Comment by MinimalAction
10 days ago
I understand this is ultimately due to AI boom.
A couple of naive questions:
1. What's the bottleneck in ramping up RAM production? Is it the availability of silicon itself? Or the factories are at capacity?
2. Is this supposed to ease up despite the AI boom? Definitely would ease up if busted.
1. Factory limits basically. There's a limit to the amount of fabrication lines that can create ram. Combined with the market incentives right now to make high bandwidth memory (HBM) over server memory (DRAM)... HBM starts as DRAM dies, so it competes with normal DRAM for wafer starts / cleanroom fab capacity.
2. Eventually more plants will come on line. Most of the main manufacturers have announced expansions but these can take O(years) to come online.
Are more plants coming? I think I heard it won't be many of them, because it's risky.
If the bubble bursts and RAM demand drops, then they'll have big losses. And that's not an impossible scenario over the few X years that it takes to build a plant
The entire capacity of RAM production is basically booked out, for at least the next year. All fabs have sold their allocations already, and it takes years to build a new one. As a result, no it will likely not ease up if demand continues like this, again for at least a year.
Also worth noting:
They sold their allocations to people who don't have a clear path to profitability, and were paid with massive amounts of money that don't exist in reality.
> and were paid with massive amounts of money that don't exist in reality
How's that possible?
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> 1. What's the bottleneck in ramping up RAM production? Is it the availability of silicon itself? Or the factories are at capacity?
For a RAM manufacturer, the incentive is to ramp up production AND prices. I doubt any of the names in the business is doing any work at all to lower their unit prices.
The current pricing isn't sustainable, and if you try to wring out the maximum amount of profit, you're gonna have competition spring up. The Chinese are probably salivating at this opportunity. Previously they would've had to sell memory at discount rates to get anyone to switch over to them, but now they'd have customers lined up for years if they were selling at the prices Samsung/Micron/SK Hynix were selling a year ago.
> The current pricing isn't sustainable, and if you try to wring out the maximum amount of profit, you're gonna have competition spring up.
I don't understand what you mean by "sustainable". The whole industry tripled their process AND is maxing out their production lines. They are cashing out as expected.
It matters nothing if this trend can't be kept up for years, because by then their output still meets demand AND they will be sitting on a huge bag of cash.
I think you are confusing "I don't want to pay this much" with "this isn't sustainable". The sellers are cleaning up stock at a huge markup and buyers are still buying like crazy.
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Meet the new memory cartel, it's just like the old memory cartel but with CXMT being priced a tiny tad below.
Safe to say they're not in it out of sheer altruism.
I heard a long time stock market analyst saying the semiconductor industry always has boom and bust cycles. This is a boom (for the semiconductor industry) and it will be followed by a bust as demand rapidly drops off, just like every other time.