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As a outside observer, NAND and DRAM prices have skyrocket ed with the AI infrastructure boom just as the China-based fabs are coming online. It is wise for th
by someperson 8mo ago
As a outside observer, NAND and DRAM prices have skyrocket ed with the AI infrastructure boom just as the China-based fabs are coming online.
It is wise for these Chinese fabs to eventually use a very aggressive dumping strategy to price well below cost push out other players forever, especially in DRAM.
But right now it seems they can max out their supply capacity without selling below cost.
Appears to me like China's endless state led (often unproductive) investment in semiconductor manufacturing subsidies (for decades) is about to pay off with some industry dominance soon.
Like the electric vehicle sector.
- nutjob2 8mo agoIt's funny that you call this an "very aggressive dumping strategy" while AI vendors are doing the same but with even greater losses and on a much larger scale. It's all simply a fight for market share. The original sin is the existing DRAM vendors selling their entire (spare) capacity to the likes of OpenAI.
- xadhominemx 8mo agoNo one sold their capacity to OpenAI. The vast majority of DRAM is transacted in what is essentially a quarterly auction.
- nutjob2 8mo ago"RAM is going to AI: OpenAI has secured up to 40% of the market." https://globalcio.com/news/16062/ https://globalcio.com/news/16062/ You're maybe talking about the spot market, but companies are free to make any sort of supply contract.
- xadhominemx 8mo agoAI slop article
- vel0city 8mo agoOk here's a different analysis: https://www.tomshardware.com/pc-components/dram/openais-stargate-project-to-consume-up-to-40-percent-of-global-dram-output-inks-deal-with-samsung-and-sk-hynix-to-the-tune-of-up-to-900-000-wafers-per-month https://www.tomshardware.com/pc-components/dram/openais-star...
- sho 8mo agoCan we please stop with this irritatingly persistent myth? AI companies, at least the big ones, do not sell inference at a loss - far from it. This has been debunked and explained many times and yet it keeps being repeated. The numbers aren't public but most guesses I've heard are that Anthropic's markup is around 50% on average, and that if considered in isolation, most models are profitable overall. The constant losses are instead due to training the next models, which will also eventually recoup but later, and forward capex investment. This idea that big AI companies are normally and systematically selling inference at a loss as some kind of market share strategy is just not supported by the facts.
- rjh29 8mo agoYou talk about myths and then quote vague guesses of 50% without sourcing.
- sho 8mo agoYes, because it can't be sourced. These are private companies. That doesn't mean that anyone's guess is as good as anyone else's. The CEO of Anthropic, for example, has publicly stated multiple times that if their individual models were companies in and of themselves, they'd be profitable. I have no reason to think he's lying.
- PowerElectronix 8mo agoI personally fail to see the downside of any manufacturer selling forever at a loss, except for the manufacturer itself.
- numpad0 8mo agothe currency eventually collapses
- extraduder_ire 8mo agoI don't know if it's still a thing, but China was getting a lot of heat about a decade ago for purposefully devaluing their currency to make their exports more attractive. They kind of had to do this, because their large amount of exports were pushing the value of it up compared to others.
- xyzzy123 8mo agoYou become dependent on the supplier. The downside in general is that other countries lose production capacity in steel, heavy industry, semiconductors, machine tools etc - industries that took decades to build and can't be easily replaced. Also they gradually lose the ability to meaningfully innovate in those sectors because there's no grounding against production reality anymore. This has geopolitical consequences further down the line.
- riku_iki 8mo ago> steel, heavy industry, semiconductors, machine tools the question is if single country can carry all these industries at loss for prolonged period of time. Another approach is to rely on international supply chain and speed of innovation, we can't produce steel domestically profitably today, fine, we may buy it from diversified international supplier network, and rebuild it fast tomorrow if needed using new tech, and focus on many other high margin verticals, instead of putting many billions of resources into infra which could be obsolete tomorrow.
- 8mo ago
- PearlRiver 8mo agoChinese investment has not been unproductive. It gave them independence so that the US could not cut them of- see Cuba.
- dygd 8mo ago> It is wise for these Chinese fabs to eventually use a very aggressive dumping strategy to price well below cost push out other players forever, especially in DRAM. Crucial's departure from the consumer market left such a gaping hole, that CXMT doesn't even need to push other players out to gain a footing.
- RobotToaster 8mo agoIt's more like everyone else abandoned the market, and CXMT realised it was free real estate.
