Nobody is going to do anything if they can't be sure that they'll be able to run the fab they built for a long time and sell most of what they make. Conversely fabs don't tend to idle a lot. Sometimes they're only built if their capacity is essentially sold already. Given how massive the AI bubble is looking right now, I personally wouldn't expect anyone to make a gamble building a new fab.
* Someone explained this at length on here a while ago, but I can't seem to find their comment. Should've favorited it.
"Hyperscalers" already have multi-year contracts going. If the demand really was there, they could make it happen. Now it seems more like they're taking capacity from what would've been sold on the spot or quarterly markets. They already made their money.
Following your reasoning, which is common in manufacturing, the capex needed is already allocated. So, where does the 2x price hike come from if not supply/demand?
The cost to produce did not go up 100%, or even 20%
Actually, DRAM fabs do get scaled down, very similar to the Middle East scaling down oil production.
It absolutely is supply/demand. Well, mostly demand, since supply is essentially fixed over shorter time spans. My point is that "cost per square mm [of wafer]" is too much of a simplification, given that it depends mostly on the specific production line and also ignores a lot of the stuff going on down the line. You can use to look at one fab making one specific product in isolation, but it's completely useless to compare between them or when looking at the entire industry.
It's a bit like saying the cost of cars is per gram of metal used. Sure, you can come up with some number, but what is it really useful for?
https://www.tomshardware.com/pc-components/storage/perfect-s...
...except current peak in demand is mostly driven by build-out of AI capacity.
Both inference and training workloads are often bottlenecked on RAM speed, and trying to shoehorn older/slower memory tech into that niche requires non-trivial amount of R&D into widening memory bus on CPU/GPU/NPUs, which is unlikely to happen - there is plenty demand on those as is.
If there is high demand for the former due to AI, they can increase production to generate higher profits. This cuts the production capacity of consumer DRAM, and lead to higher prices in that segment too. Simple supply & demand at work.
A consumer DDR5 module has two 32-bit-wide buses, which are both for example implemented using 4 chips which each handle 8 bits operating in parallel - just like RAID 0.
An enterprise DDR5 module has a 40-bit-wide bus implemented using 5 chips. The memory controller uses those 8 additional bits to store the parity calculated over the 32 regular bits - so just like RAID 4 (or RAID 5, I haven't dug into the details too deeply). The whole magic happens inside the controller, the DRAM chip itself isn't even aware of it.
Given the way the industry works (some companies do DRAM chip production, it is sold as a commodity, and others buy a bunch of chips to turn them into RAM modules) the factory producing the chips does not even know if the chips they have just produced will be turned into ECC or non-ECC. The prices rise and fall as one because it is functionally a single market.
Each memory DIMM/stick is made up of multiple DRAM chip. ECC DIMMs have an extra chip for storing the error correcting parity data.
The bottleneck is with the chips and not the DIMMs. Chip fabs are expensive and time consuming, while making PCBs and placing components down onto them is much easier to get into.
I don't really understand why every little thing needs to be spelled out. It doesn't matter. We're not getting the RAM at an affordable price anymore.
Even China has no reason to reduce prices much for memory sold to the US when they know we have no choice but to buy at the prices already set by the cartel. I expect that if China does start making memory they'll sell it cheap within China and export it at much higher prices. Maybe we'll get a black market for cheap DRAM smuggled out of China though.
So, it would happen even with best intentions and no conspiracies. AI boom already hiked GPU prices, memory was next in line.
Do we really think the current level of AI-driven data center demand will continue indefinitely? The world only needs so many pictures of bears wearing suits.
I feel like the question of how many computers are needed to steer a bunch of self-driving taxis probably has an answer, and I bet it's not anything even remotely close to what would justify a decade's worth of maximum investment in silicon for AI data centers, which is what we were talking about.
In a traditional pork cycle there's a relatively large number of players and a relatively low investment cost. The DRAM market in the 1970s and 1980s operated quite similarly: you could build a fab for a few million dollars, and it could be done by a fab which also churned out regular logic - it's how Intel got started! There were dozens of DRAM-producing companies in the US alone.
