wrote: post #2

Predatory. 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 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.

Re: Micron locks in historically high memory prices for five years

#32

Post by hmate9 »

kubb wrote: post #26
nok22kon wrote: post #21

This 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.

You can pay the most if you can get the most value out of it

Re: Micron locks in historically high memory prices for five years

#33

Post by LoganDark »

potatototoo99 wrote: post #30
LoganDark wrote: post #29

Huh. 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.

Well, I didn't say the price is fixed. Just that even if the boom goes away, Micron will have their price floor. The benefit to a customer signing a contract like that, of course, is the price ceiling. But indeed, prices can continue to grow within that range.

Re: Micron locks in historically high memory prices for five years

#34

Post by LoganDark »

cm2187 wrote: post #20
dygd wrote: post #15

Earlier 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

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.

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.

Re: Micron locks in historically high memory prices for five years

#35

Post by adrian_b »

hmate9 wrote: post #32
kubb wrote: post #26

Earlier quoted context omitted.

You mean those who can pay the most for them? Value is not in the picture here.

You can pay the most if you can get the most value out of it

No, you pay the most if you believe that you might get the most value out of it.

Moreover, the AI companies have not bought anything with their own money, but with the money of naive investors who believe that their money will be used by the AI companies to buy things out of which they will be able to get the most value.

So for now, this is strictly only speculation, which has driven the prices sky high. It remains to be seen who will really get any value (besides Micron, NVIDIA and the like, who have got good money for their products).

Re: Micron locks in historically high memory prices for five years

#36

Post by m4rtink »

baq wrote: post #14
digitaltrees wrote: post #2

Predatory. I hope the tech community remembers this and diversifies away from companies that behave this way

waiting for you[0] to lay the $10B on the table for a new DDR fab - there's only so long I can wait for a new PC for the kids [0] can actually be anyone

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.

Re: Micron locks in historically high memory prices for five years

#39

Post by vkou »

adrian_b wrote: post #31
cycomanic wrote: post #24

Earlier quoted context omitted.

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 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 sabotagi…

> is just a consequence of the fact that the memory market is now dominated by quasi-monopolies.

And software isn't?

Re: Micron locks in historically high memory prices for five years

#40

Post by adrian_b »

nok22kon wrote: post #21

This is Capitalism working as intended - resources (RAM) are allocated to those which can extract most value from them (AI labs)

Yes, Capitalism is working by a mechanism where some people have access to huge fictitious resources, a.k.a. money, for whom they have never given anything equivalent in exchange, and they use those fictitious resources to outbid the other people and take possession of the real physical resources, which they can use then to make more money, in a positive feedback loop.

Money was supposed to be a means by which it is recorded what someone has given to others, so that they may receive equivalent resources in return. But now money has retained this function only for employees and other low-income categories.

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