I have fairly simplistic view of the economics involved here. Could you explain why the ability to sell more chips wouldn't be sufficient enough incentive to increase supply?
I have fairly simplistic view of the economics involved here. Could you explain why the ability to sell more chips wouldn't be sufficient enough incentive to increase supply?
Not the person you’re replying to, but RAM has historically been a boom-or-bust business, and companies that invest to meet demand during a boom cycle usually have that new capacity come online just in time for the bust.
If it was just variable costs and new capacity was available today they’d do it. But there are substantial fixed costs and delays to increasing capacity, and that uncertainty makes it risky.
That's such a nonsensical argument, it holds for every other business too and in this case it's just a lame excuse for monopolization. If you are that chicken and can't stomach competition you should not be in business anyway.
The current RAM manufactures were convicted of conspiracy to manipulate prices back in the 2000s or thereabout, doing so is their modus operandi, but this time the government is participating in the racket.
Bringing on new fabs takes many years and billions of dollars. You're exposing yourself to a lot of risk if you build now and find that the gold rush is over by the time your new capacity is online.
Let's imagine you're drilling oil instead. You have to spend billions of dollars over years finding and developing a new oilfield to make any profit back. And once you have it, you have to continuously spend enormous amounts of money to keep producing it, which means your effective price floor is higher than the current stable price.
Now it's 2021 and someone gets a tanker stuck in the Suez, sending the price of oil sky-high. How long does the ship have to be stuck before you spend those billions of dollars on a bet that it'll recoup before someone gets the ship out?
Although on the flipside, let's pretend it's 2017's and you are Nvidia selling GPU's for Bitcoin - maybe demand will dry up at some point? Do you stop scaling production as this might be the max of the market, or do you follow the market and increase production?
It's always easier to see the right move in hindsight!
Nvidia doesn't own fabs though, TSMC does. By 2017, ASICs for Bitcoin were well underway. Ethereum hadn't switched to PoS, and wouldn't until 2022. For that specific question, the answer is yes, because the GTX 1080 Ti is/was a monster card, and the crypto miners have a somewhat predictable demand for them, so there's some modeling you can do based on demand for the 2016 generation of cards. The question is ofc, if you're Nvidia, what are you optimizing for? Let's say, without foresight that Ethereum would move to PoS in 2022 and that AI would replace that demand, how many 1090 Ti cards do you make, how many 1070s, how many mobile 1080s, how many Titans? In order to answer that, someone at Nvidia would have to have, for better or worse, really had to have gotten into cryptocurrency in order to understand that market. Because you, as Nvidia, know how much better the 1080 will be for mining Ethereum, certain predictions can be made on demand.
Question is, without hindsight, 2022 rolls around, Ethereum moves to PoS, do you sell NVDA?
Its a lot easier to commit to spending billions of dollars in a hypothetical then reality.