The memory makers will not expand demand drastically. It is in the nature of their business to keep the market under-supplied, otherwise the following oversupply will kill them. Instead, supply is just rerouted from less profitable segments such as mobile and personal computing.
China is about to flood the market and prove this notion wrong. If there is demand they want to meet it with supply.
But to your point, that is exactly how American companies like to play now. No one is stopping them from screwing over the consumer.
I have a Micron near me and they are building another chip facility but we are years away still so I suspect China will beat them to the punch.
Yeah, more global competition in DRAM would be great.
SK Hynix and Samsung are South Korean.
> SK Hynix and Samsung are South Korean.
The Korean memory makers are playing the same game as Micron and simply moving existing capacity up-market.
GP was referring to upstart Chinese memory manufacturers like ChangXin, who - if their yields manage to catch the wave - could not have asked for a more favorable market after the big 3 have abandoned the consumer segment. Consumers who would have otherwise turned up their noses at CXMT will not have the luxury.
China wants a sovereign DRAM capacity. They're playing an entirely different game then the commercial suppliers in the West.
I suspect Chinese factories will get built first, but quality may take a few years to really nail down.
Basically:
China floods the market with cheaper but less QA'd parts, makes a gazillion dollars, is able to spend said money to fix yields / QA issues and streamline operations, by the time that happens Micron and maybe a few other existing players will have new memory production, and then we'll have a flood of cheap, reliable memory. 4yr, maybe?
They're doing decent enough already for consumer electronics. Corsair is selling 16GB 6000MT/s CL36 DDR5 sticks in China using memory from CXMT: https://www.tomshardware.com/pc-components/ddr5/chinese-memo...
How long would it take an aggressive company to expand production capacity? I always thought it takes a few years, at minimum, for even established players to stand up new fabs
It is not a law of nature that Chinese products are lower quality (cf. electric cars) and I don't see why they would go for that. They can just bin what they produce like everyone else and sell their products for what they have been tested to deliver.
But it is a near law that the first to market attempts will fully embraces the deeply engrained culture of 差不多, until market forces beat it out of the product line.
This has nothing to do about nationality, it has everything to do with building and running a brand new, highly technical, mass production facility.
This is wrong. It is NOT in their nature to keep the market under-supplied -- eg, Samsung, the industry's largest company, was notorious for expanding their capacity during the industry downturn to gain market share while everyone else was cutting back to minimize loss.
I'm guessing you are also probably unfamiliar with the terms like "chicken game" which refers to the cutthroat, high-stakes price wars where dominant semiconductor manufacturers intentionally overproduce and slash prices. This is literally how the industry went from dozens to just three majors today since the 80's.
You're making the point for him. Undersupply in a boom, store cash to ramp up capacity in a downturn. Presevres capital and avoids overcapacity during the turning
Sure, but the key word here is "was"
The industry is so naturally prone to oversupply that the only stable equilibrium is undersupply. Aggressive expansion kicks off a price war, which immediately undercuts the logic of the expansion.
This only changes with new entrants, which will come, especially from China. But it takes time to build fab capacity, so the medium-term modal outcome is consistent undersupply.
If the existing memory makers retains control of the market and don't defect from the optimal-long-term equilibrium for themselves, that's true. It just takes one player to defect for short term gains as we've seen with some past boom-and-bust cycles. Alternatively, it takes a sufficiently-resourced player with enough incentive to enter the market themselves (NVidia, Google, Amazon, the PRC government through one of many companies...)
Relevant article posted on HN about this a few days ago: https://davidoks.blog/p/ai-is-killing-the-cheap-smartphone
Reminds me of how Samsung is giving out $340,000 per person bonuses. Shows you how much of a stronghold they have in market.
CXMT is scaling up incredibly fast, they are on a clock (south koreans) their monopoly will end relatively soon, although I'm guessing that the AI companies will crash before that anyways.
Supply and demand always balance out. There is no way manufacturers aren’t going to compete away these inflated margins, as long as they feel like this demand is sustainable.
You know there's other strategies? Companies can be more clever than naively undercutting each other...
Memory in particular ... https://en.wikipedia.org/wiki/DRAM_price_fixing_scandal
The entry-cost to getting into memory is on the order of $billions and years - you can do just about anything...
There's very few manufacturers, I believe 3 globally? And there's a large moat. Nobody can compete with them in the next 10 years. It's really not hard to coordinate action between 3 companies.
There are trillions to be made. That moat won't be as insurmountable in hindsight.
There used to be over 50 memory manufactures in the US alone. Everytime there was a bust (following a boom) there'd be bankruptcies. The lucky ones got bought out and consolidated. Empirically, attempting to capitalize on memory booms is a losing strategy.
There really aren't though. The reason there's only three is because memory is a commodity and margins are historically very low. It's not a very good business to be in, generally.
In the past when memory supply was short and then rebounded, many companies went out of business because making memory was no longer profitable.
Only in the most naive sense.
If it costs you $1B and five years to build out new supply and you think demand will not sustain for more than three years, it does not make sense to expand supply.
Instead you will maintain your margins currently and await demand to decrease back to your current supply.
This is pretty common and as others have pointed out is even more common in markets where competition is slow and lead times are long.
Ammunition is a great example over the last decade or so as political turnover caused relatively short lived demand spikes and manufacturers didn't expand supply because they knew once political winds shift, demand would decrease.
...which is presumably why GP said "as long as they feel like this demand is sustainable."
Apple could always decide to build their own fab or some such thing.
That’s not the Apple way, but they might fund a supplier to build out capacity in return for priority access.
The thing is they tend to only do that when they can get a technological competitive advantage. The priority access gives them a locked in competitive edge, for a while. It’s not clear there is an opportunity like that in memory.