But these days the market looks completely different. The market is roughly equally divided up between SK Hynix, Micron, and Samsung. Building a fab costs billions and can easily a year of 5 - if not a decade - from start to finish. Responding to current market conditions is basically impossible, you have to plan for the market you expect years from now.
Ignoring the current AI bubble, DRAM demand has become relatively stable - and so has the price. Unless there's a good reason to believe the current buying craze will last over a decade, why would the DRAM manufacturers risk significantly changing their plans and potentially creating an oversupply in the future? It's not like the high prices are hurting them...
Will the company be evicted from the country in 6 months? A year? Will there be 100% tariffs on competitions imports? Or 0%? Will there be an anti-labor gov’t in effect when the investment might mature, or a pro-labor?
The bigger the investment, the longer the investment timeframe, and the more sane the returns - the harder it is to make the investment happen.
High risk requires a correspondingly high potential return.
That everyone has to pay more for current production is a side effect of the uncertainty, because no one knows what the odds are of even future production actually happening, let along the next fancy wiz-bang technology.
But people do need the current production.
Also worth mentioning DRAM and NAND's profit from Samsung is what keep the Samsung Foundry fighting TSMC. Especially for those who thinks TSMC is somehow a monopoly.
Another things to point out which is not mentioned yet, China is working on both DRAM and NAND. Both LPDDR5 and Stacked NAND are already in production and waiting for yield and scale. Higher Price will finally be perfect timing for them to join the commodity DRAM and NAND race. Good for consumer I suppose, not so good for a lot of other things which I wont go into.
Is this the ‘but he loves me, he wouldn’t hit me again’ of the tech world?
The firms can coordinate by agreeing on a strategy they deem necessary for the future of the industry, and that strategy requires significant capital expenditures, and the industry does not get (or does not want) outside investment to fund it, and if any of the firms defects and keeps prices low the others cannot execute on the strategy, so they all agree to raise prices.
Then, after the strategy succeeds, they have gotten addicted to the higher revenues, they do not allow prices to fall as fast as they should, their coordination becomes blatantly illegal, and they have to get smacked down by regulators.
As long as it doesn't fall into the "collusion" prohibitions of the relevant competition law.
> “People of the same trade seldom meet … but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”
Adam Smith, The Wealth of Nations (1776)
So said and did the infamous Phoebus cartel, to unnaturally "fix" the prices and quality of light bulbs.
https://spectrum.ieee.org/the-great-lightbulb-conspiracy
https://en.wikipedia.org/wiki/Phoebus_cartel
For more than a century, one strange mystery has puzzled the world: why do old light bulbs last for decades while modern bulbs barely survive a couple of years?
The answer lies in a secret meeting held in Geneva, Switzerland in 1924, where the world’s biggest light bulb companies formed the notorious Phoebus Cartel.
Their mission was simple but shocking: control the global market, set fixed prices, and most importantly… reduce bulb lifespan.
Before this cartel, bulbs could easily run for 2500+ hours. But after the Phoebus Cartel pact and actions, all companies were forced to limit lifespan to just 1000 hours. More failure meant more purchases. More purchases meant more profit. Any company who refused faced heavy financial penalties.
The most unbelievable proof is the world-famous Livermore Fire Station bulb in California, glowing since 1901. More than 120 years old. Still alive. While our new incandescent bulbs die in 1–2 years.
Though the Phoebus cartel was dissolved in the 1930s due to government pressure, its impact still shadows modern manufacturing. Planned obsolescence didn’t just begin here… but Phoebus made it industrial.
I still try to fight that habit of not unnecessarily cycling even tho all my lights are LED.
Unfortunately commodity business is not sexy, it doesn't get the press, nor does it get told even in business schools. But a lot of the times these call called price fixing is a natural phenomenon.
I wont even go into what get decided in court doesn't always mean it is right.
I will also add we absolutely want the DRAM and NAND or in fact any industries to make profits, or as much profits as it could. What is far more important is where do they spend not those profits. I didn't look into SK Hynix but both Samsung and Micron spends significant amount of R&D at least try to lower the total production cost of DRAM per GB. We want them to make healthy margin selling DRAM at $1/GB, not losing money and then go bankrupt.
(That's just me eyeballing it, feel free to do the math)