Comment by cm2187
18 hours 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.
> 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"
Memory 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.
Would 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.
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There are several Chinese fabs that they could contract out production to. In fact that's exactly what Apple tried to do, before the U.S. government went full protectionist and added the two memory manufacturers to the banned imports list. There's also the Texas Instruments fab that's underutilized right now. The extra capacity exists, it's just Micro and SK Hynix are throwing their money around to stifle anything that could jeopardize their spike in profits that are historic not only for their industry, but for manufacturing as a whole.
I didn't say the build out time was months.
I said:
> the test isn't "how much is price going up" it's "how aggressively are the RAM producers expanding supply production"
Large barriers to entry are anathema to competitive markets, so the conclusion here is still that firms are benefitting from the lack of a competitive market.
Memory fabs take years to build, they cost a lot and there is no guarantee that the demand will stay as high years in the future. It's all very complex.
And yet, memory manufacturers have been caught (in legal cases and fined) many times to collide and keep prices high artificially in the past.
I'm curious what the limiting factor is for "years not months" when building these fabs. DRAM is a commodity, there are only threeish major manufacturers, all have huge amounts of capital, multiple nations bend over backwards for new semiconductor production projects, and there seems to be unlimited money going into purchasing these things.
Even when it comes to manufacturing the tooling/testing infrastructure, it's just a question of money aiui.
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> But a market captured by a cartel will be much slower to expand the supply.
Oh yea, governments can fix by putting 100 billion in memory fabs right now, and when demand crater in decade or so, let tax payer eat the cost of those fabs. At least it will benefit poor computer users like me.
Free Market doesn’t mean new ram production can “just be stood up”
And given that these are independent actors in the free market, they’ve seen the history of boom/bust cycles in this market
Free market doesn’t mean “everything just magically happens”
As has already been pointed out further down, OPEC is the perfect example of this. Things don't really work that way when the time scales are so extended. What we need is fracking, but silicon.
This system is too complex, the few individual players too big, with too many artificial distortions for the adjustment to equalize out in a way that's anything but years-long (it may have shock-waves that extend past the decade), and highly destructive to everyone who isn't OPEC, or their largest customers, in this analogy.
The brunt of it will be paid by the people further down the food chain.
> In a free market, the suppliers would respond to the price signal by quickly expanding their production to meet the elevated demand.
That’s a good one!
> In a free market, the suppliers would respond to the price signal by quickly expanding their production to meet the elevated demand.
Why would they?
And you claim to have historic examples where they did?
Generally speaking, if demand stays high, and existing suppliers don't increase supply, the high prices create an incentive and opportunity for new market entrants to increase the supply.
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Even if the memory market was completely competitive the time it takes to expand supply is measured in years. There was no way for them to serve the AI demand without reducing supply given to everyone else in the short run
> There was no way for them to serve the AI demand without reducing supply given to everyone else in the short run
I didn't say that there was a way to do it in the short run. I laid out what the test is to determine if there's cartel-like behavior or competitive-market-like behavior.
I will say, in a market with only 3 players and very high cap-ex cost, my prior is that you're likely to see more cartel-like behavior than competitive-market-like behavior, but that's still to be determined.
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> I don't understand the distinction you are making.
20 years ago: 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
"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.
I 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.
You 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.
Gamers may need the memory more, but AI labs can use the memory more productively
Profitably-for-the-fabs*
>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.
Nobody really "needs" RAM immediately though, like a heart or a lung or something.
That’s a bold statement to make in the 21st century when nearly everything is run on computers, including cars, planes, hospital networks, etc etc.
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What if it’s for the machines that support this surgery?
Someone please put RAM into Maslow's hierarchy of needs
"limited supply goes to the buyer who need it the most"
No? It goes to the buyer with the deepest pockets.
it 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.
"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...
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> 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.
Real history here on this subject is the LCD panel price fixing scheme: https://en.wikipedia.org/wiki/TFT-LCD_(Flat_Panel)_Antitrust...
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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 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.
> 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.
>In a market with healthy competition (no collusion), this generally can't happen.
We're talking about the memory market here.
The "healthy competition (no collusion). Every single vendor is incentivized to lower their prices slightly at all times, with a floor at cost plus margin" is the fairy-tale version they teach at 101s.
why plus margin? the floor is cost
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They 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
I'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.
Byron the bulb checking in.
The distinction is that on the latter case you have a cartel that decided to fix prices and fuck everyone in the ass.
Google: Cartel
What is cartelization for 500%, Alex.
I'm not sure how turning into crabs is going to help us download more RAM.
In 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.
I 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.
Yes 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).
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I feel like I and HN live in different worlds,
https://www.blocksandfiles.com/ai-ml/2026/01/20/samsung-sk-h...
Big manufactures have absolutely cut production of lower margin products and it's not like they can re-purpose all of the equipment used for it for HBM yet. edit They can definitely focus more resource because of it on HBM though.
Things have improved a bit since govts are starting to get angry.
Tldr; no one is cutting the production of high margin stuff, but low margin stuff can go and die, because it's not a free market it's a stock market these companies want to show off better margins in every unit there is no reason to keep inefficient things running when not doing it pays more.
They just don't want 30-40% margins anymore. That is not free market that is quite literally serving their own interests because they know there is a monopoly.
All big memory manufacturers are heavily supported by the govt, that's what has made them the monopolies they are Micron supported by USA (they crushed Japan's memory industry for it), and Korean giants are more tangled up with the govt than well most people in US would realize.
Somehow people think free market means anything goes, which honestly is where we stand today so I don't blame anyone.
But using govts to crush competitions and build yourself up on subsidies and similar isn't really free markets. China hasn't been able to grow a significant memory chip industry yet because of lack of EUV machines and similar technologies blocked by the US, which is also not "free market".
As for WD, and Sandisk separating I feel like this was more mutual and they new HDDs or SSDs being together was a distraction for both. Which feels more strategic, think of it like this, the shareholders who had the shares how hold shares in both and together they might have likely been worth less so shareholders made money.
Aka good for free market. I don't see how that relates to the actual memory crunch issue more broadly.
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Feel free to spin up a fab and undercut the current prices, I'd certainly appreciate it!
I don't know if I would personally fund such a venture though, for roughly the same reason existing manufacturers aren't expanding production.
How about I threaten you with mandatory 10 Electron applications / AI agent harness on your computer? Now you must be ready to fund my venture :)
If you did, then the big manufacturers would just sell a competitive product, at a loss if necessary, until you are driven out of business.
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> the memory manufacturers have refused to budge on creating new fabs
That's EXACTLY how a free market is supposed to work. The existing memory manufacturers are FREE to not build new factories, and anyone else is FREE to build those factories in their place.
Then perhaps we’re seeing one of the downsides of that. When 0->1 is prohibitively expensive, existing players can continue to raise prices *very* high because cost-of-entry is extreme, until it’s not sufficiently extreme.
And then we have bubble issues because the introduction of a new, cheaper player, causes the bottom to fall out and for the circumstances that allowed the new manufacturer to exist to completely go away.
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> 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
...that's how the market works. This is called capital discipline and is standard across industries. If the increase in demand is temporary, they would be spending 5-10 years of profit on facilities which will only lose money. The same works in non-capitalist economies too, you don't want to waste resources on stranded assets and many still believe this RAM demand is temporary and the house of cards will collapse.