- Maxious 8mo agoCXMT was already an option for consumers via brands like Kingbank and Asgard. There's Kingbank DDR5 using CXMT modules starting to become available in Australia https://www.techpowerup.com/346479/hardware-unboxed-examines-cheaper-cxmt-ic-based-kingbank-kfrw-ddr5-6000-cl36-kit https://www.techpowerup.com/346479/hardware-unboxed-examines... including from mainstream retailers like Mwave https://www.mwave.com.au/memory/pc-ddr4/kingbank https://www.mwave.com.au/memory/pc-ddr4/kingbank https://www.mwave.com.au/memory/pc-ddr5/kingbank https://www.mwave.com.au/memory/pc-ddr5/kingbank
- maxglute 8mo agoHow's it dumping below cost when hey can simply sell for 100% margins instead of western makers selling for 400%.
- shimman 8mo agoBecause only western companies are allowed to make massive profits at the expense of entire nations, it's not greed when they do it apparently.
- theLiminator 8mo agoIs it not the case that they're raising price in response to demand? Ie. if they kept the price low, they'd be perpetually out of supply?
- econ 8mo agoCan chose to increase production or embrace the scarcity. The later might look delicious on paper. More profit, less effort, less short term risk. All you have to do is ignore the whale in the room.
- fc417fc802 8mo agoThey are increasing production. Fabs take multiple years to come online. The modern semiconductor industry moves only very slowly and at very great cost.
- imtringued 8mo agoThere is no point in increasing production for a memory standard that will be phased out next year unless you're Chinese.
- joecool1029 8mo agoNo, they raise price because they can and demand isn’t showing signs of stopping despite increased prices. This won’t affect whether there’s a shortage or not, besides we’re not talking direct to consumer float product, they inked commitments. If they didn’t have a documented history of running cartel price fixing schemes for LCD/OLED display tech, NAND, and DRAM, I’d maybe agree with you but we have the history. They cry every time about China ‘dumping’ for not going along with the racket.
- RobotToaster 8mo agoIt's amazing what can be achieved when you can plan 5 years in advance, instead of just making the line go up for the next quarter.
- nine_k 8mo agoNot five, but likely twenty-five. Not specific plans but attention: situation changes all the time, but the interest remains.
- abtinf 8mo agoHistory is littered with the corpses of those slaughtered by the millions in the name of great leader’s 5 year plans. https://en.wikipedia.org/wiki/Great_Leap_Forward https://en.wikipedia.org/wiki/Great_Leap_Forward
- ceejayoz 8mo agoAnd you don’t think short term profit chasing has a death count?
- 0_____0 8mo agoThat's the most obvious example of failure of Chinese central planning. That and one child policy were abysmal failures that resulted from shoddy science coupled to effective central authority. Look at the 12/13/14th 5 year plan (the most recently passed). Do you think they achieved their goals? If your headcanon is that the CCP is inept because they caused crop failures 60 years ago... you could stand to take a look at what they're doing today.
- ahartmetz 8mo agoI guess the summary is as simple as: Good five year plans are great, bad five year plans are terrible. There are sooo many variables in how one could go about making and executing five year plans. They must have figured out a couple of things that tend to work.
- refulgentis 8mo ago
- SlinkyOnStairs 8mo ago> It is wise for these Chinese fabs to eventually use a very aggressive dumping strategy to price well below cost push out other players forever, especially in DRAM. It's not dumping, it's the opposite. Sam Altman's stunt has created massive amounts of fictitious demand (OpenAI isn't using those wafers it's ordering) and triggered massive panic-buying from everyone else. Prices are arteficially high, this has turbocharged China's fab and R&D budgets as you observe. > is about to pay off with some industry dominance soon. They're not looking to dump the semiconductor markets. They're looking to invade Taiwan. All this buildout in their semiconductor industry is to detach themselves from the western semiconductor industry that will either sanction them if they invade Taiwan, or in the case of TSMC, suffer major damage in the ensuing conflict. That the collapse/destruction of the Taiwanese semiconductor and electronics industries will utterly ruin the western tech industry is somewhere between a happy coincidence and acceptable collateral damage to them. No dumping required.
- fc417fc802 8mo ago> utterly ruin I realize Intel has done some serious ball dropping over the past two decades but you do realize the US has on shore cutting edge fabs, right? It's only luxury consumer electronics and the highest end corporate gear that use cutting edge nodes to begin with. Disruption of the cutting edge would certainly wreak havoc on the pricing and specs of high end luxury electronics but that would hardly be the end of the world. I still use a desktop with DDR3 on a daily basis (granted the GPU is much newer with GDDR6) and my laptop is from the early era of DDR4 ...
