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Comment by noobermin | Hacker News Reader

Tbf, this current era of capitalism really is a lot where absolutely no one wants to enter the market and take advantage of a clear overpricing of memory for consumers but simply wants to charge the same amount as everyone else. So much for "efficient markets."

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Everyone always wants to charge as much as they possibly can, and if SK Hynix would be the only manufacturer prices would be 10x of what they are today. Especially new incumbents will not ruin the market prices as they have the highest upfront cost and their calculation of entering the market is probably based on the high prices that can be achieved. In the long run, more competition is still good as everyone ramps up production to profit more from the high prices and at some point supply will outpace demand and prices will fall (assuming no cartel / price fixing is involved).

Nobody's stopping you from taking advantage of that shortage :) Just don't forget to turn your garage EUV machine on and off if it starts glitching.

US is stopping China to increase their DRAM and flash production as they would, by forbidding everybody to sell modern semiconductor manufacturing equipment and consumables to China.

China is increasing their production of DDR5 and SSDs, but much more slowly than it would have been possible in a free market.

The current prices for DRAM and SSDs would have never happened if USA had not started to sabotage the Chinese memory industry a few years ago, presumably because Micron wanted to eliminate their competition.

The US sanctions against memory producers have started exactly when Apple was considering the use of Chinese memories in their smartphones, so Apple had to cancel their plans.

The claims that the sanctions against the Chinese memory producers have anything to do with US "national security" or with military applications are just a big shameless lie.

Military applications are content with older memories, which China can produce in sufficient amounts. The SOTA DRAM modules and SSDs are more important for consumer products and the US "sanctions" have the only purpose of maintaining artificially high prices for the consumer products, which steals money from millions of people all over the world.

Could you please expand on this?

Aren’t prices sky rocketing precisely because of excess demand? And they’d collapse in turn if demand disappeared.

My understanding of economics is entry level so please forgive my ignorance. I’m just curious what you mean.

The usual argument is that as prices rise, demand will shrink and supply will rise to take advantage of the increased price.

It all depends on the particular situation as to whether there is elasticity of supply or demand.

In this particular situation there is a bit of inelasticity of supply because it takes a long time to spin up a DRAM factory and if people believe it is temporary they won’t make the investment

Yes, it will. It's just delayed because fab buildout takes several years.

> Aren’t prices sky rocketing precisely because of excess demand?

Not exactly. The RAM crisis was sparked by OpenAI contracting with multiple vendors to take vast quantities of raw, unfinished wafers off the market. Wafers which OpenAI had no use for -- they just wanted to starve competitors.

This is different from an "AI is so popular that manufacturers can't keep up with demand" story.

OpenAI and Anthropic are the sleaziest companies that have come out of Silicon Valley in a long time, and that's really saying something.

I think you are splitting hairs. Both arguments boil down to 'AI companies are taking all the chips'. It doesnt really matter why, the result and reasons are the same.

Sorry, that was a tangent unrelated to the original point. Seeing people chalk this situation up to “high demand” when anticompetitive sabotage was the cause just makes my eye twitch.

It basically Silver Thursday all over again but with RAM. I wish they crash and burn like the Hunt brothers did, Altman goes the way of Sam Bankman-Fried and Micron gets bought by the Chinese. That's what they all deserve.

   > they just wanted to starve competitors

i don't have much to contribute except to say i'm surprised this kind of thing is legal, especially at the scale of what's happening; its extremely damaging to basically everything

Looks pretty darn efficient to me:

https://ourworldindata.org/grapher/historical-cost-of-comput...

That chart stops in 2023.

You don't want to build a huge factory if you believe the market might deflate suddently.

A lot of industries got bitten by greed and the sudden deflation of demand and huge unsold inventory post COVID. The reality is the market was overly and abnormaly inflated and consumers who bought the stuff during COVID period were equipped for the next ~10 years in stuff like sporting goods and had no reason to buy new items in the subsequent years.

I do believe we will always need more RAM even if there is a market correction or AI bubble burst whatever you want to call it. It will not destroy AI completely, just cleanup the market. But how much will we need? I guess the chip makers makes their own guesses but don't want to make their company in peril either.

And that’s exactly what it’s going to do because the dependency chain on actually using this RAM is unlikely to succeed.

But they are building huge datacenters for AI. The investment appetite is there. So there must be some worse bottleneck when it comes to memory itself.

The one building the datacenters aren't the ones making the chips. A construction of a datacenter can be halted suddently and an order of chips cancelled. We might assume that the chip makers are ready to supply said datacenters, just they don't necessarily feel necessary to build new factories for the consumer market which itself might not be ready to spend the same amount of money on RAM chips. And building factories do not magically create price reduction, quite the contrary. The consumers buying $150-200 smartphones aren't necessarily ready to buy $400 ones. Most would just buy on the second hand market and replace less often their phones instead.

Whales being whales, they will pay the highest end iphone at any price, no question. But the market is not made entirely of whales.

Exactly, and this isn’t the 1st time this happens. Some companies disappeared years ago due to overcapacity when prices went down.

> A lot of industries got bitten by greed and the sudden deflation of demand and huge unsold inventory post COVID.

I’m betting that the world is about to hit a wall of inflation.

https://i.ibb.co/s9Mm8w2r/IMG-0743.jpg

This is a graph I made.

It shows:

* the inflation rate from 1971 until 1991

* the inflation rate from the start of COVID 19 until today.

Does anyone notice anything interesting about the graph?

You can tell that a chart is authoritative when it economizes on pixels?

> Does anyone notice anything interesting about the graph?

Cherrypicked dates? But I'd like to hear analysis comparing the Nixon shock to the covid shock since one was monetary and one was supply and demand.

> Cherrypicked dates? But I'd like to hear analysis comparing the Nixon shock to the covid shock since one was monetary and one was supply and demand.

Of course!

* In 1971 and 2019, the M2 money supply was flooded. In 1971 by the Nixon Shock, in 2019 by Covid: The amount of US dollars that existed between 1961 and 1971 increased by 100%, the amount of US dollars that existed between 1971 and 1981 increased by 253%. Assets are denominated in dollars and the flood of money that the Nixon Shock caused led to the inflation of the late 70s and 80s. The flood of money that Covid caused led to the inflation of the last six years, 2022 in particular.

* The other factor that contributed was the lack of oil supply. In the 1970s, it was caused by a war in the Middle east. Will we see history repeat again? My bet is yes.

Data: https://fred.stlouisfed.org/series/M2SL

Note that the Fed data is difficult to read in the 70s, you'll want to play around with the length of the time window. It's difficult to read because the supply of money has grown so much.

As if simply entering the market is trivial.

dumping on it certainly is

This is Capitalism working exactly as intended - resources (RAM) are allocated to those which can use them most productively (AI data-centers)

And the AI data-centers are using the RAM so productively, that they are willing to buy them at any price whatsoever.

No, this is not Capitalism working as intended, because there is an entity, the US government, whose purpose is to sabotage those who are willing to increase production to satisfy the extra demand and decrease the prices.

So the market is not free at all, the lack of competition is maintained by force.

Already for many years, the prices of various products like smartphones, SSDs and memory modules have been kept artificially high by the anticompetitive measures called "US sanctions".

Capitalism has no intent beyond allowing private ownership of capital. Markets are a separate concept.

Umm… a simpler explanation is that supply takes a lot longer to ramp up than demand.

See analogues in oil booms (then busts).

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