Comment by someperson
4 days ago
As a outside observer, NAND and DRAM prices have skyrocket ed with the AI infrastructure boom just as the China-based fabs are coming online.
It is wise for these Chinese fabs to eventually use a very aggressive dumping strategy to price well below cost push out other players forever, especially in DRAM.
But right now it seems they can max out their supply capacity without selling below cost.
Appears to me like China's endless state led (often unproductive) investment in semiconductor manufacturing subsidies (for decades) is about to pay off with some industry dominance soon.
Like the electric vehicle sector.
It's amazing what can be achieved when you can plan 5 years in advance, instead of just making the line go up for the next quarter.
History is littered with the corpses of those slaughtered by the millions in the name of great leader’s 5 year plans.
https://en.wikipedia.org/wiki/Great_Leap_Forward
That's the most obvious example of failure of Chinese central planning. That and one child policy were abysmal failures that resulted from shoddy science coupled to effective central authority.
Look at the 12/13/14th 5 year plan (the most recently passed). Do you think they achieved their goals?
If your headcanon is that the CCP is inept because they caused crop failures 60 years ago... you could stand to take a look at what they're doing today.
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And you don’t think short term profit chasing has a death count?
OP's point exactly: the Great Leap Forward is the classic example of society murdering people to make the line go up every quarter, no matter the cost or the truth.
Deaths in the Great Leap Forward were heavily concentrated as compared to the Industrial Revolution but the death tolls from IR-related famines weren't really all that far off. Industrialization was messy everywhere.
The Irish Potato Famine alone killed 15% of Ireland vs the GLF killing 5% of China.
That's not a reason not to plan 5 years in advance... is it? Any more than the Potato Famine is a reason we should't have capitalism.
I can't say that I've ever heard the argument that a plan led to a famine therefore we should never make plans, when we have great counterexamples that not planning also led to famine. Feels like learning the wrong lesson here.
[edit] I also think it's worth pointing out that America's response to the Dust Bowl was the Farm Bill, which it could be argued is one of the largest-scale examples of central planning in history. It continues to this day, and is part of the reason Americans pay less as a share of their spending on food than any other country on earth.
People say everyone remembers the hits, nobody remembers the misses - but that is the opposite of true for government. Everyone remembers the misses, nobody thinks twice about the hits.
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History is littered with corpses. For those willing to see them.
Great leaders use human resources as resources, that's historically why they're great, acquire territory, build state capacity, both at expenditure of regenerating resources - lives. A few 5 year plans that traded a few million lives to save more millions later. And by million we mean low single digit percent, i.e. historic rounding error that isn't remarkable nor worth the fixation except by muh liberal value types.
There's a reason there was persistent Chinese famines before GLF, and none after, because early industrial policies sorted out land resource management via massive rural mobilization/infra/industrial efforts, i.e. why PRC industrialization % and lifespan was vastly higher than developing peers in 70s... that's all because GLF broadly worked, adding about cumulative 200 milliion lives in terms of extended lifespan and likely ~100m+ in terms of averted famine deaths. Most historically competent Chinese leadership is return to farseeing utilitarianism, willing to trade lives for progress, which always sucks for the people during time of upheaval, but ultimately net good.
Not five, but likely twenty-five. Not specific plans but attention: situation changes all the time, but the interest remains.
Most importantly it's amazing what you can achieve if you can cut the red tape.
But, we do plan 5 years in advance. Cloud, VR, Crypto, and now AI. All glorious five year plans from the Silicon Valley Planning Bureau comrade.
The CEO reads the WSJ and their McKinsey report and says “We must leverage AI to keep up and accelerate innovation!” Each division’s executive vice president sets a current year goal to use AI to increase productivity and simultaneously decrease cost. The VPs below them are given a goal to increase their department productivity by 30% by the end of Q3. The middle managers require line managers to train all individual contributors on AI (specifically LLMs) by the end of Q2 to get their bonus. Line managers email their direct reports links to LinkedIn courses and set a deadline by the end of Q1. When the end of the year comes AI has not raised productivity by 30% and AI spending has increased costs. To make Wall Street happy 10% of employees are laid off.
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Also amazing what could be wasted when you can plan 5 years in the wrong direction. Remember USSR computers? They also been planned years in advance.
If CXMT new what was coming 5 years ago, they could've bought NVDA stock and 14x their investment.
This has nothing to do with 5 year plans, but with having a functional and competent government enable to enact a coherent long term policy.
In western countries every couple of years we elect a new clown show, which then proceeds to destroy whatever the last clown show tried to accomplish. That has happened again and again for decades, truly awesome "our democracy".
Don’t forget all the times those plans fail because the world did not turn out to be what you thought it would.
Dumping is when you sell things for below cost. It is not dumping when you charge a 500% markup instead of a 1000% markup, even if the market is currently selling at that markup.
