And by doing this, they ensure local LLMs never become feasible for the vast majority of people and AI companies solidify subscriptions forever.
The reason memory prices can stay high for years in this mega cycle is because the 3 players will be very cautious on overbuilding. They’d rather under build, make great profit (not maximum) and reduce the risk of going bust if this suddenly ends.
Same for TSMC in chips.
Great opportunity for Chinese companies though. This shortage is exactly what Chinese companies need to scale.
Exactly, so what’s the incentive for anyone to sink half a billy into building out more capacity.
The existing players get to rest on their laurels and succeed whether or not the AI bubble busts.
Samsung, SK Hynix, and Micron all have to balance between capex spending, making as much profit as possible, and risk of bankruptcy.
Heck, the US is now pressuring ASML to not sell even DUV machines to China, period.
Then why do only 3 companies make it?
When Samsung had to sell memory at a loss after COVID, no one came to save them. They buffered their memory division using profits from their other businesses. That’s how Samsung survives memory downturns.
According to some stories, this is how Samsung convinced TSMC to not enter the memory business - that you need a nation or other lines of business to prevent bankruptcies.
The market has stabilized to 3 players.
Because it's an incredibly capital intensive process, involving billions of dollars of investment into manufacturing infrastructure.
That is to say, making memory is quite hard.
I didn’t say owning a memory business is easy.
Other examples from outside of tech of easy but capital intensive processes are power generation and railroads. Very easy to do, but easy to end up broken by overbuilding for demand that fails to materialize or stay stable for the duration of your financing.
You can't do that with Intel or AMD CPUs. There is no spec. Each vendor does CPU socketing and chipsets in their own unique way.
Not to mention that your design needs to be good. For DRAM manufacturers, they just need to design one really good cell design and spam it a billion times.
The problem is that DRAM is a specialised product that has a specialized process. Your fab is a one trick pony that can't take advantage of other markets. Since you're stuck with fixed costs on a single design, you're cranking up the volume to make your money back, but everyone does that and if everyone does it, then the market is flooded with cheap memory that won't recoup the costs.
Now that AI memory is something the companies can specialise in to increase the margins, they can exit the contested market with low differentiation. If anything, they will prefer it of a single company is left doing consumer DRAM, because it is one less company in the AI memory space.
Placing the bet isn't as hard as making an accurate prediction.
These two aren't related.
Dram is a commodity because the you can replace a chip from hynix with a chip from micron, the have the same behaviour.
And a price competitive Dram isn't easy manufacture, or China would have made it already.
Right now their opportunity cost is too high.
> risky it is to spin up a new fab
You don't need a new fab. You can build memory in 20 years old fab.
This boom is magnitudes higher than before. The attention will be endless.
I’m sure Nvidia, Elon, Tim Cook, OpenAI, Anthropic are already whispering in Trump’s ears to do something.
You can't expect me to believe that any of those would want any kind of antitrust action against anybody.
Memory prices and shortages directly impact all of their profit margins and revenue.
Journalism is dead. There will be no more investigative journalists like the type you describe.
Memory is a commodity, so I think you will be very lonely in your quest.