I'm not buying shit unless I have to. And then I'll likely buy used.
“strategic customer agreements”
Quick question: what consumer is agreeing to this?
I haven't seen the customers named, but Apple finally increasing prices makes me think they're one of them.
I wonder if anybody has told Micron about what happens when customers sign a contract but then declare bankruptcy shortly after.
Or what happens to the stock price once the temporary surge in demand fades or new companies enter the market and disrupt it.
That's the point of the agreement. It locks in that demand by contractually requiring the companies agreeing to it to buy a certain amount of product regardless of whether they actually want it.
Personally, I view this as a sign that Micron believes the AI bubble is going to burst within 5 years, so they're locking people in at bubble prices now.
Likely they're just trying to hoard all of the compute in the US despite not producing many of the components, to try to create a substantive gap on AI. DARPA is not used to just being 6 months ahead. But eventually, something's got to give. If nothing else, China is catching up on chip making.
Software developers: more Electron and bloated frameworks are what the people want! Running 10 independent browser instances for simple chat apps is a great idea!
I never understood the scale of this bullshit until I had a user request his script packaged. Now, Intune doesn't like executing random python scripts, so I gave him several options for 8 KB, 50-lines-of-code script.
He disregarded them and wrapped it all in Electron.
I received a 380 MB zip file.
But, well, it had an .exe inside so I could work with that. ¯\_(ツ)_/¯
"Locks in"...if all of a sudden there was no demand you can be assured they would "lock out". Micron likes to put the boot to the throat when they have an advantage. Not someone I'd do business with.
The same Micron that plead guilty to price fixing of memory 20 years ago.
https://www.theregister.com/off-prem/2004/02/27/memory-makers-hit-by-price-fixing-claims/1070959
Isn't that called price fixing, and is generally illegal?
This is just like selling / buying options in any other industry, e.g farming to buy something at a specified price in the future.
They've agreed to buy XYZ product at 123 time at a price between $100 and $200.
If prices plummet, they've still agreed to buy it at $100 (similar to selling an options $100 Strike PUT), but if prices skyrocket, they don't need to pay more than $200 (similar to buying an options $200 Strike CALL)
Anything in between is just the price, so if it's $150 then its just $150
It's not exactly the same as using options, but the rough idea.
I've never signed a contract to buy something 5 years from now at a certain price.
You're not a company dealing with massive inventories :P
It's a real thing.
no?
Agreed, it's obviously not related to that concept. Confusing suggestion.
its price fixing if the agreement is among 'competitors' - this is price fixing for a customer(s)
Only if regulatory bodies do something about it.
Unfortunately yes, but the current government is not going to enforce the laws
Wouldn’t this just be selling security?
You would enter the SCA if you want to secure your supply chain against the risk of inflated pricing. The risk would now be overspending if the market drops. Comparing the two risk profiles, an organization might decide that they have more stomach for overpaying a set amount over 5 years. As opposed, of course, to the risk of paying an arbitrarily expensive amount indefinitely as the market remains volatile.
So now, while planning out the next 5 years of business objectives, you can plan against a much more solid best/worst case scenario. That minimized uncertainty, which lets the business keep moving even if at a more expense pace.
Yes, but the fine is far lower than their profits here... so, it's only illegal if you can't afford it.
If there’s some collusion, sure, but you’d have to find a government body with the will and teeth to prosecute.
Nothing really against charging whatever you feel like outside of things like certain supplies during disasters. It’s shitty
Hopefully Chinese firms recognize the gap in the market and increase their capacity.
Hopefully the bubble bursts next year, and we all eat popcorn watching Micron's revenue.
They are scaling up but as with other things they will most likely scale to their inner market first, and then I doubt they'll subsidize a price depreciation to help westerners when they can get the profits for themselves
gross margin for Micron
Gross indeed. Fucking greedy scumbags
Remember they are traitors to actual customers when the bubble burtsts.
They should fail, totally, and vanish from the world.
Traitors would mean they were ever on your side. Welcome to capitalism, bud. They've always been on the side of maximum profit, like all other corporations.
Padme: “…and then they’ll drop, right?”
Five years is too long for the buyers. The AI bubble will burst before then and then the market price will drop as the inflated demand disappears, especially if this continues long enough for more production capacity to come online.
They might not have had much of a choice in making the deal, though. Micron has been extracting the absolute maximum they can out of this situation. Make a deal or get nothing. Their clients will remember, though, and flag them as an unreliable supplier. Once this ends—and these always end—they’ll likely have a lower market share and end up having to cut prices.
Micron is optimistic in saying the demand won’t start easing until 2028. A lot of the rest of the technology manufacturing industry is about to grind to a crawl if not a halt because it’s nearly impossible to get components. Some companies are already delaying product launches and I think a lot more are about to this summer as they realize what’s happening. If non-AI businesses start to slow, the whole economy starts to slow, the AI demand will falter and that’s when the bubble bursts. I’m thinking maybe by the end of this year, more likely next year.
When the bubble bursts I’m guessing at least a couple of the companies Micron signed SCAs with will fold and Micron won’t get anything.
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