I thought the same but when I googled, the results disagreed with this point of view.
https://en.wikipedia.org/wiki/Dumping_(pricing_policy)
All the laws listed there define dumping as something being sold below the "normal price" and there being some quantifiable harm being done to local industry of the country being exported to.
So it has nothing to do necessarily with the cost of production, and based on this it could be considered price dumping.
That's merely the marginalists at the WTO struggling to fit their beliefs that value is subjective and unkowable into the reality of commodity production.
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> It is wise for these Chinese fabs to eventually use a very aggressive dumping strategy to price well below cost push out other players forever, especially in DRAM.
Crucial's departure from the consumer market left such a gaping hole, that CXMT doesn't even need to push other players out to gain a footing.
It's more like everyone else abandoned the market, and CXMT realised it was free real estate.
CXMT was already an option for consumers via brands like Kingbank and Asgard.
There's Kingbank DDR5 using CXMT modules starting to become available in Australia https://www.techpowerup.com/346479/hardware-unboxed-examines... including from mainstream retailers like Mwave https://www.mwave.com.au/memory/pc-ddr4/kingbank https://www.mwave.com.au/memory/pc-ddr5/kingbank
How's it dumping below cost when hey can simply sell for 100% margins instead of western makers selling for 400%.
Because only western companies are allowed to make massive profits at the expense of entire nations, it's not greed when they do it apparently.
Is it not the case that they're raising price in response to demand? Ie. if they kept the price low, they'd be perpetually out of supply?
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It's easy to misread, but they're not arguing that. Note the "eventually" and "but right now".
It's funny that you call this an "very aggressive dumping strategy" while AI vendors are doing the same but with even greater losses and on a much larger scale.
It's all simply a fight for market share.
The original sin is the existing DRAM vendors selling their entire (spare) capacity to the likes of OpenAI.
Can we please stop with this irritatingly persistent myth? AI companies, at least the big ones, do not sell inference at a loss - far from it. This has been debunked and explained many times and yet it keeps being repeated.
The numbers aren't public but most guesses I've heard are that Anthropic's markup is around 50% on average, and that if considered in isolation, most models are profitable overall. The constant losses are instead due to training the next models, which will also eventually recoup but later, and forward capex investment.
This idea that big AI companies are normally and systematically selling inference at a loss as some kind of market share strategy is just not supported by the facts.
You talk about myths and then quote vague guesses of 50% without sourcing.
No one sold their capacity to OpenAI. The vast majority of DRAM is transacted in what is essentially a quarterly auction.
"RAM is going to AI: OpenAI has secured up to 40% of the market."
https://globalcio.com/news/16062/
You're maybe talking about the spot market, but companies are free to make any sort of supply contract.
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I find people tend to miss the productive aspects of Chinese state led investments because they don't consider their value at scale. Take the HSR system, it has been derided time and again as being wasteful, and too expensive, and so on. Yet, now it's become a key artery for trade and commerce across China. It allows goods to move at an incredible speed, boosts tourism, and helps overall development of many regions which otherwise wouldn't see much economic activity.
I personally fail to see the downside of any manufacturer selling forever at a loss, except for the manufacturer itself.
You become dependent on the supplier.
The downside in general is that other countries lose production capacity in steel, heavy industry, semiconductors, machine tools etc - industries that took decades to build and can't be easily replaced.
Also they gradually lose the ability to meaningfully innovate in those sectors because there's no grounding against production reality anymore.
This has geopolitical consequences further down the line.
Blame China.
As though moving production to China wasn’t something the West did intentionally.
And now continues to push manufacturing out of Western countries by, for example in the UK and Germany, and Australia too, making electricity and gas so expensive it becomes cost prohibitive to manufacture much at all.
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> The downside in general is that other countries lose production capacity in steel, heavy industry, semiconductors, machine tools etc - industries that took decades to build and can't be easily replaced.
That's not really what happens though. You don't actually "lose" capacity, you just move to higher-valued special niches within the overall industry because (1) you can afford to, while low-cost competitors can't and (2) you can no longer expect to be the lowest-cost supplier for the bulk of the market. That's a win-win development and something to be encouraged.
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> steel, heavy industry, semiconductors, machine tools
the question is if single country can carry all these industries at loss for prolonged period of time.
Another approach is to rely on international supply chain and speed of innovation, we can't produce steel domestically profitably today, fine, we may buy it from diversified international supplier network, and rebuild it fast tomorrow if needed using new tech, and focus on many other high margin verticals, instead of putting many billions of resources into infra which could be obsolete tomorrow.
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First, they're not selling at a loss; the huge price increases have allowed them to push aggrssively in the legacy markets. They're making "slightly smaller" profits than other manufacturers (of which there are now very few).
