Thread

1. ocd · 1790861971 · 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. AnthonyMouse · 1790882878 · focus · HN ↗

      > 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

      The interesting question is, why aren't other companies looking at this from the other direction?

      For example, AMD now has a trillion dollar market cap. They make consumer and enterprise GPUs with integrated GDDR/HBM and have got to be looking at APUs that do the same going forward. They don't benefit from the price of their complement being high. They sold off their logic fabs at a point when they were half dead and had fallen behind, but you don't have to be TSMC to make DRAM. A large DRAM fab costs around $25 billion, i.e. 2.5% of their market cap. Why aren't they building two of them? Best case supply is still tight when it opens and they have a huge win, worst case the market has crashed by then but they still have a productive asset worth several billion dollars and paid for with cash from the time when it was highly available to them. And since they have internal demand, the amount the price would have to crash before the investment is a net loss is significantly more than it is for other companies.

      Likewise Apple, Google, Amazon, etc. who have even more capital. What are these companies doing? They have the option to spend an amount of money they can easily afford to write off if it goes south, to get a huge win if supply continues to be tight.

      1. flyinglizard · 1790883224 · focus · HN ↗

         Even if they hold the same opinion as Micron’s CEO, spinning up such a fab to reasonable yields would take a couple of years.

         It’s a known dilemma in farming. Your crops are losing, so you decide to switch them to crops that are profitable, but so do your six neighbors and by the time the new crops start producing, you have flooded the market and everyone’s losing again.

         1. AnthonyMouse · 1790883391 · focus · HN ↗

            Which is a huge problem for a farmer who redirected 100% of their capital to a new crop that turns out to be unprofitable. Whereas if you do that with 5% of your capital and it doesn't work out, you shrug and hardly notice. But if it does work out, that 5% is now worth 20%.

            1. flyinglizard · 1790889069 · focus · HN ↗

               Market cap is not capital. AMD's cash-on-hand is $13b, which is considerable, and they could very well bring external funding to such a project on attractive terms, but it's not pittance. And for what, an historically low-margin commodity like DRAM? Let the boys play it out.

               If anyone should do that, though, it's Apple. They have the money, the easy to predict need, the vertical integration in manufacturing. It could open all sorts of avenues for proprietary SoC to RAM interfaces. It makes a lot of sense for them to do.

               1. AnthonyMouse · 1790891219 · focus · HN ↗

                  > Market cap is not capital.

                  Market cap is de facto capital because companies can issue their own shares.

                  > And for what, an historically low-margin commodity like DRAM?

                  How are they enjoying paying the "low" margins to the incumbents right now?

                  > They have the money, the easy to predict need, the vertical integration in manufacturing. It could open all sorts of avenues for proprietary SoC to RAM interfaces. It makes a lot of sense for them to do.

                  Which of those is supposed to not apply to AMD or Nvidia or, for that matter, Amazon or Google who are massive DRAM customers and also make the likes of Graviton and Axion?

                  And "proprietary interfaces" are essentially nonsense in this context. When a company comes up with a better way to connect DRAM to processors, the industry is more than happy to put it in the next version of the standard, which is what you want because it allows you to source the industry standard components in the event that your own facilities can't meet demand for any reason.

                  The primary reason companies use proprietary interfaces for things like this is when they're trying to capture the upgrade market, even then they're still typically using standard chips with a purposely incompatible connector, and Apple solders everything now anyway.

                  1. flyinglizard · 1790892281 · focus · HN ↗

                     Nvidia and AMD do not fall in "easy to predict". Half, or more, of Nvidia's demand base is like, what, 5 hyperscalers? Which themselves are driven by OpenAI and Anthropic? It's not a sustainable market. Meanwhile Apple's business and demand are very easy to predict, with near constant moderate growth. Apple is also much more sensitive to margins than the hyperscalers, which is why Nvidia can get away with 75% margin.

                     1. AnthonyMouse · 1790892851 · focus · HN ↗

                        That would be a fine argument for why Nvidia or AMD shouldn't build DRAM fabs to supply 100% of their present-day demand. What's the argument supposed to be for why they shouldn't build any at all? Build enough to satisfy 25% of their current demand and they would still need all of that even if the demand crashed by 75%.

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