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Microsoft doesn't know what to do about the memory pricing crisis Microsoft is causing (www.pcgamer.com)
submitted 3 months ago by to c/technology@lemmy.world
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[–] 14 points 3 months ago (5 children)

They're going to start up an entire RAM company to fill a temporary shortage?

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  • [–] 10 points 3 months ago (4 children)

    Yes, then they'll be shortage resistant

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  • [–] 16 points 3 months ago (1 child)

    It can't really work the way to want it to.

    You have let's say Samsung who can make money selling a chip as long as the price > $50. And historically the price of the chip has averaged $100.

    But the demand is crazy and they can't keep up and the price of the chip is $500. They are making money hand over fist but let's say they feel a moral obligation (hahahahaha) to lower the price by increasing capacity.

    So they invest a billion dollars to increase capacity. Now that's a huge cost that reduces their margin on all chips. Between loans and maintenance, now they have to sell a chip for $90 to break even. But that's fine because they are making $410 per chip instead of $50!

    Except now you fix the supply issue and demand falls to normal. You've just cut your profit from $50 to $10. You have to sell 5x the volume to make the money you were making!

    Except it's even worse, because now you have all these extra chips you're building and nowhere to put them. Supply exceeds demand, pushing prices lower so instead of $100, they are selling for $80. Now Samsung loses $10 on every chip and they go bankrupt trying to pay back a billion in loans.

    So it's not really in their interest to build capacity to meet a temporary demand. Unfortunately.

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  • [–] 3 points 3 months ago

    That is not how it works at all. RAM is a necessary part for every compute device, and there is no way to recover any part of selling at a loss once it's acquired by the final owner. Thus, they will never be sold without a profit margin. This is very different from, for example, the video game consoles market. Once you have the console, you still need games, so, whatever loss the manufacturer is assuming has a chance of being filled by the customer "buying" (renting) games.

    Having said that, the rest of your logic is sound. However, I don't see prices dropping back to what they were before this AI bullshit even if the market is suddenly flooded by triple the offer vs demand. These corporations would certainly manufacture a fictional shortage somehow, makeing people rush-purchase ram for fear of the prices going too high again, and release all the production into the market to maintain the illusion of low offer.

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  • [–] 5 points 3 months ago

    There were loads of ram companies in the eighties, so many that when meager times came, half went bankrupt.

    RAM making is a brutal market. It's very different to chip making, it's "just" billions of capacitors.

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