Comment by mrandish
21 hours ago
> it seems they'd be a prime candidate to spin up their own memory fab.
While Apple et al certainly have the money to tilt up their own fab, they're savvy enough to understand the memory market's long history of constant boom/bust cycles. I still remember the huge DRAM shortage in late 80s forcing my startup at the time to delay launching our new product for a year.
People assume Apple cares about vertically integrating cost but they're actually focused on integrating margin. Apple has billions in cash on hand and when they think about what to do with it, a key metric is Return on Capital, especially the margin that capital will generate. Since a core metric public companies are judged on is blended margin, they are looking for ways their bags o' cash can be put to work generating revenue at margins that will pull their current average margin up vs down.
Averaged over time, mainstream memory devices are historically one of the worst margin areas of the semi market. It's super expensive to tilt up a fab on a new node but once you do, turning the crank faster to make a lot more chips isn't too hard because mainstream DRAM tends to be quite uniform. So when a fab on a new node and/or RAM generation first opens, the margins tend to be pretty great. But as the node matures and/or the RAM generation goes from 'new' to 'commodity', competition heats up as everyone gets better at making more faster. Then they're tempted to maximize revenue by cutting prices until their mature fab is at 101% utilization. And that eventually drives margins down until someone's selling near cost to sustain their low-price-enabling volume - with occasional dips below cost when they get stuck holding excess inventory. That's why cash-rich companies with high margins like Apple are delighted to buy DRAM built with Other People's Money. As long as the DRAM market is under competitive pressure, Apple gets to shop their huge orders around to get the absolute lowest price on RAM that was built with other investor's low margin dollars.
> I still remember the huge DRAM shortage in late 80s forcing my startup at the time to delay launching our new product for a year.
That one was caused by manipulation by politicians, not market forces. Micron started a price war with Japanese memory manufacturers, the Japanese cut prices to compete, Micron sued them for "dumping". The saga ended with the 1986 U.S.–Japan Semiconductor Agreement, which, among other things, created production controls that limited the total dram supply. The level was set based on then current demand, and due to the rapid growth of demand at the time it almost instantly caused a massive global supply deficit.
The agreement also caused the rise of the South Korean memory industry, because the Japanese companies offloaded their now surplus equipment for cheap.
> That one was caused by manipulation by politicians, not market forces.
Funny how you then go on to explain it was market _actors_ that drove the politicians to act, but that this is nevertheless totally not an example of market _forces_.
Market forces are usually meant in the spherical cow sense, not that the cow has politicians on their pockets.
Here it's useful to point out that free markets can't exist without an external force keeping them in check.
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This has become like opec's best years. Only there's no cartel at least not openly.
But there's another key bottleneck. Even with all the money in the world, getting those machines that etch the RAM could be a multi year ration shop queue. And they're not making those companies every day!
> This has become like opec's best years
Yes, except no DRAM maker is taking this as a signal to go deep into debt to double or triple capacity. It takes a minimum of 3+ years to dramatically increase capacity and no one expects this inflated demand bubble to last that long. Because they've seen this cycle before, they'll bump next gen capacity up a bit more than planned, maybe 15-25% because the current windfall profits are enough to build a buffer to absorb the hit if that excess capacity comes online in the next DRAM demand crash.
In the meantime, they'll just apologize to everyone for the "market conditions beyond our control" while banking as much of these crazy profits as they possibly can while it lasts. But deep down they remember they were starving just yesterday and know they'll be starving again tomorrow.
I understand why everyone's pissed at the "evil DRAM makers" but I also remember boasting about how I scored some crazy cheap RAM sticks not so long ago. None of us were shedding tears when they were selling at a loss just to survive.
> Yes, except no DRAM maker is taking this as a signal to go deep...
Incorrect. CXMT is taking this as a signal to open new fabs, create new products, develop new silicon manufacturing techniques, and enter the consumer market worldwide (except USA).
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To reframe your great comment:
Is it fair to conclude that DRAM is basically a commodity that can be specified well enough by a set of parameters?
If so it won’t allow you to get any competitive advantage in your products and thus wouldn’t be a business you want to be in as Apple.
Yes, that's what I meant by "Mainstream DRAM". The basic parameters are specified by standards like JEDEC, so the most common types can be used in many systems thus reach high volumes. This can be less true for specialized RAM like HBM or the highest performance grades.
The competitive advantage is having access to it.
The only reason I can see Apple do this is if it enables them to sell entry level devices with vastly more ram than the competition can afford. Say entry level MacBook Pro with 256GiB ram to facilitate running frontier level local models. If that is an edge they want to have.
In what world would 256GB of RAM be “entry level”?
In the same world 8GB used to be unfathomably huge not that long ago?
Hell, an 8GB hard drive was unfathomable when I was a kid in the 90s. I remember getting a 30 megabyte drive for our Mac LC.
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The same world where a MacBook Pro G4 12" came base level with 256MB of RAM.
The same world where a classic Mac came with 128KB of RAM.
We might someday live in a world where entry-level is 256TB of RAM.
That is the timeline I want to live in. Probably.
A world where Apple has invested in their own fabs, so they can sell devices with drastically more RAM than their competition at entry-level prices.
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And yet, Apple had to drop base configs from their lineup. They weren't selling $599 Minis at cost. They could take someone over and inflict damage on competition.