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Micron CEO Says Memory Supply Will Be Much Tighter in 2027 and 2028 Than in 2026

394 points · 443 comments · speckx

  1. ocd · · focus · HN ↗
    I'm not a business guy, but I think I would be very worried if I created any opening (even on the very long term) for competition to justify itself being built up to meet demand (or national security requirements of other countries) on an industry I mostly control, because I prioritized extremely high prices for a few years that might have the effect of changing the arithmetic for potential competitors that wouldn't have done it before.

    It makes me consider whether there would be retaliation in later years against the US intellectual property system in countries other than China. While RAM is a tangible product, the areas it serves aren't really.

    1. malfist · · focus · HN ↗
      The argument I've seen about why someone else doesn't start selling RAM is it takes a year or two to ramp production. But here's a CEO saying he's going to make sure prices stay high enough, long enough that you can spin up a competitor
      1. tzs · · focus · HN ↗
        > But here's a CEO saying he's going to make sure prices stay high enough, long enough that you can spin up a competitor

        Where does he say he's going to make sure prices stay high?

        1. zehaeva · · focus · HN ↗
          Not to be snarky, but the CEO is saying that the supply will be tight for years. I know Econ 101 is over simplified but I do recall that when you reduce supply and demand stays constant, or increases, the price goes up.
          1. tzs · · focus · HN ↗
            I also recall some Econ 101, but I seem to recall a little but more than you since I also recall that the price goes up when the supply stays constant or even increases but the demand increases faster than the supply increases.

            The CEO is saying that that is the situation we are in.

            Demand has increased massively over a short time. Supply cannot increase as rapidly because for big demand increases it involves building new factories and equipment which takes significant time.

            The CEO says that their new stuff will start coming online in 2028 but they can't forecast when supply will catch up.

            1. ffsm8 · · focus · HN ↗
              > but I seem to recall a little but more than you

              or less, as you seem to forget what this whole discussion is about.

              If they dont make sure the prices dont go up, they go up.

              Once theyre up, and expected to stay up for the foreseeable future, competitors see a gigantic opportunity. Suddenly, the large amount of investment necessary to the ball rolling is worth it.

              Once this opportunity is taken advantage of, the original market position of the company being able to freely set whatever price they wanted is eroded forever -- and in this particular case: it opens them up to being out-competed by the new competitor(s).

              In this case those will will likely be coming out of china and be state backed, so theyll likely operate at a loss for maximum damage to get as much of the market as they can get.

              in 5 years, Micron is likely going to go cry for state support to socialize their upcoming losses.

              and before you say "but there are other competitors already": you should be aware that theyve previously been convicted of running a cartel. And the way theyve been behaving is exactly how they were behaving back then. While unproven, it is more then just likely that theyre still price fixing (and have been for years)

              1. tzs · · focus · HN ↗
                I'm curious what you think they could do to make sure prices don't up?
                1. ffsm8 · · focus · HN ↗
                  dont increase the price of the product?

                  the price didnt just go up for consumers, they themselves have deeply dipped into the opportunity to maximize profits.

                  its so hilariously outlandish that eg SK Hynix has to pay out >$450k to union employees (per employee - not in total!) because they have a contract that a percentage of profits get shared as a bonus across the company. this payout is usually not particularly high.

                  1. tzs · · focus · HN ↗
                    The price is up because demand is way above supply (and will be for a long time because it takes years to expand supply to match the current level of demand).

                    If the manufacturers decided to keep the price constant that would NOT stop the price that most people pay from going up. It would just mean that the people who managed to buy from the manufacturer before the supply ran out would resell on the secondary market for a giant profit.

                    1. dingaling · · focus · HN ↗
                      "would resell on the secondary market for a giant profit."

                      But you've no evidence that that "giant profit" would be more than the increase that the suppliers would apply.

                      Arbitrage allows the market to find an agreeable price; a middleman arbiter with a warehouse of RAM has an incentive to agree a price with a buyer because he's stuck with that inventory if he doesn't shift it, and he has costs related to financing it.

                      A supplier has no such incentive, they can just jack the price up and if sales drop off they run the machines at a lower rate, or sack employees. But sales aren't going to drop off, because the baseline for demand has been lifted

                      Once this "RAM Crisis" is over, what reason would manufacturers have to reduce prices?

                      1. selectodude · · focus · HN ↗
                        They have to cover their fixed costs somehow. Collusion and cartels only get you so far. OPEC and Mexican drug cartels are still exposed to market pressures.
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