3 ms·

Keeping prices at this level is precisely how one or more competitor will rise up. Making memory isn’t super hard. That’s why it is a commodity. The problem wit

Keeping prices at this level is precisely how one or more competitor will rise up. Making memory isn’t super hard. That’s why it is a commodity. The problem with the memory market is that up and down cycles have bankrupted the vast majority of players in the past. Now we only have 3 players left except for a few smaller ones in China. The reason memory prices can stay high for years in this mega cycle is because the 3 players will be very cautious on overbuilding. They’d rather under build, make great profit (not maximum) and reduce the risk of going bust if this suddenly ends. Same for TSMC in chips. Great opportunity for Chinese companies though. This shortage is exactly what Chinese companies need to scale.

jazzyjackson 5mo ago
> up and down cycles have bankrupted the vast majority of players in the past Exactly, so what’s the incentive for anyone to sink half a billy into building out more capacity. The existing players get to rest on their laurels and succeed whether or not the AI bubble busts.
- aurareturn 5mo ago
  The incentive is that your 2 competitors will build more than you and gain market share on you if you are too conservative. Samsung, SK Hynix, and Micron all have to balance between capex spending, making as much profit as possible, and risk of bankruptcy.
  - deadbabe 5mo ago
    So are the new competitors currently in progress of starting up? Because it takes at least several years.
    - aurareturn 5mo ago
      Only Chinese companies have a chance. Problem is that China can’t buy EUV machines and the most advanced memory chips now use EUV. Heck, the US is now pressuring ASML to not sell even DUV machines to China, period.
      - jononor 5mo ago
        Yeqh that is a challenge. DDR5 and LPDDR5X are both manufacturable with DUV. So let's hope they still get access to that...
- jtbayly 5mo ago
  When costs are high enough, you can recoup that, if you have an appetite for risking the downturn.
dymk 5mo ago
> Making memory isn’t super hard. Then why do only 3 companies make it?
- aurareturn 5mo ago
  Bankruptcy risks. When Samsung had to sell memory at a loss after COVID, no one came to save them. They buffered their memory division using profits from their other businesses. That’s how Samsung survives memory downturns. According to some stories, this is how Samsung convinced TSMC to not enter the memory business - that you need a nation or other lines of business to prevent bankruptcies. The market has stabilized to 3 players.
  - dymk 5mo ago
    ...And why do they go bankrupt? Because it's an incredibly capital intensive process, involving billions of dollars of investment into manufacturing infrastructure. That is to say, making memory is quite hard.
    - aurareturn 5mo ago
      The technical process of making memory is relatively easy. Hence, it is a commodity. I didn’t say owning a memory business is easy.
    - kortilla 5mo ago
      You’re confusing two independent things. There are simple processes that are extremely capital intensive with long lead times and then there are complex processes that require lots of R&D and industry secrets. Memory is the former in the chip world. Other examples from outside of tech of easy but capital intensive processes are power generation and railroads. Very easy to do, but easy to end up broken by overbuilding for demand that fails to materialize or stay stable for the duration of your financing.
    - imtringued 5mo ago
      Making memory is easy in the sense that any company that makes JEDEC compliant DDR5 can sell you their product and you can put it into your mainboard (soldered or not). You can't do that with Intel or AMD CPUs. There is no spec. Each vendor does CPU socketing and chipsets in their own unique way. Not to mention that your design needs to be good. For DRAM manufacturers, they just need to design one really good cell design and spam it a billion times. The problem is that DRAM is a specialised product that has a specialized process. Your fab is a one trick pony that can't take advantage of other markets. Since you're stuck with fixed costs on a single design, you're cranking up the volume to make your money back, but everyone does that and if everyone does it, then the market is flooded with cheap memory that won't recoup the costs. Now that AI memory is something the companies can specialise in to increase the margins, they can exit the contested market with low differentiation. If anything, they will prefer it of a single company is left doing consumer DRAM, because it is one less company in the AI memory space.
petra 5mo ago
//Making memory isn’t super hard. That’s why it is a commodity. These two aren't related. Dram is a commodity because the you can replace a chip from hynix with a chip from micron, the have the same behaviour. And a price competitive Dram isn't easy manufacture, or China would have made it already.

jazzyjackson 5mo ago

> up and down cycles have bankrupted the vast majority of players in the past Exactly, so what’s the incentive for anyone to sink half a billy into building out more capacity. The existing players get to rest on their laurels and succeed whether or not the AI bubble busts.

aurareturn 5mo ago
The incentive is that your 2 competitors will build more than you and gain market share on you if you are too conservative. Samsung, SK Hynix, and Micron all have to balance between capex spending, making as much profit as possible, and risk of bankruptcy.
- deadbabe 5mo ago
  So are the new competitors currently in progress of starting up? Because it takes at least several years.
  - aurareturn 5mo ago
    Only Chinese companies have a chance. Problem is that China can’t buy EUV machines and the most advanced memory chips now use EUV. Heck, the US is now pressuring ASML to not sell even DUV machines to China, period.
    - jononor 5mo ago
      Yeqh that is a challenge. DDR5 and LPDDR5X are both manufacturable with DUV. So let's hope they still get access to that...
jtbayly 5mo ago
When costs are high enough, you can recoup that, if you have an appetite for risking the downturn.

dymk 5mo ago

> Making memory isn’t super hard. Then why do only 3 companies make it?

aurareturn 5mo ago
Bankruptcy risks. When Samsung had to sell memory at a loss after COVID, no one came to save them. They buffered their memory division using profits from their other businesses. That’s how Samsung survives memory downturns. According to some stories, this is how Samsung convinced TSMC to not enter the memory business - that you need a nation or other lines of business to prevent bankruptcies. The market has stabilized to 3 players.
- dymk 5mo ago
  ...And why do they go bankrupt? Because it's an incredibly capital intensive process, involving billions of dollars of investment into manufacturing infrastructure. That is to say, making memory is quite hard.
  - aurareturn 5mo ago
    The technical process of making memory is relatively easy. Hence, it is a commodity. I didn’t say owning a memory business is easy.
  - kortilla 5mo ago
    You’re confusing two independent things. There are simple processes that are extremely capital intensive with long lead times and then there are complex processes that require lots of R&D and industry secrets. Memory is the former in the chip world. Other examples from outside of tech of easy but capital intensive processes are power generation and railroads. Very easy to do, but easy to end up broken by overbuilding for demand that fails to materialize or stay stable for the duration of your financing.
  - imtringued 5mo ago
    Making memory is easy in the sense that any company that makes JEDEC compliant DDR5 can sell you their product and you can put it into your mainboard (soldered or not). You can't do that with Intel or AMD CPUs. There is no spec. Each vendor does CPU socketing and chipsets in their own unique way. Not to mention that your design needs to be good. For DRAM manufacturers, they just need to design one really good cell design and spam it a billion times. The problem is that DRAM is a specialised product that has a specialized process. Your fab is a one trick pony that can't take advantage of other markets. Since you're stuck with fixed costs on a single design, you're cranking up the volume to make your money back, but everyone does that and if everyone does it, then the market is flooded with cheap memory that won't recoup the costs. Now that AI memory is something the companies can specialise in to increase the margins, they can exit the contested market with low differentiation. If anything, they will prefer it of a single company is left doing consumer DRAM, because it is one less company in the AI memory space.

petra 5mo ago

//Making memory isn’t super hard. That’s why it is a commodity. These two aren't related. Dram is a commodity because the you can replace a chip from hynix with a chip from micron, the have the same behaviour. And a price competitive Dram isn't easy manufacture, or China would have made it already.