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I don't understand the distinction you are making. If you have a massive excess of demand ready to pay any price, and a limited supply, of course the sellers wi
by cm2187 2mo ago
I don't understand the distinction you are making. If you have a massive excess of demand ready to pay any price, and a limited supply, of course the sellers will take advantage, that's how any market works. They can do that because of the lack of supply.
Over the long term demand will rationalise and supply will adjust. But in between there is a squeeze, and the right price is the maximum price buyers are willing to bid for the limited supply. Sucks for other buyers, on the other hand it ensures demand destruction, i.e. that the limited supply goes to the buyer who need it the most, other buyers will delay their purchase and do with what they have.
- solarengineer 2mo ago"that the limited supply goes to the buyer who need it the most" - I would say that the limited supply goes to the buyer who can afford to pay higher than others. Someone may need the memory more, but may not have the deeper pockets to pay for it like NVidia and Apple might.
- dist-epoch 2mo agoGamers may need the memory more, but AI labs can use the memory more productively
- t-writescode 2mo agoProfitably-for-the-fabs*
- lasthemy 2mo agoI would have framed it as "buyer who can get the most leverage from it", which equates to being able to spend more. It's an economic argument, not a values argument.
- bji9jhff 2mo agoYou suppose what you'll do with the ram has an incidence on your capacity to buy it which is only true if you are part of those able to get financing.
- minraws 2mo agoIn an absolutely free market? sure. But we don't live in an absolutely free market, the memory manufacturers have refused to budge on creating new fabs until recently out of caution and to be able to create a demand excess. They have slow rolled rollouts and everything, if there wasn't CXMT they would probably still wouldn't have budged on building new fabs for a while longer. You can absolutely price fix/manufacture a shortage. Ever heard of merchants setting fire to crops after hoarding to sell at a higher price? The issue is the distributer and producer are the very same people this essentially means producers have no incentive to rationalize supply, they can make much more money of the long drawn out shortage.
- cm2187 2mo agoI think everyone is aware now that you don't build a fab by snapping your fingers, and you need to amortise it over many years. The said manufacturers are just out of a massive slump in demand during covid, when they were selling at a loss, and these cycles happened many times in this industry. It is understandable that they don't jump all-in on the AI bandwagon, which, god knows where it is going and for how long. If you want evidence that no one predicted this, look at WD. They disinvested from sandisk up to early this year. Now sandisk is worth more than WD. Doesn't seem consistent with a concerted strategy to gauge prices. > You can absolutely price fix/manufacture a shortage. Ever heard of merchants setting fire to crops after hoarding to sell at a higher price? Fine. Show me which manufacturer is cutting production to corner the market. I don't see that.
- SoftTalker 2mo agoYes when there are large fixed costs to expanding production, that will happen more slowly, after determining that the high demand isn't just a short term spike. It's not like wheat, where you just can just plant more at marginal cost (I'm sure someone in farming will now explain why that isn't exactly true either).
- HWR_14 2mo agoI'm not super familiar with farming, but I'm pretty sure there is an upper bound on how much wheat you can plant dictated by the amount of land you own.
- ncallaway 2mo ago> If you have a massive excess of demand ready to pay any price, and a limited supply, of course the sellers will take advantage, that's how any market work The question is how quickly the supply adjusts. In a free market, the suppliers would respond to the price signal by quickly expanding their production to meet the elevated demand. But a market captured by a cartel will be much slower to expand the supply. So, the test isn't "how much is price going up" it's "how aggressively are the RAM producers expanding supply production"
- lvzw 2mo agoMemory fab build out times are years not months. The existing ones already run 24/7. If these companies could pull more supply out of thin air they would, but they cannot.
- mschild 2mo agoWould they? Cartels aren't known for massively increasing production to satisfy all demand. Far from it I'd say, they're more likely to expand supply to such a level that they can still reap massive profits. Very few countries/companies have the knowhow and willingness to be able to build more. OPEC is a perfect example of this behaviour. They set hearly production goals to keep prices high. Or the Quebec Maple Syrup Producers organization that limits the amount of syrup a farmer can produce and sell in a year to keep prices high.
- deleted 2mo ago[deleted]
- AnimalMuppet 2mo agoBut are the memory chip producers acting like a cartel? In the past they have not. When there was a shortage, they increased production as rapidly as they could build the new fabs, crashing the price of memory.
- nemomarx 2mo ago
- jldugger 2mo ago> I don't understand the distinction you are making. 20 years ago: https://en.wikipedia.org/wiki/DRAM_industry_price_fixing https://en.wikipedia.org/wiki/DRAM_industry_price_fixing > According to the one-count charge filed in San Francisco's federal court on Thursday, Park conspired with unnamed employees from other memory makers to fix the price of DRAM sold to computer makers from April 1, 2001, to June 15, 2002. The government says the move directly affected sales to U.S. computer makers Dell, Hewlett-Packard, Compaq, IBM, Apple Computer, and Gateway. etc
- elorant 2mo agoThe distinction is that on the latter case you have a cartel that decided to fix prices and fuck everyone in the ass.
