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0 pointsAurornis3mo ago0 comments

> prevent overcapacity" is just a fancy way of saying "we prefer to gouge consumers at little risk to us."

No it’s not. Memory business has been cyclical for years. Over expansion is a real risk because new manufacturing capacity is very expensive and takes a long time to come online.

If they could make new manufacturing come online quickly they would do it and capture the additional profit of more sales.

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jorvi3mo ago

If you present an operating profit of €25 billion USD, yes, in a healthy true market competition would force you to either A) eat into your profit margin by reducing prices or B) invest in R&D and capacit-

Actually, let me eat my words, you are right. As I typed this I saw some news from an hour ago[0] about SK Hynix planning to invest about $500 billion into 4 more fabs. I imagine [hope] Samsung will follow, and together with Chinese memory fabs ramping up both in capacity and technology, prices will return to earth in 2027, maybe 2028.

Guess I am just a little too bitter because GPU prices finally seemed to normalize after half a decade of craziness. Topped with corporations in the West usually forgoing investment and using profits like these to do massive stock buybacks and dividends, souring my expectations.

[0]https://www.pcgamer.com/hardware/memory/hot-on-the-heels-of-...

Dylan168073mo ago

Additional profit? They're making a lot more money right now than if they had more supply.

The risk of overexpansion is real but I really doubt they want to expand much in the next couple years. They don't have to worry about being undercut by small competitors so they can enjoy the moment.

Nevermark3mo ago

No they are making higher margins, but not getting as much profit as they could have.

Look at the standard Econ 101 supply-demand curve.

If they could make and sell twice as many chips, it would not cut there margins anywhere near half. They would be making much more.

When demand spikes up and down there will be pain. Because booms are not predictable, in timing, size or duration. And accelerating supply expansion is very expensive, slow, and risky.

Many boom prompted RAM supply expansions have ended in years of unprofitable over capacity.

Dylan168073mo ago

> If they could make and sell twice as many chips, it would not cut there margins anywhere near half. So they would be making much more.

You really think that? I would expect their margins to drop down to a small percentage if they doubled production. Maybe even less.

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jdxcode3mo ago

at these prices, there are certainly potential customers not purchasing when they otherwise would have

Dylan168073mo ago

You don't maximize profit by maximizing sales.

j / k navigate · click thread line to collapse

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jorvi3mo ago

[0]https://www.pcgamer.com/hardware/memory/hot-on-the-heels-of-...

Dylan168073mo ago

Additional profit? They're making a lot more money right now than if they had more supply.

Nevermark3mo ago

No they are making higher margins, but not getting as much profit as they could have.

Look at the standard Econ 101 supply-demand curve.

If they could make and sell twice as many chips, it would not cut there margins anywhere near half. They would be making much more.

When demand spikes up and down there will be pain. Because booms are not predictable, in timing, size or duration. And accelerating supply expansion is very expensive, slow, and risky.

Many boom prompted RAM supply expansions have ended in years of unprofitable over capacity.

Dylan168073mo ago

> If they could make and sell twice as many chips, it would not cut there margins anywhere near half. So they would be making much more.

You really think that? I would expect their margins to drop down to a small percentage if they doubled production. Maybe even less.

1 more reply

jdxcode3mo ago

at these prices, there are certainly potential customers not purchasing when they otherwise would have

Dylan168073mo ago

You don't maximize profit by maximizing sales.

j / k navigate · click thread line to collapse