Second, they can drive out all competition and then have a captive audience for whatever prices they want, as the barriers to entry in these markets are very high. This is essentially what's happened with all higher-end manufacturing in the west over the past 30+ years.
Because it's never forever. It's until the corporation substitutes the market, at which point you are at their mercy.
You're always at someone's mercy in any industry with significant barriers to entry, you might as well pick a low-cost supplier.
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If you actually believe this, then what is your explanation for a manufacturer to do this?
Do you think they are just stupid?
Microsoft gave away Internet Explorer at a loss, and what happened to internet standards?
the currency eventually collapses
I don't know if it's still a thing, but China was getting a lot of heat about a decade ago for purposefully devaluing their currency to make their exports more attractive.
They kind of had to do this, because their large amount of exports were pushing the value of it up compared to others.
> It is wise … to price well below cost push out other players forever
I challenge you to name a single successful example of this that isn’t state enforced.
All VC funded companies that release free or underpriced products and services, capture market share, then raise prices or enshittify?
The entire business model of VC funded tech?
Typically, VC funded firms are inventing new markets entirely.
Simply overcoming startup capital costs is not the argument being made when folks claim dumping.
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Uber
Amazon?
Amazon was wildly profitable on a unit cost basis from relatively early on. They didn’t show profits on paper because they reinvested everything into their capital buildout to reduce costs even more.
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Chinese investment has not been unproductive. It gave them independence so that the US could not cut them of- see Cuba.
Is China doing to DRAM what Amazon did to bookstores?
> It is wise for these Chinese fabs to eventually use a very aggressive dumping strategy to price well below cost push out other players forever, especially in DRAM.
It's not dumping, it's the opposite.
Sam Altman's stunt has created massive amounts of fictitious demand (OpenAI isn't using those wafers it's ordering) and triggered massive panic-buying from everyone else.
Prices are arteficially high, this has turbocharged China's fab and R&D budgets as you observe.
> is about to pay off with some industry dominance soon.
They're not looking to dump the semiconductor markets. They're looking to invade Taiwan.
All this buildout in their semiconductor industry is to detach themselves from the western semiconductor industry that will either sanction them if they invade Taiwan, or in the case of TSMC, suffer major damage in the ensuing conflict.
That the collapse/destruction of the Taiwanese semiconductor and electronics industries will utterly ruin the western tech industry is somewhere between a happy coincidence and acceptable collateral damage to them. No dumping required.
Why would they bother to invade Taiwan when they’re winning economically and diplomatically?
Public opinion in Taiwan is rapidly changing towards peaceful re-unification and no one anywhere on earth trust the US will help them with anything.
China economic numbers don't have a winning tune to the in the least. I don't think taiwan could ever be taken by force, but that doesn't matter as Xi Jinping seems to think it's doable and is taking steps towards it (developing landing ships, purging the military of oppsition and pacifists, building a fleet and bombers...)
It would be very surprising to me that taiwan people think a reunification is feasable while the CCP still exists, just see how things are going in HK to see what would be waiting taiwan if they reunite.
> Why would they bother to invade Taiwan when they’re winning economically and diplomatically?
They are hedging their bets. If Taiwan refuses to accept re-unification, China wants to have the option of a military annexation.
They have been planning this for quite a bit longer than the current US administration. They're not going to bank on Donald Trump forever, he's not getting any younger and healthier, and November 2028 is sooner with every passing day. A military conflict is not off the table, and so it is considered and prepared for.
> utterly ruin
I realize Intel has done some serious ball dropping over the past two decades but you do realize the US has on shore cutting edge fabs, right? It's only luxury consumer electronics and the highest end corporate gear that use cutting edge nodes to begin with.
Disruption of the cutting edge would certainly wreak havoc on the pricing and specs of high end luxury electronics but that would hardly be the end of the world. I still use a desktop with DDR3 on a daily basis (granted the GPU is much newer with GDDR6) and my laptop is from the early era of DDR4 ...
> but you do realize the US has on shore cutting edge fabs, right?
No they don't. Even the US partnerships with TSMC aren't cutting edge.
TSMC and arguably Samsung have cutting edge fabs, no one else.
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> I realize Intel has done some serious ball dropping over the past two decades but you do realize the US has on shore cutting edge fabs, right?
We could squabble about the finer details of Intel's fab capabilities. They have advanced nodes, but it's irrelevant. They simply do not have the capacity to support the entire demand that is currently supplied by TSMC.
It is not just "high end luxury electronics" that have modern CPUs. It's every bloody server in the cloud. (Have a look at who makes and distributes the mainboards. Same story, substitute Intel for Supermicro.)
The economic impact on this field would be a disaster. Compute becomes much more expensive, SaaS prices will follow, and with that a massive drop in demand.
Not to mention you can kiss the entire AI industry goodbye if the price of GPUs spike.
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