5 ms·

Supply will not meet demand. What incentive do the handful of dram manufacturers have to end the party? This is what happens when legal monopolies finally win c

Supply will not meet demand. What incentive do the handful of dram manufacturers have to end the party? This is what happens when legal monopolies finally win control. Dont't worry. The patents will expire in a few decades. Our grandkids will see DDR5 get cheap again. The system functions as intended.

fitblipper 5mo ago
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?
- brookst 5mo ago
  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.
  - bigbadfeline 5mo ago
    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.
    - rcxdude 5mo ago
      Chip manufacturing has unusually long spin-up times, high capital costs and relatively thin margins for anything but the latest and greatest processes, compared to most industries.
      - bigbadfeline 5mo ago
        Well, let's remove the sanctions from China then and we'll get a better idea about costs and spin-times. BTW all RAM is severely overpriced, not only the one using the latest process nodes.
        brookst 5mo ago
        You seem more invested in hating RAM manufacturers than interested in the actual economics of the business. Look up Qiminda, ProMOS, Elpida. They invested in capacity during booms.
    - hylaride 5mo ago
      There are other boom/bust businesses that have had waves of bankruptcies. The commodity sector is of particular note. You're seeing the same reluctance to spin up new oil rigs in the shale industry for similar reasons, despite record high energy prices.
- the_snooze 5mo ago
  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.
  - deleted 5mo ago
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- deleted 5mo ago
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- AlotOfReading 5mo ago
  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?
  - Closi 5mo ago
    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!
    - XorNot 5mo ago
      Its a lot easier to commit to spending billions of dollars in a hypothetical then reality.
      - Closi 5mo ago
        But it's also easier if you have a market cap of 2 trillion and are worried about your competitors scaling to meet demand.
    - fragmede 5mo ago
      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?
aDyslecticCrow 5mo ago
Patents is not the issue here. Not even close. The up-front investment of a memory fab is measured in billions, and takes years to construct and get running. The margin on the chips themselves is terrible, so without scale its not worth even trying. DDR5 is a industry standard that takes some effort to conform to, but the licence fees is a drop in the bucket to the cost of creating a fab. The fabricators were cautious about increasing production, and slow to start planning. It takes further time to build up capacity, and if the demand drops down, they may end up producing dram at a loss when the market flips over to oversupply. The demand whiplash could kill any company that dared betting on increasing production. See the "bullwhip effect" https://en.wikipedia.org/wiki/Bullwhip_effect https://en.wikipedia.org/wiki/Bullwhip_effect which has killed semiconductor fabricators before. There is a discussion to be had about how to maintain national semiconductor production in Europe and US as a strategic industry, but historic attempts have all failed.
- Closi 5mo ago
  Billions is nothing in this market - if the market is supply constrained in the medium term then the hyperscalers will purchase their own route to manufacture (e.g. through coinvestment). Also that's not what the bullwhip effect is - although I know what you are saying. The bullwhip scenario is about the effect of communication and batching through various layers in the supply chain, this is more similar to the cobweb effect/theory.
deleted 5mo ago
[deleted]

fitblipper 5mo ago

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?

brookst 5mo ago
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.
- bigbadfeline 5mo ago
  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.
  - rcxdude 5mo ago
    Chip manufacturing has unusually long spin-up times, high capital costs and relatively thin margins for anything but the latest and greatest processes, compared to most industries.
    - bigbadfeline 5mo ago
      Well, let's remove the sanctions from China then and we'll get a better idea about costs and spin-times. BTW all RAM is severely overpriced, not only the one using the latest process nodes.
      - brookst 5mo ago
        You seem more invested in hating RAM manufacturers than interested in the actual economics of the business. Look up Qiminda, ProMOS, Elpida. They invested in capacity during booms.
  - hylaride 5mo ago
    There are other boom/bust businesses that have had waves of bankruptcies. The commodity sector is of particular note. You're seeing the same reluctance to spin up new oil rigs in the shale industry for similar reasons, despite record high energy prices.
the_snooze 5mo ago
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.
- deleted 5mo ago
  [deleted]
deleted 5mo ago
[deleted]
AlotOfReading 5mo ago
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?
- Closi 5mo ago
  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!
  - XorNot 5mo ago
    Its a lot easier to commit to spending billions of dollars in a hypothetical then reality.
    - Closi 5mo ago
      But it's also easier if you have a market cap of 2 trillion and are worried about your competitors scaling to meet demand.
  - fragmede 5mo ago
    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?

aDyslecticCrow 5mo ago

Patents is not the issue here. Not even close. The up-front investment of a memory fab is measured in billions, and takes years to construct and get running. The margin on the chips themselves is terrible, so without scale its not worth even trying. DDR5 is a industry standard that takes some effort to conform to, but the licence fees is a drop in the bucket to the cost of creating a fab. The fabricators were cautious about increasing production, and slow to start planning. It takes further time to build up capacity, and if the demand drops down, they may end up producing dram at a loss when the market flips over to oversupply. The demand whiplash could kill any company that dared betting on increasing production. See the "bullwhip effect" https://en.wikipedia.org/wiki/Bullwhip_effect https://en.wikipedia.org/wiki/Bullwhip_effect which has killed semiconductor fabricators before. There is a discussion to be had about how to maintain national semiconductor production in Europe and US as a strategic industry, but historic attempts have all failed.

Closi 5mo ago
Billions is nothing in this market - if the market is supply constrained in the medium term then the hyperscalers will purchase their own route to manufacture (e.g. through coinvestment). Also that's not what the bullwhip effect is - although I know what you are saying. The bullwhip scenario is about the effect of communication and batching through various layers in the supply chain, this is more similar to the cobweb effect/theory.

deleted 5mo ago

[deleted]