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> it seems they'd be a prime candidate to spin up their own memory fab. While Apple et al certainly have the money to tilt up their own fab, they're savvy enou
by mrandish 5mo ago
> it seems they'd be a prime candidate to spin up their own memory fab.
While Apple et al certainly have the money to tilt up their own fab, they're savvy enough to understand the memory market's long history of constant boom/bust cycles. I still remember the huge DRAM shortage in late 80s forcing my startup at the time to delay launching our new product for a year.
People assume Apple cares about vertically integrating cost but they're actually focused on integrating margin. Apple has billions in cash on hand and when they think about what to do with it, a key metric is Return on Capital, especially the margin that capital will generate. Since a core metric public companies are judged on is blended margin, they are looking for ways their bags o' cash can be put to work generating revenue at margins that will pull their current average margin up vs down.
Averaged over time, mainstream memory devices are historically one of the worst margin areas of the semi market. It's super expensive to tilt up a fab on a new node but once you do, turning the crank faster to make a lot more chips isn't too hard because mainstream DRAM tends to be quite uniform. So when a fab on a new node and/or RAM generation first opens, the margins tend to be pretty great. But as the node matures and/or the RAM generation goes from 'new' to 'commodity', competition heats up as everyone gets better at making more faster. Then they're tempted to maximize revenue by cutting prices until their mature fab is at 101% utilization. And that eventually drives margins down until someone's selling near cost to sustain their low-price-enabling volume - with occasional dips below cost when they get stuck holding excess inventory. That's why cash-rich companies with high margins like Apple are delighted to buy DRAM built with Other People's Money. As long as the DRAM market is under competitive pressure, Apple gets to shop their huge orders around to get the absolute lowest price on RAM that was built with other investor's low margin dollars.
- baxtr 5mo agoTo reframe your great comment: Is it fair to conclude that DRAM is basically a commodity that can be specified well enough by a set of parameters? If so it won’t allow you to get any competitive advantage in your products and thus wouldn’t be a business you want to be in as Apple.
- mrandish 5mo agoYes, that's what I meant by "Mainstream DRAM". The basic parameters are specified by standards like JEDEC, so the most common types can be used in many systems thus reach high volumes. This can be less true for specialized RAM like HBM or the highest performance grades.
- RealityVoid 5mo agoThe competitive advantage is having access to it.
- kopirgan 5mo agoThis has become like opec's best years. Only there's no cartel at least not openly. But there's another key bottleneck. Even with all the money in the world, getting those machines that etch the RAM could be a multi year ration shop queue. And they're not making those companies every day!
- mrandish 5mo ago> This has become like opec's best years Yes, except no DRAM maker is taking this as a signal to go deep into debt to double or triple capacity. It takes a minimum of 3+ years to dramatically increase capacity and no one expects this inflated demand bubble to last that long. Because they've seen this cycle before, they'll bump next gen capacity up a bit more than planned, maybe 15-25% because the current windfall profits are enough to build a buffer to absorb the hit if that excess capacity comes online in the next DRAM demand crash. In the meantime, they'll just apologize to everyone for the "market conditions beyond our control" while banking as much of these crazy profits as they possibly can while it lasts. But deep down they remember they were starving just yesterday and know they'll be starving again tomorrow. I understand why everyone's pissed at the "evil DRAM makers" but I also remember boasting about how I scored some crazy cheap RAM sticks not so long ago. None of us were shedding tears when they were selling at a loss just to survive.
- officialchicken 5mo ago> Yes, except no DRAM maker is taking this as a signal to go deep... Incorrect. CXMT is taking this as a signal to open new fabs, create new products, develop new silicon manufacturing techniques, and enter the consumer market worldwide (except USA).
- MichaelZuo 5mo agoIsn’t that the point? Everyone knows the commodity market (outside HBM) is going to be margin crushed within a few years… by CXMT, demand swings, and so on. So nobody cares to fully meet the demand today. They are perfectly happy telling customers (those not willing to sign a 10 year contract paying up front at least) to go pound sand. They don’t even need an OPEC like arrangement. They are effectively perfectly coordinated already in dismissing customers.
- Tuna-Fish 5mo ago> I still remember the huge DRAM shortage in late 80s forcing my startup at the time to delay launching our new product for a year. That one was caused by manipulation by politicians, not market forces. Micron started a price war with Japanese memory manufacturers, the Japanese cut prices to compete, Micron sued them for "dumping". The saga ended with the 1986 U.S.–Japan Semiconductor Agreement, which, among other things, created production controls that limited the total dram supply. The level was set based on then current demand, and due to the rapid growth of demand at the time it almost instantly caused a massive global supply deficit. The agreement also caused the rise of the South Korean memory industry, because the Japanese companies offloaded their now surplus equipment for cheap.
- SiempreViernes 5mo ago> That one was caused by manipulation by politicians, not market forces. Funny how you then go on to explain it was market _actors_ that drove the politicians to act, but that this is nevertheless totally not an example of market _forces_.
- actionfromafar 5mo agoMarket forces are usually meant in the spherical cow sense, not that the cow has politicians on their pockets. Here it's useful to point out that free markets can't exist without an external force keeping them in check.
- deleted 5mo ago[deleted]
- FarmerPotato 5mo agoI worked in DRAM salvage from 1987-88. It became niche profitable to harvest 4116s from years-old boards (4164s if you could get them) and put them right back into 256K memory expansion boards for PC ATs. 256K bytes of RAM that way made us $128 in sales. I earned $3.35 an hour. Any inventory I accumulated went out the door next morning. It was a brief moment, but it makes me wonder if we'll see refurbished memory in fashion next year. BTW the company, OEM Parts, was one of the last great surplus shops, surviving until just recently. Probably there were still cardboard bins with my handwriting for all the TTL chips that weren't in demand.
- spockz 5mo agoThe only reason I can see Apple do this is if it enables them to sell entry level devices with vastly more ram than the competition can afford. Say entry level MacBook Pro with 256GiB ram to facilitate running frontier level local models. If that is an edge they want to have.
- sokoloff 5mo agoIn what world would 256GB of RAM be “entry level”?
- m4x 5mo agoA world where Apple has invested in their own fabs, so they can sell devices with drastically more RAM than their competition at entry-level prices.
- sokoloff 5mo agoWhy would they sell a device with 256GB of RAM as the lowest-spec device rather than making 8 32GB or 16 16GB machines as their entry-level? Apple’s not exactly famous for their low pricing on spec upgrades nor competing based on being the price leader…
- ethbr1 5mo agoIf 256GB of RAM enables them to run on-device AI models that (for reasons) are a key feature differentiator? Personally, I think there's no way memory heavy inference moves on-device (vs cloud) due to the economics, but it's not impossible technology + platforms go that way for currently unforeseeable reasons.
- sokoloff 5mo agoRight. I’m not arguing that Apple wouldn’t offer a 256GB model if they could make money doing it; I’m puzzled as to why they wouldn’t offer several lower-spec models as the entry-level into and then progressive upgrades within that line, since only some people need that 256GB feature differentiator of running frontier-level models on their MacBook Pro.
- stasomatic 5mo agoAnd yet, Apple had to drop base configs from their lineup. They weren't selling $599 Minis at cost. They could take someone over and inflict damage on competition.