- smw 8mo ago> but you do realize the US has on shore cutting edge fabs, right? No they don't. Even the US partnerships with TSMC aren't cutting edge. TSMC and arguably Samsung have cutting edge fabs, no one else.
- adrian_b 8mo agoThe Intel CMOS process 18A, which they have launched a few weeks ago, is the first after almost a decade that is somewhat competitive with TSMC and Samsung. Good for Intel: their new manufacturing process has demonstrated a much better energy efficiency than the TSMC "3 nm" process that was used to make Intel Arrow Lake and Intel Lunar Lake. Unknown: TSMC now has a "2 nm" process and the first products using variants of this process are being launched. It is unknown how TSMC "2 nm" compares with Intel 18A, but it is almost certain that the TSMC "2 nm" is better. Bad for Intel: they had difficulties to achieve high clock frequencies in Intel 18A in comparison with TSMC "3 nm", so most Panther Lake models have lower clock frequencies than their Arrow Lake counterparts. Moreover, it is also pretty certain that for now Intel 18A has much lower fabrication yields than even the latest TSMC "2 nm" process.
- abtinf 8mo ago> It is wise … to price well below cost push out other players forever I challenge you to name a single successful example of this that isn’t state enforced.
- stingraycharles 8mo agoAmazon?
- abtinf 8mo agoAmazon was wildly profitable on a unit cost basis from relatively early on. They didn’t show profits on paper because they reinvested everything into their capital buildout to reduce costs even more.
- stingraycharles 8mo agoI thought Amazon was selling quite a few items at a loss to undercut competition early on?
- ayewo 8mo agoThey did in some instances, not all. A notable example where they ate $ millions in losses is the Diapers.com story [1] [2]. [1]: https://slate.com/technology/2013/10/amazon-book-how-jeff-bezos-went-thermonuclear-on-diapers-com.html https://slate.com/technology/2013/10/amazon-book-how-jeff-be... [2]: https://arstechnica.com/tech-policy/2020/07/emails-detail-amazons-plan-to-crush-a-startup-rival-with-price-cuts/ https://arstechnica.com/tech-policy/2020/07/emails-detail-am...
- api 8mo agoAll VC funded companies that release free or underpriced products and services, capture market share, then raise prices or enshittify? The entire business model of VC funded tech?
- 8mo ago
- pclmulqdq 8mo agoDumping is when you sell things for below cost. It is not dumping when you charge a 500% markup instead of a 1000% markup, even if the market is currently selling at that markup.
- HauntingPin 8mo agoI thought the same but when I googled, the results disagreed with this point of view. https://en.wikipedia.org/wiki/Dumping_(pricing_policy) https://en.wikipedia.org/wiki/Dumping_(pricing_policy) All the laws listed there define dumping as something being sold below the "normal price" and there being some quantifiable harm being done to local industry of the country being exported to. So it has nothing to do necessarily with the cost of production, and based on this it could be considered price dumping.
- Yohvee7u 8mo agoThat's merely the marginalists at the WTO struggling to fit their beliefs that value is subjective and unkowable into the reality of commodity production.
- HauntingPin 8mo agoOkay, so what official sources do you base your definition of price dumping on? Nobody is asking for your opinion on what you think price dumping is. This is a legally recognised thing, not just some random talking point.
- zarzavat 8mo agoThe normal price is not the same as the market price. The normal price is what we had last year. The market price is higher than normal, due to a sudden demand spike and production shifting to HBM. More manufacturing capacity coming online to return the price to normal is not dumping, it's how markets are supposed to operate. Dumping would be e.g. if China used subsidies to sell DRAM at a price below what unsubsidised manufacturers can sell at, in an effort to push them out of the market.
- yogthos 8mo agoI find people tend to miss the productive aspects of Chinese state led investments because they don't consider their value at scale. Take the HSR system, it has been derided time and again as being wasteful, and too expensive, and so on. Yet, now it's become a key artery for trade and commerce across China. It allows goods to move at an incredible speed, boosts tourism, and helps overall development of many regions which otherwise wouldn't see much economic activity.
- gchamonlive 8mo agoIs China doing to DRAM what Amazon did to bookstores?