> 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.
> 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.