- afavour 2mo ago> I don't understand the distinction you are making. It's pretty simple. In a correctly regulated market the sellers are in competition with each other so there is a limit to how much they can increase prices, since they'll just lose business to their competitor. In a poorly regulated market that allows competitors to collude with each other to raise prices by the same amount, they'll inflate prices much further.
- inquirerGeneral 2mo ago[dead]
- srmatto 2mo agoReal history here on this subject is the LCD panel price fixing scheme: https://en.wikipedia.org/wiki/TFT-LCD_(Flat_Panel)_Antitrust_Litigation https://en.wikipedia.org/wiki/TFT-LCD_(Flat_Panel)_Antitrust...
- shibapuppie 2mo ago"limited supply goes to the buyer who need it the most" No? It goes to the buyer with the deepest pockets.
- empiricus 2mo agoit is probable that you don't get the deepest pockets by wasting money. anyone that pays so much for memory means they expect to get even bigger value from that.
- shibapuppie 2mo ago"It is probable" So RAM manufacturers will turn down company B's $2M offer for company A's $1M offer because company A "needed it more"? I'm actually done discussing this...
- empiricus 2mo agoMy comment is about B offering 2M when normally the price of that RAM was around 1M. Most probably B has a way to get > 2M value from that RAM.
- pixl97 2mo agoThis is a misunderstanding of bubble markets to an extreme degree. In a bubble market where B has massive amounts of capital allocated to it in a way that will likely collapse in the future than it's very likely they will never recuperate the 2M they put in the RAM. Instead buyer A that would get at least 1M of usefulness if not more, gets far less, crippling their business. Then when B collapses a ton of RAM is dumped on the market for far less than 1M cratering the RAM providers business for years.
- Keyframe 2mo agoWhat is cartelization for 500%, Alex.
- Pxtl 2mo agoI'm not sure how turning into crabs is going to help us download more RAM.
- elictronic 2mo agoI'm sure there will be no large scale leverage campaign against a country who is enabling profiteering at this level. No defense agreements removed, troops removed from the country, or large tariff increases around failed investments. I'm sure it will only suck for the buyers. This has no effect on inflation and probably will be overlooked by the current admin.
- hahahaa 2mo agoGoogle: Cartel
- timcobb 2mo agoThey fixed prices in the past and now they have an easy cover, like egg producers had with eggs after the cull a few years ago
- coldtea 2mo ago>I don't understand the distinction you are making. If you have a massive excess of demand ready to pay any price, and a limited supply, of course the sellers will take advantage, that's how any market works. They can do that because of the lack of supply. The question is how much of this demand is actually based on AI, or just an excuse to fleece regular buyers (and AI is not really the actual demand driving such prices). Memory manufacturers have driven up prices via collusion many times in the past (and paid fines for it), without AI or some similar high demand vertical market existing. But I don't think it's the case now, see my answer elsewhere here for why.
- RickHull 2mo ago> or just an excuse to fleece regular buyers In a market with healthy competition (no collusion), this generally can't happen. Every single vendor is incentivized to lower their prices slightly at all times, with a floor at cost plus margin.
- nubg 2mo agowhy plus margin? the floor is cost
- deleted 2mo ago[deleted]
- pixl97 2mo agoFloor is below cost if you think you can put one of your competitors out of business before you run out of money, and you'll make the money back after doing so. And this includes even after fines.
- nubg 2mo agothat's true, also see "loss leaders" like milk in supermarkets
- coldtea 2mo ago
- WheatMillington 2mo ago>that the limited supply goes to the buyer who need it the most Everything else you said is accurate, but this is not. Supply will go to those most able to pay, not those who need it the most. It is not a moral allocation, which your language implies.
- arcfour 2mo agoNobody really "needs" RAM immediately though, like a heart or a lung or something.
- vlovich123 2mo agoThat’s a bold statement to make in the 21st century when nearly everything is run on computers, including cars, planes, hospital networks, etc etc.
- arcfour 2mo agoNot really. They can get RAM just fine, and delay upgrade/refresh cycles to stretch existing component lifecycle, which was already very long if they needed to.
- vlovich123 2mo agoThey can get RAM at drastically more expensive rates. And not all critical applications have unlimited budgets to absorb the increase. It’s the reverse Jevon’s paradox.
- stingraycharles 2mo agoWhat if it’s for the machines that support this surgery?
- timacles 2mo agoSomeone please put RAM into Maslow's hierarchy of needs
- danskoclogs 2mo agoByron the bulb checking in.
- deleted 2mo ago[deleted]