By that logic things should get more expensive, not cheaper, as the demand increases.
To put it another way, why wouldn't someone undercut the current suppliers and sell at just above their marginal cost and take over the whole market.
To put it another way, why wouldn't someone undercut the current suppliers and sell at just above their marginal cost and take over the whole market.
[1] https://bit-tech.net/news/tech/memory/samsung-micron-sk-hyni...
https://www.extremetech.com/computing/261330-china-investiga...
And the Chinese accusations of price fixing need to be understood in the context that they're trying very hard to get their own NAND fabs up and running, almost certainly using at least some stolen tech. Even without Chinese influence, NAND prices have fallen dramatically since that article was written, due to ordinary healthy market forces.
Moat. Or the Entry Barrier. You can't built a Fab, ignore the yield and expect it to be profitable. TSMC famously said they will never enter the NAND and DRAM market and thought of those as commodities. In 2017 that look utterly stupid when NAND and DRAM prices were sky high, while not widely reported, making Samsung Electronics the most profitable company in the world ( They own ~60% of the world's DRAM and NAND market ), even more so than Apple. By 2018, a 5% drop in World Wide Smartphone shipment trigger a knock on effect, the prices has seen been plummeting. Still profitable, just not as much as they were.
It was once thought the $100B USD from China would have solve this problem. Even if they make 50% less yield, and earned net zero margin, along with forcing Chinese Smartphone companies to use a percentage of those components, should have been enough to sustain those Chinese based NAND fab. Turns out it wasn't quite as easy as they thought. Most of the DRAM and NAND were far too inferior. 3D NAND, or Multilayer Stacked NAND along with leading edge node is a huge barrier of entry.
One reason why you keep hearing there are lots of IP theft going on.
Note: All the Apple product sold in China are using Chinese bases NAND.
This is... exactly what everyone expects, and the assumption of every economic graph in the world?
The stupidest, most basic supply-demand model is:
Prices fall with falling demand and/or rising supply.
Prices rise with rising demand and/or falling supply.
There are actually markets where the opposite holds. Basically anything with high fixed costs, because the more units sold, the less of the fixed costs each unit has to cover.
But fabs don't really work like that because, while very expensive, they have finite capacity. A fab that can produce a million units costs a billion dollars. If you want two million units, that'll be two billion dollars and be available a few years from now. And if you build more capacity than there is demand, you're bankrupt. So they purposely build somewhat less than expected, which when demand is higher than expected results in much more demand than supply.
In Oligopoly markets, because there are only a few producers, the producers have more leverage over their buyers and are therefore able to charge prices higher than the marginal cost of production.
To your suggesstion, lets say I realize this and I want to start a NAND factory that undercuts my competitors by a little bit but leave me plenty of profit, I have to first build a factory large enough to reach the economy of scales that my competitors have. Reason for that is for a period of time, the marginal cost of production decreases as sheer production increases because the process gets more streamlined and automated. However to do that I need to hire engineers who know how to make a NAND, and maybe I need permission from the Chinese communist party. Then I need to get a bank to agree to give me a loan so I can have enough money to build my factory and hire my engineers. Banks probably are not going to be too keen on lending an unknown quantity and will likely charge me a higher interest rate to compensate for that risk. Only then can I enter the market.
So as you can see while its not impossible to enter the market, its not easy either. Since thats the case, the few existing producers can, without any nefarious activity (which is not to say there isn't any, but its not required), charge prices higher than the marginal cost of production.
pretty nefarious if you ask me. we gotta own the means of production! take-over these oligopolies and turn them into worker-owned-and-directed cooperatives!