Comment by sc68cal
3 days ago
> The incentive for one of the big players to undercut the other on cost even just a little bit to pick up market share is extremely lucrative.
I would argue that the DRAM price fixing scandal actually demonstrates that the industry operates like a cartel. During times of low demand and high supply, they will coordinate to protect prices, and then during spikes in demand (or alleged spikes in demand) they coordinate to keep the price from dropping.
> then during spikes in demand (or alleged spikes in demand) they coordinate to keep the price from dropping.
Why would they need to coordinate to keep the price from dropping during a spike in demand? a spike in demand will obviously not be expected to lower prices regardless of collusion
Yes, the industry is capacity limited so if there's a true spike in demand, prices will be high even absent any collusion. Especially if previous investment in expanding capacity has been lacking for many years.
To keep someone from undercutting others’ prices and causing a competitive pricing war.
Realistically, it wouldn’t be a meaningful drop to the consumer. But it’ll affect some executive’s ability to buy another unnecessary trinket.
If the industry is at capacity (which it plausibly is, especially since HBM memory is made in the same facilities) then no one can physically "undercut" anyone else. Collusion works by artificially restraining supply of some valuable good; if there was genuine collusion at play, we'd probably be seeing companies make less of the expensive HBM (to push its price even higher; note that patent and other IPR restrictions can in fact have this effect, to some extent) and more of the comparatively cheap DRAM!
>Why would they need to coordinate to keep the price from dropping during a spike in demand?
They wouldn't you're right.
But I would expect for them to follow the sorts of behavior we've observed in other markets - egg prices, gasoline prices. When a spike occurs, even if as brief as a lightning strike, they will only very slowly drop prices, when in a purely capitalistic world the price drop ought to be equally fast - suggestive that the slow drop is a mutual agreed upon collusion. After all, it's in all sellers best interest to game that "consumers temporarily agreeable to scalping prices" as hard as possible, Nash equilibrium or whatever amongst sellers. Many such cases and more vicious and brutal punishments for such behavior would serve to benefit the common man, the final point and benefit of capitalism
>they will only very slowly drop prices
Of course. Price drops only really come through in response to competition.
Long term high prices invite further investment. Investment arrives and wants a quick return. Fastest way to return is to sell above cost but below market. Established players respond. Yada yada. I once met a former projector salesman who was unbelievably angry that someone, I think Acer, came along and destroyed the ~2000 AUD hard price floor that projectors once commanded, which dropped the whole market and his commissions along with it.
Even when collusion is government endorsed instead of outlawed, the same rules apply. See the bromkonvention. You need the new player willing to take the 10% margin to hurt the bottom line of the guy taking 150%.
>when in a purely capitalistic world the price drop ought to be equally fast
No the price can only drop as fast as supply and competition can catch up. For an industry with high input capex costs, thats extremely slowly. I would think some banks would be keen to take a risk on a new RAM fab based on the demands coming from AI, but also I would personally not take the bet that AI will be in this state in 5 years time. So assuming Banks and other lenders are as skeptical as I am, they wouldn't lend, or would request a bigger entity guarantee the loan.
>brutal punishments for such behavior
Brutal punishments for failing to ramp up production? Or for not lowering prices for no reason? I really dont understand
> when in a purely capitalistic world the price drop ought to be equally fast
That is not obvious. When demand is higher than supply, it is clearly good move to raise prices. But when demand is lower than supply it us not clear than lowering prices would raise volumes to compensate for lower margins.
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If there are a small number of sellers and barriers to entry are high, we should expect at the bare minimum "tacit collusion":
https://en.wikipedia.org/wiki/Tacit_collusion
> Following the plea agreement he was sentenced to 8 months in prison and fined US$250,000.[6] Lee was subsequently promoted to President of Samsung Germany in 2009, and then President of Samsung Europe in 2014.
Lmao he got rewarded for taking the fall.
Was in the room working for a hardware company during the offshoring phase of high tech manufacturing
Offshoring was 100% because of antitrust concerns. Copyright landlords and hardware manufacturers were concerned with Americans and their morals also having the skills to create endless competition.
American workers compensation prize was endless hustle jobs to distract them from political revolution.
The olds don't care if the kids end up unskilled knowledge serfs, fuzzy VHS tapes of outdated academics. The olds will be dead.
The problem with citing cartels and greed is...when prices are low, is it because the industry is momentarily altruistic? Did the industry wake up in late 2025 and think "holy shit, I've been being nice, but it's time to turn over a new leaf and start gouging people?"
I mean, don't get me wrong, they are greedy. But that's been true for years. What's changed is the market.
i thought samsung took a fab offline as well?